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You are the worlds most popular donut shop. People are literally fighting each other in line to get your donuts. For reasons (quality, scale) you can only prod
by vorpalhex 4y ago
You are the worlds most popular donut shop. People are literally fighting each other in line to get your donuts.
For reasons (quality, scale) you can only produce 100 donuts a day. Definitely no more.
On an average day, you have 200 potential customers. Busy days, closer to 400.
A donut costs you $0.20 to make (incl labor).
Do you sell them for $0.20 each and let the first person in the door buy all of your donuts for $20? Do you ration them and let each person only buy one? (Sorry mom! Guess you have to split with the kids.) You have not benefitted anyone! You have made the situation worse.
No, you raise the price of your donuts to $5 or so. Some people will buy a couple but most people in the front of the line will get a donut still.
This is literally what the super famous donut shop near me does! Buying a dozen donuts from them would be like $60+, but almost everyone can buy a donut or two.
Raising prices for a limited commodity when literally not everyone who wants one can get one is the best strategy.
> everyone is able to afford them
It doesn't matter if all 400 people in line could afford them if the first person in line buys them all!
- andrekandre 4y ago> Raising prices for a limited commodity when literally not everyone who wants one can get one is the best strategy. ... > It doesn't matter if all 400 people in line could afford them if the first person in line buys them all! the other solution to raising prices is to limit purchases per customer isn't it? i seem to recall they did this with ps5, and same for iphone in the old days during launch... its not novel idea imo... e.g "limit one dozen donuts per customer" etc
- danielmarkbruce 4y agoThen you get people paying other people to stand in line. It's a thing.
- andrekandre 4y agoso whats the alternative to raising prices... nothing?
- danielmarkbruce 4y agoDepends what you are optimizing for. That might sounds like a non-answer, but it's true.
- Nifty3929 4y agoI provided two other very reasonable alternatives in my prior comment. All three of these options make sense and are used in various contexts. But other than these three choices, I can't think of any others.