The Hindu Business Line : Lost in the flavour?

I was recently invited to a typical “all-you-can-eat” buffet. It was interesting to observe adults and children display contrasting eating behaviour. Adults typically heaped their plates with food, perhaps, twice the weight of their children! The children, however, only ate till their hunger was satisfied. How can economics explain this difference in behaviour?

Get money’s worth

An “all-you-can-eat” buffet offers a spread that you can eat for a fixed price. As consumers, we always aim to get money’s worth. That means consuming more in a buffet with fixed price.

Children do not understand economics the way we do. They prefer to listen to their stomach instead — they stop when their hunger is satisfied.

But it turns out that the children are better economists as far as buffet meal is concerned. And that is because of satisfaction or what economists call as utility value. A five-year-old child may derive more satisfaction from an “all-you-can-eat” buffet than we do. Why?

The sunk cost

You and I miss the point when we think that eating one tonne of food for Rs 750 carries more value than eating just 200 gm. Your bank balance is already lower by Rs 3,000 (Rs 750 per person) the moment four of you walk into the buffet bar. It does not matter how much you or your friends eat. Economists call this the sunk cost.

Your objective then should be to derive maximum satisfaction. And that means eating your favourite dishes till your hunger is satisfied — not eating excessively and feeling miserable for the next two days.

The problem is that we measure value in terms of price and quantity.

That is why we buy a 200 ml soft drink for Rs 10 but will refuse to buy a 400 ml bottle for Rs 20. Yet, we will buy a 400 ml drink for Rs 15 even if we do want to imbibe as much liquid!

So, remember this: The next time you see a heaped plate at a buffet, understand that the person is either very hungry or just does not understand economics!

(The author is an investment strategist.)

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