(I'll be the first to tell you that this article is based on my very limited, subjective experience eating once at a single restaurant, and my theories on the economic and political implications of this one meal are total generalizations based on extremely limited evidence; evidence based on a sample size of 1. Nonetheless, there might be something to my theory. Read on.)
When I ordered the very worst meal I ever ate, I was on a lunch break from jury service. I had left the downtown LA courthouse and walked a couple of blocks in a random direction looking for a restaurant. I walked into what turned out to be a grubby, nasty place and ordered a hot dog and what they called "homemade mac and cheese", basically a pile of inedible, greasy, flavorless, stringy slop. I try not to waste food, but I couldn't make it through this. It was definitely the most disgusting, seemingly half-assed meal I have ever seen prepared.
Disregarding the possibility that I came into the restaurant on a very very bad day, how would such a substandard restaurant stay in business? I'll theorize with two words: Jury Duty. Think about it, every weekday, thousands of people coerced by the legal duty to perform jury service converge upon the courthouse, and they all need to eat. Like me, many of them will just walk down a block in a random direction, stop at the first restaurant they see, eat there, and possibly prop up the fortunes of a restaurant that would otherwise fail. But this is not simply a matter of an increased volume of foot traffic outside. If that were the case, restaurants next to all highly visited areas would have lesser quality food, but that is clearly not true. A restaurant next to, for example a large office building that the same workers go to every day, needs to maintain high standards to keep those same people coming back. But this restaurant next to the courthouse would get a different set of suckers almost every single day. So where is their incentive to improve? Nowhere. Each day the restaurant could survive by pumping out disgusting slop for a new set of unsuspecting people called in for jury duty; people who will probably not set foot on that same block unless one day they get called back for jury service at the same courthouse. Also, word-of-mouth is inhibited. What's the use of telling your friends and neighbors about a bad dining experience in a completely different neighborhood than they live in? And while bad restaurants near the courthouse would gain benefits from this lack of word-of-mouth, the good restaurants would be harmed by this.
So, because of the (perhaps absolutely necessary and unavoidable) government coercion of people to come to courthouses, I am putting forth the theory, (arrogantly generalizing based on my own reasoning and the evidence of one bad experience) that many bad restaurants near courthouses in large urban areas probably get the benefit of a distortion of the market. The jurors are a captive audience, and have little power to move that "invisible hand" away from such nasty, disgusting restaurants.
Or do they? Perhaps the internet will come to the rescue. On websites such as Yelp, that an increasing number of jurors will have access to on their smartphones, website users can blow the lid off of the nastiness of bad restaurants such as this one, and promote the good ones. This however, depends on how widespread smartphone based restaurant reviewing becomes. It all depends on whether or not more Americans become mobile-device-addicted, whining foodies (like me). And on a completely different topic: would that be such a good thing?
Anyone else out there had any interesting juty duty lunchtime experiences, good or bad? I've got to get more evidence.
Note the steep drop-off at a certain point, when the number of partygoers reaches the maximum capacity of the party's physical location. Clearly people like a good party, but no one wants to get squished. As you can see, the appeal of a party is a function of the number of people already there, and this determines how many people will want to join that party in the future. The self fulfilling prophesy is in full effect. Because of this, the success or failure of a party depends largely on the number of people attracted in the initial stages, and this can depend largely on chance. When a party has reached a "tipping point" of popularity through word of mouth, it can fill up to the point of reaching the maximum capacity of the party's physical location. Then there will be spillover to the less popular parties, and a new equilibrium will be reached.
Rather than a drop in total fun occurring at the point of some number of users as we saw with the physical party, there is simply a levelling off. There are diminishing marginal returns to fun here, because, for example with Facebook, you can only have so many Facebook friends (5000 as of today I believe, and even fewer you really interact with on a regular basis). But there is no drop-off in benefit, because there is no restriction on capacity. Unlike a real physical party, this party on the internet shows no sign of slowing down. Facebook has become a fixture, and it would be very difficult for another company to come in and compete with it on its own turf. A new site would need to provide amazing new benefits to compete with the massive positive network externalities Facebook has built up through its user base. And why did Facebook build up such a large base of users? Partially because it's a very well designed site, but also because of the initial luck of the draw. Mark Zuckerberg's party got the initial rush of partygoers it needed to sustain itself and grow. Without any capacity restrictions, it seems to be here to stay. Even if there were a better party next door, people would probably ignore it.
Knowing there was a chance that this Rite-Aid didn't have a POS system sophisticated enough to handle a real quantity discount, and hungry for a bunny, I bought just one item. And just as I had guessed, this wasn't a real quantity discount, just a re-setting of the price to $1.50 per unit. Here's the proof:
As you can see, the supply curve has shifted outwards as technology makes a greater quantity of embarrassing videos available. This increases the quantity viewed from Q1 to Q2, but also decreases the value that people place upon each individual embarrassing videos from P1 to P2. This can be very intuitively understood. If there were suddenly twice as many videos of, say, ballroom dancing accidents, each individual video will be less special to each consumer. There are only so many ballroom dancing accident videos consumers will be able to watch within their schedules. With an increased supply, the level of cultural saturation each individual viral video achieves is nothing like the earlier days of the internet. With an increase in supply, viral videos as a whole become more prevalent, but each individual video becomes less distinctive and culturally valued.
The market price is at P1 and the quantity sold is at Q1. Suddenly the county government for this market allows EBT to be used to buy fast food. What would this do to the demand curve? Because higher income, non-food-stamp recipient customers like person A can affect the entire market demand curve, from the highest prices to the lowest, and lower income food-stamp recipient customers like person B would tend to only affect the lower parts of the demand curve, when EBT is suddenly allowed for fast food purchases, it is only the lower parts of the demand curve that will shift outward (in reality the change would probably not be this prominent but I have made it prominent just for demonstration). Here is the new market demand curve:
The result is a kink in the demand curve pushing out at the point where most food stamp recipients would be priced out of the market. Assuming the supply curve is below that point, this increases the equilibrium price to P2 and the equilibrium quantity to Q2. Thus this policy is a good thing for fast food companies, increasing their revenue by the amount of:
