Why do restaurants serve lunch cheaper than dinner?

Abstract

The article explores a question why restaurants serve lunch meals cheaper than dinner meals. Departing from traditional demand curves derived from utility functions, the article uses a distribution function of reservation prices of patrons to represent a market demand curve. Given identical convex market demand curves in two distinct markets isolated by the time, restaurants exploit the convexity of the market demand curves by setting two prices whose average price is higher than the competitive market equilibrium price. This exploitation opportunity induces restaurants to adopt oligopolistic pricing behaviours.

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Correspondence to Taiji Watanabe.

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This article discusses why restaurants serve lunch cheaper than dinner in a very simple manner with graphic exposition. This article intends to bring practice and theory together in explaining actual business practices of lower lunch price than dinner price observed in the restaurant industry.

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Watanabe, T. Why do restaurants serve lunch cheaper than dinner?. J Revenue Pricing Manag 14, 293–295 (2015). https://doi.org/10.1057/rpm.2015.25

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Keywords

  • restaurant pricing behaviour
  • oligopolistic pricing
  • exploitation of reservation prices
  • convex demand curve