Nutella Open Jar

Demand and Supply: A Columbia Dining Hall

by Elaine Schwartz    •    Mar 9, 2013

The Nutella-gate crisis at Columbia University is classic demand and supply.

First the facts…

A “creamier-than-peanut-butter, chocolate hazelnut spread from Italy, …” Nutella had been served in crepes on weekends at Columbia’s undergraduate dining halls. However, when Columbia started offering it alone, the response was massive. Students ate huge amounts in the dining hall and used soup containers and cups to take Nutella to their dorm rooms.

Concerned, cafeteria authorities complained that they were depleting the school’s food budget. At $5,000 a week according to the Dining Services Executive Director, the total could be $250,000 a year. Disagreeing, Columbia students cited much cheaper Costco prices.

At this point, officials realized they had to contain a rapidly escalating crisis.  Calling it “a tongue-in-cheek university statement,” they said, “Nutella-Gate Exposed…It’s a Smear.” As for the numbers, the university admitted they were far lower than $250,000 and they added that students were leaving dining halls with much less because of the publicity.

Thinking about incentives, the student response to Nutella was predictable. On the demand side, paying as much as $2363 a semester for a meal plan, they have the “all you can eat” incentive. Taking Nutella, some bread, maybe silverware and plates back to the dorm cost them nothing extra.

Because meal plans give students access to an unlimited supply for a single price, for an individual student, the supply curve is perfectly elastic. So, when his or her demand increases, still it crosses supply at the same price. The result? Students have the incentive to consume huge amounts. The law of demand, with less quantity at higher prices does not kick in.

How to get around demand side “over consumption?” I read that one Columbia dining hall eliminated trays. (I am not sure if all did.)

Even when demand increases, price is constant because of perfectly elastic supply.

Even when a student’s demand for Nutella increases, price is constant because of perfectly elastic supply.

Sources and Resources: While my Nutella quote is from a NY Times article and I got other facts from a follow-up NY Times piece and Business Insider, the Columbia Spectator provided a more serious perspective.

 

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