The McRib Returns

Marginal Analysis: The Return of the McRib

Dec 23, 2012 • Behavioral Economics, Demand, Supply, and Markets, Economic Debates, Economic History, Economic Humor, Households, Innovation, Labor, Thinking Economically • 614 Views    No Comments

The McRib is back.

People wonder though, why McDonald’s doesn’t just leave it on the menu. The reason might be how we perceive that extra bite.

Have you ever seen one of those newspaper devices where you put your money in and the top opens to reveal 10 or so NY Times? People, though, take only one and snap the lid shut. Logically, we take no more than a single paper because the second one has little usefulness. Or, using marginal analysis, an economist would say that the marginal utility diminished. The second newspaper had much less usefulness than the first one.

For the McRib, one McDonald’s franchisee explains that when the McRib first returns, he sells close to 200 a day. However, by the end of the promotion, anticipation plummets and his daily McRib sales drop to fewer than 50. In other words, similar to that second copy of the NY Times, McRibs buyers are displaying diminishing marginal utility. After their first sandwich, they rarely return for more. Then though, if McDonald’s delays the McRib’s return, excitement again builds as consumers look forward to their first bite. This year, they said the McRib would return during October and then the date was postponed to December 17.

Sources and Resources: As Freakonomics economist Stephen Dubner explains it, McDonald’s just has to wait long enough for him to forget how bad it is. Here, a great analysis of McDonald’s strategy says it is all about arbitrage that is based on hog prices. Also, you might enjoy ths Businessinsider slide show of “11 Amazing McRib Facts” and this NPR interview of the McRib’s inventor. For example, the McRib sandwich contains 70 ingredients.

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