James Surowiecki looked at the surprisingly complex economics of lobster:

• In 2005 lobster used to cost $6 a pound. Today it can go as low as $2.20 a pound.
• Yet in American restaurants lobster dishes are just as expensive as ever.
• This is partly due to the uncertainty of supply. If restaurants were to cut the price of lobster items, and then see the price of lobster spike, they would have a hard time raising prices again.
• When people can’t evaluate a product before purchasing it – such as in a restaurant – they often assume a positive correlation between price and quality. Thus if restaurants were to mark down the price of lobster, people might think that their lobster wasn’t very good.
• People also enjoy items that are more expensive if they’re associated with luxury – as lobster is. By reducing prices diners would enjoy their lobster less.
• Eateries may also want to keep the price of lobster high so that the rest of their menu items look cheap by comparison.
• Restaurants have found ways to serve cheaper lobster dishes without offending the image of lobster as a high class product. Lobster bisque, mac and cheese, and B.L.T. are not uncommon menu items these days.
• Ultimately lobster is not a commodity – it is now a luxury product – and so price has little to do with cost.

Read about the time when servants would demand that they not be fed lobster more than three times a week, how lobster came to be associated with luxury, and psychological experiments that show what’s up with the price of lobster over here.

Source: The New Yorker

Via: Kottke