Thursday, May 08, 2008

Get your 23-cent pizza!


When it comes to pizza, Cleveland and economics, Rob Holub is on the scene.

As a gesture of goodwill to the Cleveland Cavaliers fans, Papa John's is offering 23 cent pizzas as a peace offering for a D.C. area manager printing up shirts making fun of LeBron James. Do you think people like 23-cent pizza? Judge for yourself here and here.

Some quick facts:

- There are 1,200 people in line at one location; another estimate is at 1,700.

- Papa John's stopped taking phone orders long ago.

- It took 3 hours and 20 minutes for one person to get their 23-cent pizza.

- Due to the popularity of the event, traffic on some freeways has slowed to a crawl around exits near Papa John's locations.

The obvious question here-- and it's the same when gas stations go on the cheap as a promotion-- is why do people wait in line for a giveaway when, considering the opportunity cost of doing so, it seems like a losing proposition? I think the only answer is that people really enjoying being part of a promotion. They get value out of the story; sure, I had to wait in line for 3 hours to get a cheap pizza, but how can I possibly value being able to tell my friends for the indefinite future? I don't believe it's entirely separate from betting longshots at the racetrack-- the story has value, and maybe because it's indeterminate exactly how valuable it is, you end up with individuals massively mis-pricing it.

I can't think this is a bad deal for Papa Johns; they seem to take a mild one-time financial hit (if at all-- could a plain pepperoni pizza cost them more than 23 cents?) for a big publicity boom. This is a very big company, too-- they just announced recently that they surpassed $1 billion in online orders alone. Most of the downside of this ordeal is shoveled onto the community-- congestion and a few instances of impatient customers requiring an increased police presence. Increasing private benefits through increased negative externalities? That's the plan of the day.

If the Cavs win the NBA title, I bet Papa John's might pull the same trick again.

4 comments:

Dana said...

So essentially these people value their time at... about $3-4/hour to deal with getting a pizza for 23 cents? Interesting...

The Chosen Rob said...

A co-worker and I considered heading down the street, 1.4 miles away, when they started taking orders at 11.

After reading what was going on, I valued the thawed-out hot pocket in the office kitchen more than 3 hours of my time.

If you read the links, we work near the Shaker Heights location, where it seemed to be more foolish than most.

Bryce said...

A similar thing happened in NC last week. Someone was giving away free furniture and there was so much traffic the city (I think it was King's Mountain, near Charlotte) was basically shut down. Police had to stop the promotion.

Granted, furniture is more expensive than a pizza, but people took off work and drove in from all over the state.

Also, for you Libertarians, Mike Munger has been getting a little press lately:
http://www.wral.com/news/state/story/2835411/

You can also vote for him on a webpoll on the front page of wral.com

Steamboat Lion said...

These same people who are quite happy to "sell" their time to the pizza store for $3-4 hour probably all believe in minimum wage laws...