Thursday, November 01, 2007

No Free Lunches? What About Taco Tuesday?

by Brandon Fuller

In the second game of the World Series, Jacoby Ellsbury's second-base steal triggered Taco Bell's "Steal a base, steal a taco" promotion. Between 2:00 PM and 5:00 PM on Tuesday, October 30, Taco Bell made good on a promise of free tacos to anyone in America.

Discussion Questions

1. As with most free stuff, the taco promotion involved some hidden costs for the would-be freeloaders. What are some of the costs associated with taking Taco Bell up on its offer? Did the promotion involve external costs (costs borne by people who were not part of the taco transaction)?

2. An ABC News article pointed out that there has been at least one stolen base in every World Series since 1990. Taco Bell must have expected to make good on the promotion. Why would a profit-maximizing business offer this type of promotion?

3. A free taco isn't exactly "lunch" when you can only get it between 2:00 PM and 5:00 PM. Why were people willing to stand (or drive) in line at odd dining hours in order to get a taco that would normally run you less than a buck?

4. Sunk costs are costs that have been incurred and cannot be recouped, such as the time it took you to get to Taco Bell before realizing there was a long line. Were people sticking out a 20-minute wait for a $1 taco because they failed to ignore sunk costs?

5. In his new book, Tyler Cowen offers the following explanation of signaling: "We signal every time we incur a cost to send a message about ourselves to the outside world." Often, the higher the cost incurred, the stronger the signal. Think of the costs people incur to signal to prospective employers that they have an MBA from Wharton, or to signal to acquaintances that they attended Game 2 of the World Series. Were people signaling their devotion to the Red Sox or, more improbably, to Taco Bell? If the tacos were truly free, would anyone be able to make a strong statement about their baseball fanaticism? Might signaling help to explain the long lines in the final days before the release of products like Apple's iPhone and Microsoft's Xbox?

Labels: , ,

5:14 PM | Permalink | Comments | Assign Aplia Reading

2 Comments:

  • At 2:59 PM, January 23, 2008, Blogger SweetSimz said…

    I believe that the people that waited for 20 minutes in line for the free tacos on Tuesday, October 30 really have no idea about opportunity costs, or that they're priorities are very odd. The fact that people would rather spend 20 minutes of their lives, time that will never come back to them, than spend less than a dollar on a taco, which is considered a frivolous amount to many Americans of today anyways, is quite unbelievable to me. The same country that spends an enormous amount of money on brand-named clothes and excessively expensive electronics is the same country that produces such stingy people that have no value of the opportunity cost of time, for the time that was wasted in the fast food backup could have been spent working, or in any other economically efficient way for the person in question. Anyways, another aspect of this issue is that there really is no free lunch offered by this particular Taco Bell. The mere fact that America is one of the fattest countries in the world implies that only a very few number of people will actually leave this particular Taco Bell with one taco in tow. In reality, while the "free tacos" lure people to the establishment, the fact that the people are already there will lead to the consumption of more products than originally intended. A drink or two thrown in with a salad will be the story of many of such customers. Thus, this Taco Bell may be considered naive in its seemingly gracious offer, but instead this is just another clever ploy to increase profits. As stated by the basic guidelines of economics: "There is no such thing as a free lunch."

     

  • At 3:04 PM, January 23, 2008, Blogger SweetSimz said…

    This comment has been removed by the author.

     

Post a Comment

<< Home