The Economics Of Bottomless Drinks

August 17, 2013 in Daily Bulletin

Derek Thompson took a look at how restaurants can afford to offer bottomless drinks:

  • There is an element of peer pressure. Every other restaurant offers bottomless deals, and so all restaurants have to. For them the question is “how could they afford to not offer bottomless drinks”?
  • Customers are attracted to such deals because we have a psychological predisposition to like free. Rather than a discount on individual drinks, we’d prefer to pay more up front and create the illusion of getting things for “free”.
  • People don’t just drink at a restaurant. They order things to eat and the restaurant makes money from this and from repeat customers.

Check out the entire video and its transcript over here.

Source: The Atlantic