Advanced Search
MyIDEAS: Login

Thaler’s “all-you-can-eat” puzzle: two alternative explanations

Contents:

Author Info

  • María José Caride
  • Eduardo L. Giménez

Abstract

To determine whether individuals take into account sunk costs when making deci- sions, Thaler (1980, p.48) conducted an experiment in which anonymous individuals decided to enter an \all-you-can-eat" pizza restaurant; a random selection of those customers was given back the $2.50 they had paid. The result was a surprisingly lower average consumption of pizza by the group that was reimbursed, as compared to the group that was not. Economic theory of consumer suggests that this is inconsistent with rational behavior because only incremental costs and bene ts should a ect deci- sions. Since the cost of consuming any extra pizza is zero once a person is inside the restaurant, the bene ts, then, must undergo some change once those customers are paid back. The literature of behavioral economics suggests that the money paid on en- try plays a role in consumer behavior, based on mental accounting and prospect theory. In this paper we integrate several elements of this literature into neoclassical economic theory and make use of this comprehensive economic model to explain Thaler's puzzle. However, this model presents some shortcomings, and in the end we provide a comple- mentary economic explanation involving the physical satiation constraint, which helps to overcome those limitations.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://webs.uvigo.es/x06/sites/default/files/wp0401.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Universidade de Vigo, Departamento de Economía Aplicada in its series Working Papers with number 0401.

as in new window
Length: 14 pages
Date of creation: Mar 2004
Date of revision:
Handle: RePEc:vig:wpaper:0401

Contact details of provider:
Postal: Campus de Lagoas Marcosende, s/n, 36200 VIGO
Phone: 986 - 812500
Fax: 986 - 812401
Email:
Web page: http://webs.uvigo.es/x06/dpto/
More information through EDIRC

Related research

Keywords: Sunk Costs; Mental Accounting; Prospect Theory; Physical Constraint; Satiation.;

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Arkes, Hal R. & Blumer, Catherine, 1985. "The psychology of sunk cost," Organizational Behavior and Human Decision Processes, Elsevier, vol. 35(1), pages 124-140, February.
  2. Thaler, Richard, 1980. "Toward a positive theory of consumer choice," Journal of Economic Behavior & Organization, Elsevier, vol. 1(1), pages 39-60, March.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:vig:wpaper:0401. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Patricia González Piñeiro).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.