William Poundstone, Photo: Russel Taylor

William Poundstone


Super-Sizing the Price

How a $69 hot dog persuades diners to spend more

Posted Aug 11, 2010

Serendipity 3's $69 hot dog

Serendipity 3 is a dessert-heavy place popular with tourists wanting to see celebrities. The introduction of the $69 was transparently a way of getting summer tourists' attention. It was introduced on National Hot Dog Day with a representative of the Guinness Book of World Records on hand to "certify" it as the world's most expensive hot dog. The restaurant's very busy press agent, Joe Calderone, talked up the hot dog and the alleged celebrity clientele to anyone who would listen. ("Cher is a regular who always get the regular foot-long. Now we will offer her the most expensive one.")

I will leave it to readers to contemplate the subtexts of a $69 foot-long hot dog. But there's a bit more psychology at work here than the obvious. Absurdly priced menu items are an application of "anchoring," a cognitive phenomenon discovered by psychologists Amos Tversky and Daniel Kahneman in the 1970s. Whenever we try to estimate a numerical value, we are unconsciously influenced by related numbers just seen or thought about. In this case, the diner in a touristy Manhattan restaurant is trying to decide how much he or she can afford to spend. The prices the diner is used to spending at home don't apply; it's a whole new world. That diner isn't about to order a $69 hot dog, but might happily opt for an $17.95 cheeseburger. The hot dog makes the cheeseburger appear reasonable in comparison (even though $17.95 would be a ridiculous price for a cheeseburger most places). Yes, it all sounds a little ridiculous, and the thought process I've just outlined isn't necessarily conscious. But in scores of careful laboratory studies, price contrasts like that affect decisions. It's now pretty well accepted by restaurateurs and consultants that it works on menus, too.

Serendipity 3 Menu

The hot dog isn't the most expensive thing on the Serendipity 3 menu. They have a $1000.00 chocolate sundae, introduced before the Great Recession. Its real agenda is to convince people it's sensible to pay $15.50 for a "fruit and fudge" confection, or $22.50 for a "Cheese Cake Vesuvius." Menu anchors in the $1000 price range are in the semi-mythic category. The Golden Opulence Sundae is said to be Tahitian vanilla ice cream lavished with edible 23-carat-gold leaf and caviar and chocolate. (Again, a dubious combination there.) Would Serendipity 3's chef make one if you ordered it? You bet! The profit margin must be staggering. Does anyone order it? How often does that happen? Calderone told AOL News that that the restaurant sells about one $1000 sundae a week. If you believe that, you don't know much about the glamorous life of a Manhattan press agent.