Chicken Puffs for Rs 250, the Economics Actor Anusree doesn't know

Some news sites reported about Actor Anusree’s shock and anguish over paying Rs 250 for chicken puffs, black tea Rs 80 and Rs 100 for Coffee at a restaurant in Thiruvananthapuram International Airport. When she posted this on her Facebook, several netizens protested against the Kitchen Restaurant that charged such high rates for snacks and beverages.

A Member of Parliament (MP) from Kerala is expected to raise the issue of this fleecing at the airport in Loksabha.

Actress Anusree's profile pix in FB and below her post related to Chicken Puffs

Those who have read Freakonomics, the best seller by Stephen J Dubner and Steven Levitt will understand that such premium pricing in some locations is not unusual and is quite universal. The places where you may have to shell out such premium prices for mineral water, food, beverages  are in cinema theatres, railway stations, airports, on flights,  beaches, tourist centres and five star hotels.

In these places, the seller has a monopoly, there won’t be any other seller offering at a competitive rate and the nearest seller may be a few kilometres away. Those who are thirsty or hungry need to pay higher rate at such places but if they can hold on and take the trouble to go a few kilometres they’ll get more variety fare at cheaper rates. It’s your choice.

There may be other factors behind the higher prices. The vendor who runs the restaurant at airports or railway stations may have paid a huge license fee to get a space there and may be paying higher rent compared to a similar place in the town or city. Remember, not many people will buy huge quantities of snacks or beverages in airports or five star hotels or inside flights.

In a flight you may have to shell out Rs 500 for a sandwich supplemented with ketchup or assortments whose actual value may be hardly Rs 50 or 75/-. Once a co-passenger in a Kingfisher flight from Bangalore told me he never thought food is not given free in budget flights but he chose not to buy despite being hungry as he was not willing to shell out Rs 500 for a small pack of food.

In Thiruvananthapuram International Airport, if the particular restaurant sells 100 pieces of puffs daily (quite unlikely), their earnings would Rs 25000 and sells hundred 100 cups of coffee(Rs 10000).  A business outlet in such a place needs to have atleast such volumes to justify their existence there – after all they need to meet A/c, higher rental, employee costs, raw material costs and their potential is limited to number of passengers who may choose to buy at this rate.

My wife who checked in at Taj Hotel in Chennai the other day said Idli, Vada and Tea for breakfast costs Rs 500 and she chose to go to a nearby local restaurant and got it for less than Rs 100. In fact, many people who stay in five star hotels don't eat from there unless it is sponsored by their company or somebody else.Why pay more if you can get better quality at very reasonable price from a way side dhaba?

Price is not cost + reasonable profit

Many people think, price of a product is just cost plus reasonable profit. But most often that is not the case. It is basically about how much the customer will be willing to bear and uniqueness of the product. Value rests in the mind of the buyer. You are the king, not the seller. 

Pricing (Price theory)  is an important topic in micro-economics and it is difficult to go into the nuances of it all in this blog.  I don’t expect Anusree , a talented actress of Diamond Necklace, Mahashinte Prathikaram and Oppam fame to know all these things related to economic theory but going by the huge number of shocked people who reacted to her FB post, I am worried a large majority doesn’t understand it at all- despite the fact that we are all consumers in one way or the other. 

Tailpiece: Anusree comes from film industry where super stars get crores of rupees from a single film and ordinary people who earn below Rs 500 per day queue up to watch them do all sort of stunts and drama!