Economic thought problem

There is a bakery near my house that specializes in bagels. Almost every day, they run out of sesame bagels before their other flavors. With this happening day after day, why don't they just make more sesame bagels?

Of course, we could explain this simply by saying they keep repeating a mistake. And that is possibly the right explanation. But I wonder if we can explain what is happening within a model where this is a rational, profit maximizing firm? Any ideas?

8 comments:

  1. Some ideas that occur to me --

    --They don't actually think that they pay any penalty for running out because people will just buy something else rather than leaving without buying anything

    -- More trouble than they think it is worth

    -- The person making the decision doesn't care/isn't impacted, the person impacted doesn't know/pay any attention

    -- The value of their routine/some other 'psychic'/unseen profit outweighs the profit they are losing

    My uncle told me a similar story once about really liking a product from a place, and returning about once a week for several months looking for another to give as a gift. After several tries, he asked someone who worked there. He said something to effect of "Oh those! We sold out every time we put them on the shelf. We had so much trouble keeping them stocked, we just stopped carrying them."

    Wish that were a joke. Economics is definitely not a neat science.

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    Replies
    1. The value of their routine/some other 'psychic'/unseen profit outweighs the profit they are losing

      I'd be wary of calling that "profit".

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    2. Yeah, it's probably not the best conceived name. But I think (in at least one significant place) that's how it was termed:

      http://wiki.mises.org/wiki/Psychic_profit_and_loss

      Maybe it has better names, that's just the one that came to mind...

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  2. Perhaps limiting the supply of bagels makes customers run earlier to the bakery

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  3. Maybe they just don't care enough to do so.

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  4. Are bagels baked in batches? If so, might it not be simply that a part-batch isn't economic, and one whole extra batch would provide *too many* sesame bagels? Not sure this is an economic answer, except in the sense of 'economies of scale'.

    Question: are all bagels priced the same?

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    Replies
    1. Yes, all priced the same. And I think the batch solution might be right: I am going to ask.

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  5. I've never understood the infatuation people have with this model, especially during debates about business regulations. Very few regulations are premised on this stuff.

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