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Lobster is Cheap, Except in Restaurants

lobsterFishermen are hauling in a bumper crop of lobsters this year. The harvest started early and remains big. Wholesale prices are way down right now.

It’s clear that if you walk into a fish store that the price of live lobsters has indeed fallen sharply. But at the restaurants and seafood shacks that dot the coast, prices have fallen only modestly. Instead, the lobstermen’s pain is leading to windfall profits for restaurant owners, fueling dark talk of price fixing in some quarters.

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The market-price scheme does work in reverse: When lobster prices rise, the market price does rise with them. If the price of lobster spikes, there’s no sense in a restaurant selling one at a loss even if you have empty tables. But the ratchet really only goes in one direction. When upward price swings squeeze margins enough, restaurants raise prices. But falling retail lobster prices generate big restaurant profits, angry lobstermen, and vaguely disappointed tourists.

Read more about how market forces shape the price of restaurant food at Slate. Link

(Image credit: Flickr user tup wanders)

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Date
August 23rd, 2012

Author
Stranger to the World

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