The Restaurant Puzzle
A restaurant provides me with two different products: Food and a place to eat it. Both are valuable to me, both are costly to the restaurant. Yet restaurants price only the food. The table is free, however long you use it. Why?
To see the puzzle, consider how a restaurant designed by an economist might operate. At each table there is a clock; it starts running when you sit down and the waiter shows up to take your order. When you get your bill, one of the items is table rental, proportional to the number of seats at the table and the length of time for which you used them.
The advantage of this approach is that it can be used to give diners the right incentives on both margins. Diners who want to spend an hour and a half in conversation are free to do so, with no dirty looks from the waiters—but they will pay for the privilege. Under current circumstances they are imposing a cost on the restaurant and the patrons waiting to be served and, social pressure aside, have no incentive to take account of that cost in deciding whether or not to move the conversation to some less costly space, perhaps someone's living room.
Since the restaurant is recovering part of its cost from table rentals, the price of its food can be correspondingly lower; patrons will not be discouraged from getting soup or salad by the fact that their price is higher than the actual cost of producing them by the full amount needed to pay the restaurant's fixed costs. Economist readers should be able to fill in the argument for themselves. It is the usual argument in favor of using prices as incentives to make it in the interest of individuals to take proper account of the costs and benefits of their choices.
I have, of course, oversimplified a bit. When a restaurant is half empty, the marginal cost to it of my sitting at the table is essentially zero. So a restaurant run its table clocks only during the hours when it expects to be operating at capacity. That will give diners who like leisurely conversation an incentive to try to fit their conversational meals into the times when they do not impose costs on others.
It's easy to imagine special reasons why a restaurant would not adopt such a policy. Perhaps it almost never operates at capacity. Perhaps the nuisance of keeping track of table time is greater than the gains. Perhaps a clock at the table would interfere with the aesthetic experience of fine dining for its patrons.
Each of these reasons would apply to only some restaurants. So we would expect to observe a world in which some restaurants priced only the food, some priced only the table and gave away the food—all you can eat buffets come close, although they charge a fixed price for the table, not a price per minute—and some priced both. Yet, so far as I know, no restaurant follows what I have just argued is the most natural and obvious pricing strategy, separately pricing food and table rental.
Which is the puzzle.