Barry Nalebuff’s tea

"The label of Barry Nalebuff’s, Honest Tea, which is sold on my campus, had the economics department up in arms last year.  I don’t have one in front of me, but in addition to the quote you shared, the label contains a graph plotting taste (total quality or utility in a sense, I guess) on the y-axis and sugar (presumably the only important input to the manufacturers) on the x-axis.  The graph is parabolic, revealing an increasing marginal product of sugar up to a point, and then a diminishing marginal product all the way down to the x-axis.  The manufacturer puts the competition way down past peak, as one might expect.  However, the manufacturer plots Honest Tea just BEFORE the peak of the curve.  That is, it seems they do not use sufficient sugar to maximize taste by their own standards."


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