Questions that are rarely asked

But they are asked by Roland Stephen:

What signals are food trucks sending by pricing only in round numbers ($6, $8 etc.) unlike brick and mortar competitors (whose prices are often very similar, but expressed with lots of .95s )?

My best guess is this.  You buy something from a food truck and then you eat it.  You don’t keep running up a tab.  (The same is true for food stalls by the way, though you may run up a tab in the hawker centre as a whole.)  In a sit-down restaurant, there is a sequence of salad, main course, drinks, dessert, and so on.  People might estimate their total running bill using first digits, and thus there is reason to “trick” them into thinking they have spent somewhat less than they have.  The food truck doesn’t have that same incentive.

Addendum: Many of you say “to economize on change,” and maybe so.  But why is this motive especially strong at food trucks?  The truck clearly has the room to carry the change, and the typically urban clientele is the same group of people who are paying $6.99 plus tax somewhere else.  In this context maybe speed matters more, or the percentage of cash transactions is higher to the extent many trucks do not take credit cards or wish to discourage the use of such cards.

Comments

Also a far higher share of customers are paying using cash!

True, but prices ending in .99 and .95 far predate credit cards (and presumably checks, although that's before my time). Your explanation does not reconcile well with that fact.

". People might estimate their total running bill using first digits, and thus there is reason to “trick” them into thinking they have spent somewhat less than they have. "

Umm, I just can't believe that. Businesses that price in "*.95" etc. are sending a signal, which is: "we're inexpensive." Only high-price stores price in whole units.

But, food trucks: Perhaps the signal is just, "We're fast." Although if they were clever the posted price would include any sales tax. One doesn't buy from a food truck because it's inexpensive so much as because it's fast.

Just about all large corporations price at 99's and 95's. Businesses that price in whole dollars tend to be more informal. I don't think it has anything to do with being upscale or downscale. But I strongly agree that whole dollar prices should always be tax inclusive. When they're not it just feels like they're jewing me out of that one cent.

Dude, you cannot be serious..."jewing"? Really? What is wrong with you?

Maybe the food truck guys just don't want to deal with inconvenience of handling nickels in every transaction.

I think fractional prices are a feature of establishments where the guy deciding pricing is far far removed from the guys manning the cash counter.

Does a fancy or non-chain restaurant ever have those annoying prices? I posit that every place where the owner also handles the cash register has round number pricing.

The 'annoying' prices could stem from agency issues. A large chain benefits from prices that force cashiers to open the till and give out small change (making it slightly harder to subtly pocket the payment without ever recording it) but a self-employed food truck owner obviously cannot steal from himself!

Beyond making change, I would think that adding prices together when customers order more than one item is the bigger issue. Round dollar prices would make it easier to add prices without punching numbers into a cash register or calculator.

There may also be some signalling though. Not using .95 or .99 pricing may signal that they are not run by business people, reinforcing their mom-and-pop, homestyle cooking image. That may be a false image of course. The truck may be run by very savvy business people, savvy enough to know that they should hide their business savvy.

Concur. Having owned and manned a food truck at one point in my life, I have to agree that for the truck vendor, transaction speed is paramount. Making change is time-consuming. There is no seating for customers to wait - no bar - no entertainment - and probably limited conversation. All things a regular restaurant offers to distract customers from the wait. Other factors - food trucks can (often) take a small premium for convenience - and there is little benefit to the food truck from using the "cheaper appearance" strategy involved in pricing at x.99. That leaves comparison to fast food establishments, which are more similar to trucks when it comes to waiting in line. But, I think if someone were to examine the phenomenon in detail, one would find that fast food establishments are more likely to consider themselves in competition with other fast food places. A food truck offers convenience, and sometimes preferred choice.

But at fast food places you are at least waiting indoors.

I walked away from a food truck just this afternoon, because the cashier and customer in front of me had gotten into a confusion and I thought OK, this will take too long. If I've already walked into a restaurant, there's a little more sunk cost.

Part of it is that many customers are innumerate, indecisive, and easily confused. Anything you can do to lower their cognitive load is a plus.

That was my thought also. Speed counts when your customers are standing in line and have other options if they get impatient.

My thought it is hinting to people that they would prefer payment in cash. At least in Ohio we don't have sales tax on food.

Also, where sales tax is charged, the prices generally include tax in the round number.

Do food truck guys conscientiously pay their tax? I wonder.

I hope not. They'd be heroes.

It's probably about transaction costs of cash not about signaling.

I think you are right about this. The food vendor, after he/she has prepared and delivered the food, wants the buyer to have the right amount of cash to move on to the next customer. There are transaction costs in pricing that overwhelm psychological effects of digit pricing. See my comment below.

The food truck near me has a sign on it that reads, "So we can serve you faster, we do not make change. All prices are rounded to the nearest dollar."

But, that does not require a tax payer funded study so forget I mentioned it.

Ding ding ding ding ding!

+1

Paying for meals from a truck! What has the world become? Good thing there's always a stiff Scotch at the Officer's Club with proper food to stand as the last bastion of civilization.

Yes, but you should try the beans and rice!

We don't have food trucks where I live, but I would propose that if they charge sales tax on top of these round prices, then it is about signaling, and if they include sales tax in the price, then it is about avoiding change on cash transactions.

Food trucks obviously haven't discovered behavioural economics. I would make the prices random so that people would feel like they're at a blackjack table.

At my econ grad school, there was a sub sandwich shop nearby where the grad students often got lunch. Every sandwich was basically custom ordered (even if the main ingredients were standard, you could choose whatever condiments or additional ingredients that you wanted) -- and thus had a custom price.

However that price seemed to vary randomly, even if you ordered the exact same combination of ingredients. At least such was the claim of one of the grad students, who was perpetually annoyed by the lack of clear pricing. The rest of us, despite also being econ grad students, simply shrugged and kept returning to that sub shop because random prices or not, its prices were low and its quality was decent.

at a food truck the posted price is always the tax-included price. the marginal benefits of pricing at e.g. 6.99 as opposed to 7.00 are unimportant because creating a rounded price lets the food truck operator move much faster

But in many jurisdictions, sales tax on prepared foods can be 10% or more. So a vendor who uses "tax-included price" might be selling the same thing for $7 that the food truck next door sells for $6 plus tax.

Calculating tax is even more time-consuming than counting change.

It's not the running total, although that is a good point, but rather the list price ending in .99 or .95 which are used to signal a sale or a special. Walmart goes to .89 to signal that they are always cheaper than the folks that sell at .99 or .95.

Marketing convention has it that selling at even dollar amounts signals quality, i.e., it is not on sale. You will usually never find a .99 ending on a price in a high end fashion store.

Here is a collection of some of the articles...only some...on this subject of digit endings on pricing: .http://en.wikipedia.org/wiki/Psychological_pricing

Why don't they just end this charade? We're all wise to it. No one today actually believes $99.95, is a dollar less than $100. In the 1920's, they thought in cents, today we think in dollars. Inflation has killed the value of this trick.

Proles still get suckered in by this. They do it because it works. Its not like MR commentators are all that susceptible to advertising either, yet they still do it.

Proles get suckered by "sales" at JC Penneys but I'm not sure the .99/.95 stuff means a damn to them any more, HL. I think they do it more because the Fg Str Pr marketing people are stuck in that mode of thinking and it's just institutional inertia at this point.

I think your example is bad, it isn't that 99.95 appears one dollar less than 100, it is also 1 digit less. I think it is generally believed that a different cost/benefit analysis goes on in customer's mind for single, double, triple, etc digit transactions so the store would like to creep up to the milestones without going over and triggering further thought about the purchase.

Jay, Read the literature and the field experiments. They test this effect all the time.

Round number prices signal an authentic experience without commercialization and marketing, which is attractive to people who eat from food trucks.

Whether this is because the food trucks are trying to signal this, or they actually are lacking in commercial and marketing expertise, is another question.

Nah. While some wealthy hipsters might seek an "authentic experience" from a food truck. Most people are just looking for lunch.

I'm amazed at the idea that a food truck counts as an "authentic experience" in somebody's mind versus the far more realistic case of a cheap and convenient lunch.

Dear God. SWPL's and their unquenchable, inauthentic striving for the "authentic."

It's darkly humorous that we went from a "die yuppie scum" culture to a culture where the only thing that matters is a yuppie's quest for authenticity. I fought the upper class, and the upper class won?

Well, it isn't a signal, but anyone who handles cash regularly knows that bills are easier to deal with than a mix of bills and coins. And it isn't as if 5 or 10 cents makes a difference to someone buying food to be eaten promptly (and quite possibly by hand) within a fairly specific time frame and location.

(Though this is an observation bounded by the fact that some places use less coins than others - in Turkey or the eurozone, paying with coins is practical enough - which is why prices like 3€, 3.50€ or 4€ are common - the first bill starts at 5€)

I remember the only occassion ever when I actually paid for a taxi using a single coin.

It was at the Slovak-Hungarian border, the city of Štúrovo (SK), and the 4 km journey from the border bridge to the railway station cost 2.00 Eur.

By the way, how's the weather over there in Baden, old boy? I leave this evening for Baden-Baden to take my curative bath.

Sahara dust turned the sky milky today, and showers are expected. Fairly heavy ones, in part because the dust provides an excellent medium for precipitation to form. Not that there is all that much experience with Saharan dust in Baden, of course.

However, Karlsruhe's Vierordtbad is considerably more attractive than Caracalla, if not quite so varied.

I have a novel idea. Why don't you ask the guy running the food truck?

One way to test whether it is transaction costs is to look at the pricing of food trucks that only accept credit cards...is there more price variability or is there still single digit pricing.

If I wanted to signal that my prices are based on cost, I would price by stating: Market Prices Fluctuate Based On The Market: Today's Price for the Halibut Special is....

Because it might (1) contradict somebody's elegantly constructed computer model, and (2) require spontaneous conversation with somebody outside the Caplan Bubble Horizon.

That second point reminds me of the comment thread full of people agonizing over what to call contractors and vendors with whom they, God forbid, might have to converse. How about "sir" and "ma'am."

(3) It might be interesting to try to investigate the question in general rather than for one specific food truck?

And besides, I bet you'll get a lot of responses to the effect of, "Well, it's what I see everyone else doing, so I don't want to be the dick food truck that deviates from that." This is not particularly useful if you want to know why something is the norm rather than just verify that people tend to follow norms.

If I'm recalling middle school correctly, scientific inquiry begins from the other direction.

I'm becoming reminded of that ship of climate scientists who got stuck in three years worth of sea ice that their models told them could not exist.

You plainly don't understand libertarian economics.

If you eat in a mid- to higher-tier NYC restaurant these days, you're very likely to see round numbers on menus. It's not just NYC either - I see this in other cities and in hotel restaurants and bars as well.

I guess this is more about lunch competitors like Pret A Manger, Salad Works, etc. Competition for food trucks isn't Subway or McD's.

This!

You don't see the burger going for $27.97 at a nice restaurant. It goes for $28. Food trucks sell to the wealthy, so they provide the kind of pricing the wealthy expect. McDonald's sells things for $3.99. The kind of people who eat at food trucks aren't looking closely at the prices and aren't going to be significantly influenced by a small deceptive practice. The price of lunch rounds to zero for them.

"Food trucks sell to the wealthy, so they provide the kind of pricing the wealthy expect."

This comment is pretty funny. You should probably get out more.

Have you ever been to a food truck? I've eaten lunch at them twice this week.

Tyler isn't talking about the sandwich truck that shows up at the job site, he's talking about the gourmet taco place that parks next to your urban office building. I'd be astounded if the average customer makes less than $100k per year.

I didn't mean to imply the food trucks were selling $28 hamburgers, if that's what threw you. Apologies for reacting harshly if it did.

I meant their clientele likes the rounded pricing as a sign that the food truck is like the other high-end places they eat at, and not like the places that target poor people. Also, as wealthy people, the difference between $8 for a sandwich and $9 is not very important, so even if the deception of using $8.97 as the price worked, it wouldn't help much.

At least in NYC, Finch is correct. Food trucks aren't venturing out to the Bronx. They're in Manhattan, parked outside the offices of moneyed people.

I can't speak for SF or other cities.

'Tyler isn’t talking about the sandwich truck that shows up at the job site'

Though back in the heady days of GMU's infrastructure growth in the 80s and 90s, that is exactly the sort of food truck that was seen on campus - well, for those that were looking. In general, they weren't that good. And I can never remember any faculty ever talking about them, even if some of mine co-workers at the time did.

There are very few "gourmet taco trucks." This is typical urban myopia.

> This is typical urban myopia.

No it's not. It's the subject of the conversation. Tyler is not talking about "Mary's Hot Food" that pulls into the back parking lot of the warehouse you work in selling egg salad for $2.49 and coffee for a quarter.

He's talking about the gourmet Jamaican food truck that's showing up on the street 20 floors down from my office window. Parked next to a tea-themed truck of all things. The gourmet taco truck shows up here weekly.

Well, to be completely honest, the question comes from Roland Stephen.

And if the media is to be trusted, the idea of there being more than a dozen food trucks within anything resembling walking distance of Prof. Cowen's Arlington, VA office is amusing (though there was a time in the 80s when one joked there were that many Vietnamese restaurants in that part of Arlington - Queen Bee and Cafe Dalat being particularly notable).

It is likely fair to say that Prof. Cowen is not actually basing much of his response on anything resembling daily experience.

This is how it works in Seattle as well. 3 tacos at a truck parked in front of the Amazon or Starbucks HQ will cost you exactly $9. 3 tacos at a truck in a gas station parking lot will cost you $4.89.

The food vendors around the Patagonia store in Manhattan at Columbus Ave are not selling to the poor. Though the prices are reasonable enough, in NYC terms.

"Food trucks sell to the wealthy"
does this mean I've finally made it!

Nah, sorry man, they serve me and I look homeless.

"Turkey Vulture ... they serve me"
Some of these roach coaches, I would believe it.

Anyone who thinks "gourmet" and "food truck" belong in the same sentence deserves to get fleeced from the $10 they spend for one taco. They buy their stuff from the same places the normal food trucks do, and if people here are thinking that pricing is determined because its so hard to collect money in a truck, they should also go and think about what that means for preparing the actual food in one.

Nobody's charging $10 for a taco, so save your breathless hysteria. You have outrage about something you clearly have no experience with.

I have eaten from food trucks in NYC out of convenience many, many times. The food is almost always delicious. I've never had a bad lunch and the price isn't much different from what you'd pay for a sandwich from a deli ($7-8).

My understanding is that one reason for the.95/.99 pricing is that it was a way of forcing the cash register to open and record the sale (i.e., a solution to a princpal-agent problem). Since most food trucks are operated by the owner(s) (or they are at least present), you don't have that problem.

"My understanding is that one reason for the.95/.99 pricing is that it was a way of forcing the cash register to open and record the sale"

I've heard this stated before. Round numbers result in a lot more "no change required" transactions and more opportunities for the cashier to pocket the money. However, in the case of high volume fast food restaurants, the cashier has to put an order into the system to have it prepared in any case. So I'm not sure whether that reason still has a lot of validity.

Also, many fast food restaurants now have a $1 menu which is a round number (before tax). And then some restaurants advertise a 99 cents menu.

To encourage cash transactions so they are less obligated to report their income to the IRS.

That might be one reason, but I doubt they particularly care about the IRS. Avoiding paying the given state sales tax is much more lucrative.

Yes, good point. Thank you.

In Australia all cash transactions are rounded to the nearest five cents. Frankly five cents change is a pain. Give me the straight dollar any day. So 1960s to think you get a bargain at 6.99 v $7. The food trucks probably save time dispensing change and the consumer glad for the straight up call.

More expensive restaurants don't use the ".99" pricing scheme either. Every entree is priced as a whole number.

Theres not a lot of room for people to work in that truck space, and the worker who is taking orders and dealing with the transaction money might be doing other time sensitive tasks. Fewer people are employed doing more jobs each. Reducing the time it takes to do each one adds up

I would speculate there is a merchandizing bias working here. The food truck is trying to grab passers-by. And openly compete with nearby competitors. Clean whole numbers, tax included, require less thought and, thus, are likely to not interfere with the impulse by. I'd have to check but I believe Walmart and others use whole numbers (or 10s of cents) for impulse items at registers.

The matter also removes the need for a register making fast transactions out of a cash box. Not to mention, speed things up on the daily count and at the bank.

A couple more thoughts. We see more whole dollar pricing on the Specials sheets and especially, the Specials board. Could food trucks be trying to unconsciously tie into their fare being "special" rather than just a menu? Seems this would work with the pretentious foodie crowd that rave about food trucks in some locales.

Also, for those restaurants that have their menus on the sidewalk for passer-by perusal, do they price more in whole numbers or conventional .99 cent style? If so, does it happen in all locales or is it more prevalent in tourist (transient customer) areas?

It's cultural, your peers do it and your customers expect it.

The origin of this culture is the principal-agent problem that Norman Pfyster mentioned, and, furthermore, the lack of dedicated wait staff to handle cash strengthens a truck owner-operator's incentive to round prices.

Its all about branding. Food trucks want to convey a casual and authentic brand-- they are the very opposite of Olive Garden. Everyone knows using prices that end in .99 is a gimmick (whether it works is irrelevant in this analysis). It feels corporate to charge 7.99. 8 bucks is less contrived and aligned with an authentic brand.

I really don't think that branding matters so much. You buy from a food truck because it's right outside work. Talking about authenticity for something that's a glorified hot dog cart is a sign a person is an insufferably twee hipster.

I used to frequent a used records store (yes, vinyl!) that priced in odd increments. After buying a few records, I figured out that they priced everything to add up to round numbers after sales tax was added.

A record had $8.49 on the price tag, and would sell for $9.00 after 6% sales tax. $9.43 would round up to $10.00, and so on. Pretty clever of them.

clever, but if the prices are actually stickered on to the records, probably a huge pain in the ass when the sales tax rate changes. (which has happened two or three times in the last five years in the city of los angeles.)

Are food trucks less likely to use technology (POS stations) to help with the math?

Or alternatively is it more important for the customers at the food truck to know precisely what they are paying before ordering (prices in round numbers include tax?) whereas restaurant prices rarely include tax? Brick & mortar are heavily driven by chains that have consistent store to store prices but exist in various tax districts.

Around here they all seem to use Square or some other smartphone credit card reader.

So many comments talking about the practicality of dealing with cash.

What happened to the importance of signalling?

Or is everyone too polite to point out that this is yet another example of a stereotypical tenured academic showing a lack of anything resembling real world experience when posing what seems to be a question to broaden understanding of how things work? Mainly because the question is one they have, not one that is mysterious to anyone who has ever handled cash transactions in a time pressed setting. (Why yes, I use to handle registers with thousands of dollars of cash in the late 1970s and early 1980s at GMU - and considerably less after the first few weeks of classes. It was a great job - getting paid to hear real Nobel Laureates was just an added benefit.)

You don't need to signal with a food truck. It's not like there's often another food truck down the road for you to go to. The psychology of pricing is something done to differentiate yourself as a brand, but food trucks often don't need to do this; they "brand" by the location they choose to service. Like vending machines.

And yet, that is exactly how the post frames it - 'What signals are food trucks sending by pricing only in round numbers'

There are five scheduled to park outside my building today. The least ridiculous sounding one is a NY style deli offering $11 sandwiches.

You're thinking of the wrong kind of food truck. Your kind obviously exists and existed long before Tyler's kind (and will probably exist long after Tyler's kind fade away), but it isn't what Tyler is talking about.

And my kind is precisely what most people will encounter. Got to love economists focusing on the exception and not the rule when they wonder about pricing.

I don't see why it's silly for him to ask a question about the sort of thing he encounters in his life, and I don't understand why you'd criticize him because it's not the sort of thing you encounter in your life. Numerically, I'm not sure which food truck experience is more common. And I don't see why it matters.

For the record, I think that Tyler Cowen's perspective on food is bizarre and it's not one I share. I don't like many of the trends he lauds. But the question on pricing is a completely reasonable one.

'about the sort of thing he encounters in his life'

Well, it is quite unlikely this has anything to do with his daily life (see above). Arlington VA has a long way to go before being comparable to Manhattan.

Because too many people in general assume that somehow what happens in Manhattan serves as the default model of economic or cultural behavior. We have all these economists who never seem to look past what they encounter in life, and they make predictions and theories based on a small subset of the data. Then they get blindsided when the rest of the USA makes their models invalid.

> what happens in Manhattan serves as the default model of economic or cultural behavior.

Not that it matters, but I'm not in Manhattan.

Your criticism might be true in general. But the question in the initial posting, however, was specific to the price-rounding food truck set. And when Tyler talks about food trucks, he's talking about fancy hipster-style food trucks he cares about. So the criticism is not appropriate here. The context is obvious, and he's not trying to generalize to the food truck at your place of work.

"You’re thinking of the wrong kind of food truck. Your kind obviously exists and existed long before Tyler’s kind (and will probably exist long after Tyler’s kind fade away), but it isn’t what Tyler is talking about. "

How do you know any of that? I think your are personalizing his comment with your own experiences.

Maybe I'm mistaken, but it seems like he's talking about the kind of food truck that has round-number pricing. And he normally talks about the gourmet food truck scene.

"Maybe I’m mistaken, but it seems like he’s talking about the kind of food truck that has round-number pricing"

The taco trucks I've used in Fresno used round pricing. A taco platter and a canned soda was $5. It was most definitely not a gourmet food truck.

The food truck that comes by my office (and the cabinet-maker across the street) is more the "mobile vending machine" type - one guy, selling mostly prepackaged stuff, with some hot food he or his wife prepared in their kitchen and covered in saran wrap. He doesn't sticker or tag anything, but all his prices include the sales tax, and all end in 5c or 0c. (But there are a lot that require breaking a quarter. I'm not sure why he bothers - the 90c egg roll would sell as many at $1.)

Exactly.

The question assumes that the reason couldn't be some simple practical consideration. Must be signalling or something.

Get out more.

Entering round numbers into the 10 key is quicker.

Using non-round numbers is a mechanism for reducing skimming by employees - its harder to feign ringing a customer up and pocketing the money yourself if you have to make them change. That is why a burger you buy from a cashier is $5.99, but a steak you buy from a waiter is $21.00. Food trucks are disproportionately run by their owners. If you go to Bob's Taco Truck, Bob is going to be cooking and running the register, he is executing too many simultaneous tasks to make change and he isn't worried about stealing from himself, so he charges in round numbers. If you go to the (now defunct) District Taco truck run by employees, the prices go back to being non-round numbers.

For the same reason they're selling food from trucks -- to be available at the right place at the right *time* for the customer. A retail operation is a stationary fisherman, waiting for the customers, perhaps luring them in. A food truck can *hunt* for the customers. The hunter needs to move more swiftly than the fisherman.

The food truck saves the vendor rent for a store but requires her or him to get the truck to the customers. Every aspect of doing that has special costs (fuel, possibly truck rental, driver and vendor time), most of which can be saved by saving time, or even cutting the day short if the pace of business drops too low: the large fixed expense of the rent is gone. Unlike with renting the store, where the owner can more likely maximize the return on the sunk costs of renting the store this month by staying open longer and waiting for, or perhaps persuading, more people to come to the store, or to come at unusual times, the truck-based vendor has very different strategies to maximize returns: serve all the customers he or she can in a particular location as fast as possible, and then move on, or cut the time of running the truck short and perhaps save fuel and wage costs if a particular location is tapped out.

Since the truck is mobile, it makes sense to take advantage of that and hit more locations. Or even if the food truck serves just one or two locations, the food truck can be used *as a truck* for other purposes when it's not doing good business.

When you buy food at a diner, you put money on the table. When you buy food at a 7-11, you hand money across a counter. When you buy food at a food truck, you are standing outside, and you hand money *up* to a guy in a truck, and he hands your change down.

The physical passing of money is *harder*, more fiddly, more likely to lead to dropping money, and if you drop it you drop it on a curb and roll under the truck or blow away or whatever.

Minimizing complexity in this transaction is valuable -- much more so than in an indoor establishment.

This is remarkably not hard. Round number prices speeds up service. Most food trucks can serve only a few customers at a time. Making change lengthens lines and costs customers time. Concession stands at ball parks use round numbers for the same reason.

You make change no matter what. There's no appreciable difference in time between giving back ten bucks out of twenty as opposed to 13.42 out of twenty. If time giving change were the main factor in pricing, most retail stores or restaurants would have adapted similar pricing because they have a lot higher volume of transactions over a greater volume of time. Department stores track productivity to a measure that most academics would find intrusive if not insulting; if round numbers appreciably sped up ringing, they'd know.

"There’s no appreciable difference in time between giving back ten bucks out of twenty as opposed to 13.42 out of twenty."

That's just completely wrong. Yes, there is a big difference. AND you don't have to wait for the customer to dig for change to pay teh bill.

My favorite truck has 2 dollar bills paper clipped together, and 3 dollar bills clipped together, and 4 dollar bills clipped together, so they don't have to count out singles.

I guess they haven't figured out that counting singles, pennies, nickels, dimes, and quarters wouldn't take any more time.

Two of the food trucks I frequent sometime have "premade" change for the more popular orders (one of which, contra this question, is $6.50). If you pay with a ten, he points you towards a pile containing $3.50 in change; there are other $0.50 piles for people who pay $7. It looks like he puts the piles together when things are slow.

Making change in a food truck is a little different from doing so in a shop. If there's only one person, he has to either change gloves or wash his hands every time he makes change (if he's concerned about hygine). That doesn't happen at the supermarket.

It does seem that food truck operators are reacting to their own peculiar situation and experience rather than relying on the judgement of someone who worked a cash register in an unrelated business in 1978.

That's quite foolish on their part, isn't it?

'There’s no appreciable difference in time between giving back ten bucks out of twenty as opposed to 13.42 out of twenty.'

Yes there is - but that is only my experience as a cashier speaking (on my busiest shifts, handling over $10,000 in cash in the late 70s/early 80s).

The advantage of bills only is especially true if one is using a billfold designed to handle bills - of which I have no real personal experience, except for watching them being used.

I thought of another reason why the truck has different incentives from the retail operatoin -- the food truck is nearly by definition doing business where both the *customer* and the *vendor* are in a hurry. I previously described why the vendor's in a hurry: the food truck vendor is a hunter, not a fisher. But what about the customers?

In a restaurant, customers may well make an event of the meal, and why not, if the restaurant is comfortable? With a food truck, the customers want to get their food and get gone so they can go eat it, especially in bad weather or if there are long lines.

At the same time, the wise food truck vendor has hunted for locations with the local maximum possible number of customers. For example, in NYC, it's not uncommon for morning coffee / bagel / pastry trucks to be right near busy subway exits. Lots of customers mean long lines. Those customers want to get their bagel and coffee and get to work, and they'll only tolerate the long line if it's moving *quickly*. So, it's uniquely good for both the vendor and the customer if the transactions happen very quickly.

Other things we should expect -- compared with restaurants, food trucks have a bias for the most easily packaged foods, food trucks have a bias for shorter menus than restaurants, food trucks are much less likely to take any kind of special order or variation, and food trucks engage in some amount of pre-packaging of common orders.

'Many of you say “to economize on change,” and maybe so.'

Actually, a number of commenters with actual experience handling cash disagree with 'maybe so.'

'The truck clearly has the room to carry the change, and the typically urban clientele is the same group of people who are paying $6.99 plus tax somewhere else.'

In a setting that likely involves a dedicated cashier, with dedicated food preparation personnel. This does not exactly describe the typical food vendor on public streets, however.

'In this context maybe speed matters more, or the percentage of cash transactions is higher to the extent many trucks do not take credit cards or wish to discourage the use of such cards.'

Well, when there is more than one food street vendor around, how many people on a typical day are likely to go to the one with the longest wait? And seriously, I cannot even imagine credit cards entering the discussion in this context - are you sure you really go to that many Asia restaurants in strip malls around DC? Because the ones I remember in Ballston and Crystal City years ago didn't do much business with a cash register, much less something involving the sort of transaction tracking that credit cards allow (hint - centuries of experience in not paying taxes in a cash environment did not disappear when various Asian restaurant owners shifted their market to the U.S. This includes the shocking notion of being able to pay untraceable bribes when necessary - as a business expense only, of course.)

My guess? The reason for the non-round number price amounts is likely so that management can watch employees to make sure that they don't steal from the till, i.e., they are forced to make change after a sale rather than put the money in their pockets. No such similar concern exists with a food truck as it is usually worked by one owner-operator.

This isn't limited to food trucks. Ballpark hot dog vendors don't sell hot dogs for $4.99 instead of $5. The transactions costs are far lower if prices are round numbers with tax included when doing many small cash transactions.

I suspect it's because there is frequently a line at food trucks and not having to deal with change is faster, besides, when you buy at food trucks, you're hands are usually full with food and you don't have a free hand for change.

The framing of the question leaves it open to a bit of equivocation. I tend to agree with those who think the primary reason is so the FT guys don't have to deal with change, and time savings associated. There still may be signalling going on, albeit unintentionally on the part of the vendor. I'm not sure what that may be, but I do know I appreciate any business that sells me things in round dollar figures. I'd rather spend the extra one-to-five cents and not have thirty goddamned pounds of change sloshing about in my pants for the remainder of the day.

Are the food truck prices also tax-inclusive?

Interesting to observe the amount of marginal gray matter activity devoted to a relatively inconsequential subject. Especially the repeated references to saving time. If time is money maybe a time bank, corresponding to the Fed, is required. The US cultural obsession with time is pathological.

It seems as if you have never worked as a cashier with a line of 30 people - day after day.

And if you have experience with Aldi in Germany, you might also have experience with just how important time is to Aldi - profit through volume involves moving large numbers of customers as quickly as possible past the cash register.

It isn't that different when talking about a small retail operation with small margins.

I was in Aldi yesterday. There are six cashier stations in the store but only one was in operation. Never have seen more than two open simultaneously.

If, in making a purchase at Aldi, a customer stands in line for 2 1/2 minutes instead of 45 seconds, how much money does the business lose? Is it possible that at closing time employees might have to forego sales and usher customers out the door for lack of time to ring up their purchase?

If you're a cashier, what difference does it make to you how many people are in line? Your job is to ring them through, is it not? Or was it your goal to have no one in line so you could peruse the National Enquirer?

Speed is obviously part of it. So is hygiene--handling paper only draws less attention to how dirty money is, and how the guy handling dirty money is handling food.

Another factor may be that the "tax inclusive" price isn't really tax inclusive (because the tax is never really paid).

I was looking at the lowest priced chicken entree on menus posted in front of restaurants near Disneyland: the cheaper, less socially intimidating, less class restaurants used two decimal point: e.g., $11.95. The classiest looking ones used zero decimal point prices: $18. I came upon one restaurant that by decor seemed intended to split the difference between low and high and, sure enough, it used 1 decimal point: $14.9.

Tyler, your post prompted me to run the following question by you. Your answer will almost certainly be authoritative, even though it probably has more to do with consumer behavior and psychology than economics in a strict sense…I welcome thoughts from other commenters as well, of course...

I am hoping to launch a web-based service in the next couple months and am planning to price it in on of the following ways:

$3/mo. or $33/yr.

$2.99/mo. or $32.99/yr.

The transactions will be through a website, credit card-only, and one of the selling points of this service overall is Simplicity. Therefore, I favor the 3/33 approach. However, a very intelligent friend of mine who happens to have specific expertise in pricing argues that the .99 suffix still works on people. What do you think?

2.99/month and 33/year. If you can afford that much a break, $29/yr.

I would say a majority of the reasoning comes straight from ease of transaction. It makes it a whole lot easier when you are either given exact change or only have to return bills to the customer.

The food truck has one counter, a brief lunch hour to do business, and an obvious line that potential customers can assess from a distance. Even moreso than in fast food, moving customers through the line is paramount.

Some of the comments above focus on speed only as an explanation. But, next time you go to McDonalds, observe that they have very few items in even dollar amounts. What is relevant is the opportunity cost of time for the vendor...one more sale by reducing transaction costs in selling and being able to make food for the next customer. In McD's there is a division of labor between food production and sales.

This falls under "questions that are rarely asked because the answer is so blindingly obvious."

In a food truck, the guy who puts the food on the plate, delivers the plate to the customer, takes the customer's money, gives the customer change, and cleans everything up is THE SAME GUY.

Which of those five things does he want to minimize, because it provides zero value to either his business or the quality of his customer's experience? Right -- giving change.

Jesus, people.

No, no, just no. These food trucks have one person taking orders and handling payments and one or two other people preparing food.

Again, we're not talking about the grease mobile that parks at a construction site. We're talking about trucks that park outside wealthy urban office buildings.

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