Working from Home

I wonder if it’s less about predictability per se, and more about avoiding signals of being a potentially duplicitous trading partner.

If I know that a restaurant has different prices for lunch and dinner, then there’s no real difference between lunch discounts and dinner surcharges. But suppose I’m not aware of the dynamic pricing. I go somewhere and find the price to be higher than (what I believed to be) the advertised price. In this scenario, there are several possibilities from my perspective:

1. The seller made an honest mistake, a typo, something was mislabeled, etc.
2. I was simply ignorant of the dynamic pricing, despites the seller’s efforts to advertise it; or
3. The seller’s trying to scam me.

If it’s costly to discover which of these possibilities was the true one, then it may be sensible to switch trading partners, even when the price misunderstanding is my own fault. On the other hand, when the price is lower than I expected, possibilities 1 and 2 are still on the table, but not 3, and there’s less of a reason to cut off the trade relationship.

So what’s the seller to choose? Lunch discounts or dinner surcharges? For the informed buyer, it makes no difference. For uninformed buyers, implementing a lunch discount will result in more customers but fewer repeat customers. I think there’s another testable prediction here: I’d expect “dinner surcharges” to be more common for sellers who have fewer competitors and in cases where there are large switching costs for the buyer.