It probably won't work because it contradicts behavioral economics. Daniel Kahnemann won the nobel prize in economics in 1992 "for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty". One of his findings is that people tend to overreact to small probability events, but underreact to medium and large probabilities.
What that means in the case of this particular business model is that customers will be wary of reserving a table at an early stage where they will potentially pay a high price for the seating even though the probability of this happening is very low.
If you haven't heard of Kahnemann's work his nobel lecture is definitely worth watching - it will give you some great insights on pricing, auctions, and why the economy works as it does.
I haven't read, but maybe I should - just checked out the reviews on amazon.
It is interesting to note though how markets (and in particular stockmarkets) are heavily influenced by behavioral economics and traders inability to assess a situation correctly in statistical terms, which creates a non-equilibrium in the marketplace. I actually thought up a plan for exploiting this that might just work, unfortunately I am not a programmer so I will have a tough time implementing it.
I agree. I know I wouldn't go for this sort of scheme unless there were special circumstances.
I think popular restaurants should try and find a way to offer real-time reporting of queue lengths and availability of items on their menu so that I could make a good decision quickly when friends call and want to eat somewhere.
heh i dont know if this would actually work in a restaurant.
how are they going to 'fulfill' the seating fee? does the user (restaurant goer) have to sign up while they wait and pay $5 with their CC in a little terminal before they sit down? if so, is this really any different from an online reservation service like OpenTable (the variation being you aren't actually getting anything in return from the service, just paying a fee)? are customers supposed to be happy with this?
the only way this could practically work is if the seating fee was charged to the bill when they are seated. how are you going to communicate this fee to the customer? tell them at the door? any restaurant that implements this will certainly solve the problem of over booking. they'll alienate all of their customers.
"welcome to Posh Food, where we are so pompous we charge you a floating fee for the privilege of dining here. right now it costs $8 just to sit down. cash or charge?"
What that means in the case of this particular business model is that customers will be wary of reserving a table at an early stage where they will potentially pay a high price for the seating even though the probability of this happening is very low.
If you haven't heard of Kahnemann's work his nobel lecture is definitely worth watching - it will give you some great insights on pricing, auctions, and why the economy works as it does.
http://nobelprize.org/nobel_prizes/economics/laureates/2002/...