Monday, September 17, 2007

An Economic Puzzle: Reservations at Restaurants

I'm currently working on my thorough review of Bioshock and its critique of Objectivism. But while that's in the works (and so that I don't forget in the mean time), I have an economic puzzle that recently came up. This is in the vein of "Why do people tip?" and "Why do stores charge $5.99 instead of $6.00?" (The answers to which are "Good question" and "so that the guy manning the cash register is forced to make change, recording the transaction, and preventing him from just pocketing the money", respectively.)

Why do some restaurants accept reservations, while others do not? Please note that I'm not asking "why take reservations?" in a specific sense. That is, I know that the purpose of reservations is to create an orderly list of people who can plan their arrival at a restaurant with greater certainty about their dining time. Rather, I am asking why some restaurants do not take reservations, while others do. What causes the difference in behavior?

One characteristic that stands out is that restaurants that take reservations tend to be fancier places. That is, McDonalds doesn't take reservations. On the other end, extremely fancy restaurants may only accept diners with reservations. In between, however, is a big muddle. Some chain restaurants accept reservations; others do not. Some fancy independent restaurants accept reservations; others do not (my wife and I ate at such a restaurant in Nashville on Saturday night). Also, this is just correlation, not causation. I still don't know why fancier restaurants are more likely to take reservations. Perhaps they want to avoid an unseemly crowd at the door.

Some restaurants will allow diners to "call ahead". That is, one may call the restaurant a short time in advance of one's arrival and ask that one's name be put on the wait list. I've always wondered, however, how far in advance this can be done. Can I call two hours ahead? What about four hours? Twenty-four hours? At what point does calling ahead become a reservation? One response is that calling ahead doesn't guarantee me a table at any particular time; it just gives me a place on the current wait list. Still, a place on a wait list gives me a fairly good idea of what time I'll be eating.

Does it perhaps have to do with unpredictability in the number of diners? That is, if it is difficult for diners and the owners to know if this Friday will be packed or empty, do they use reservations as a way of figuring this out in advance? This begs the question of why some restaurants have such unstable numbers from week to week. Why do some restaurants have such predictable numbers of guests, and therefore no need for reservations? If this explanation is the true reason, then do restaurants that do not take reservations occasionally take them when periods of uncertainty arise (for example, during holidays, when the owners may not know if people will be dining out more due to vacation, or less, due to more meals cooked at home or many people who leave town)? Perhaps they find it best to stick to their "no reservations" policy at all times in order to avoid confusing and possibly angering customers.

Surely there are other explanations. Perhaps someone reading this has worked in management at a restaurant, or started a restaurant, and can justify the decision to allow or disallow reservations.

Here's a possible explanation that occurred to me shortly after posting. Asking why some restaurants take reservations and others do not is like asking why some serve tacos and others do not. That is, perhaps different restaurants are simply trying to cater to different customers. Some want to show up and wait, others want to be able to place reservations in advance, just as some want tacos and others want palak paneer. There's nothing really wrong with this explanation, except that it's not interesting, and appealing to differences in tastes and preferences is considered very lazy by most economists.