Price discrimination for Big Macs

Is the Big Mac about to be the test bed for a fresh example of price discrimination?

McDonald’s is reported to have decided that it is dropping the idea of “one price fits all” for it’s chain of over 1,200 franchise-based stores across the UK and may move towards regionally-based pricing for cheeseburgers and other products. Like many other fast food retailers, McDonald’s has come under huge pressure because of rising operating costs. The key issue is how much of the rise in the price of ingredients and wages for staff can be passed onto consumers without it damaging sales volumes. Is the market demand for burgers sensitive to the economic cycle? Is the demand for McDonald’s burgers price elastic or inelastic?

The Financial Times has reported that Revenue Management Solutions has been commissioned to do some market research to find out how price-sensitive customers are in Britain and recommend where and on what menu items it can raise prices by 10p-20p. This would move McDonald’s closer towards Burger King which allows franchises to charge different prices and Sainsbury and Tesco which charge different prices at high street stores.