Thursday, September 18, 2014

What do All-You-Can-Eat Buffets and Health Insurance have in common?

As somebody who loves a good (and sometimes bad)  all-you-can-eat buffet, I consider myself somewhat of an expert on the subject.  I even considered majoring in "Chinese Buffet" while in college.  Sadly, there is little demand for a buffet expert.  I always wondered how buffets actually make money.  It turns out that many economists have asked the same question.

Real the article below about Bill Wisth and the economics of all-you-can eat buffets, watch the video, and then answer the questions that follow.

Use the internet to find another article about the Economics of all-you-can-eat buffets in order to answer the second question.  Be sure to include the webpage link at the end of your response.  You may have to read multiple articles before fully answering the question.

http://www.forbes.com/sites/modeledbehavior/2012/05/23/the-economics-of-all-you-can-eat-buffets/
https://www.youtube.com/watch?v=czq_QIUQIRY


Discussion questions:

  1. Explain the concept of adverse selection and how it relates to the author's argument about all-you-can-eat buffets and health insurance?  Why shouldn't either exist?
  2. How do all-you-can-eat buffets actually make a profit?  Be sure to use the terms marginal cost and marginal benefit in your analysis.