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Those Michelin Stars Translate as Dollar Signs
Here is my latest New York Times column, on the economics of fine dining and The Society for Quantitative Gastronomy. It is fitting that I am now in Lyon. Excerpt:
Receiving a Michelin star increases prices in a Parisian restaurant by 20 percent, controlling for measures of quality, décor and location. Michelin-starred restaurants in fancy hotels, or in areas with other Michelin-starred restaurants, also have higher prices, again adjusting for quality. Diners are paying more to eat in fine or prestigious surroundings, whether or not the food is better. One gastronomy expert, speaking in Le Nouvel Observateur, noted, “Gaining a Michelin star ensures that your banker will be kind to you.”
For those who hold the food as their main concern, the researchers offer a way forward. Dr. Verardi and Dr. Gergaud have built an index for overpriced and underpriced restaurants, relative to their food. They use the Zagat Survey to Parisian restaurants — whose popularity rankings are generated by diners’ reports, not critics — to provide an independent measure of customer satisfaction, which is then compared with price.
There is also a new Journal of Wine Economics, see the column for more information. Here is Dubner, on the same.
Posted by Tyler Cowen on July 13, 2006 at 02:59 AM in Food and Drink | Permalink
Comments
I believe Zagats is a biased method of estimating food quality. In NYC, Zagats is notorious for inflated scores for expensive restaurants. People want to self-validate that their expensive meals were worth the cost. I be inclined to just the opposite of what these Drs did, use Michelin as the true estimate of quality and Zagats as the popularity contest.
Posted by: OneEyedMan at Jul 13, 2006 8:41:52 AM
In going to a new restaurant, there exists an uncertainty over the quality of food. If the restaurant has a high ranking and a few stars, this risk is greatly reduced. The 20% increase in price could be a result of people willing to pay a premium in order to forgo the risk.
Posted by: Jonathan at Jul 13, 2006 10:21:06 AM
OneEyed, that bias doesn't undermine the results of the study; if anything it means they're understated. Jonathan is right, though. The writers could easily be reversing the causal direction, and the higher prices are what patrons pay for the informational benefit of the Michelin star (or similarly, they pay more because the expected food quality is higher).
Posted by: Dave at Jul 13, 2006 11:56:55 AM
Zagat's cannot be used for cross-city comparisons. There are "29" restaurants in
some cities that would not get "25" in New York or San Francisco, but those eating
at those places do not know what a good restaurant is. There are serious sampling
biases cross-city for Zagat's
In Paris there is a high correlation between what Zagat says and what Michelin says.
I have not looked at the most recent ratings, but it is always interesting to see
where there are noticeable disjunctures. Thus, a couple of years ago, the top list
of Zagat's were all 3-stars, but one 3-star was noticeably not on the top list, indeed
much further down, Ledoyen. I do not know what its current ranking on either list is
right now.
Posted by: Barkley Rosser at Jul 13, 2006 1:36:45 PM
Zagats gives separate rating for food, decor, and service. (Did I miss one?) Before you count a restaurant as overpricing their food based on Zagats, make sure you take the decor and service ratings into account as well.
When I'm looking for a fantastic night out, I want high ratings on all three, not just good food. And I'm willing to pay extra for it. If you are willing to eat great food in a mediocre setting with undifferentiated service, you should be happy to pay less, but if you have guests that may not be what you're looking for.
Posted by: Chris Hibbert at Jul 13, 2006 3:14:59 PM
Michelin has what is essentially a separate decor
rating, forks. They can range from one to five, and
also they can be either gray or red. So, the top,
such as La Tour d'Argent, has five red forks, even
though it fell to only two stars for food some years
ago, leading its proprietor, Claude Terrail, to declare
that "there are worse things than death." (During WW II
Terrail rushed back from the front when it was clear
the Germans were heading for Paris to brick up and
preserve from German deprivations the wine cellar there,
almost certainly the best in any restaurant in the world,
with cognacs dating back before the French Revolution).
Also, a chef in Bourgogne committed suicide a few years
ago when it looked like his restaurant would lose its
third star.
I think service is buried in the food rating. Service
is almost always superb in the multi-numbered stars
restaurants. I will note one exception, my candidate
for most overpriced restaurant in the world, and the
most expensive in Paris (at least as of a couple of
years ago). That is Lucas-Carton, a three star and
five red forker. Overrated and overpriced, with third
rate service.
Posted by: Barkley Rosser at Jul 13, 2006 4:37:39 PM
In writing that "... American dining has been less subject to rigidly stratified layers of prestige. The Michelin dining guide has come to New York City, but it does not have the same cachet as in France, where it sells 400,000 copies a year" aren't you ignoring the prestige and authority of the New York Times restaurant review that likely has the Michelin role in NYC, esp. for expensive restaurants.
Also you write "It remains easier to get good cheap food in the United States" but I've been quite happy with finding good cheap food in NYC-equivalent cities--Paris, Rome, Madrid, etc. outside of "ethnic" (to their locations) restaurants or the Guy Savoys although I strongly agree with ethnic restaurants as the way to go when eating at home.
Posted by: Andrew at Jul 14, 2006 11:38:52 AM
These studies seem to show that expert opinion correlates with price more than consumer opinion. So it probably does mean that, from a taste perspective, it may not make sense for an average guy like myself to stock up on Chateau Mouton-Rothschild. But if you happen to have “expert” taste buds, it may be worth it to spend the extra money. Alternatively, some people undoubtedly go to fancy restaurants and by expensive wines precisely for the prestige and image.
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