Economics Lesson 1: The Mystery of Papa John's Pricing Strategy [Part 1.]

An economic puzzle:

What is going on with the pricing at Papa John's?

As you can see in the images

- Under Pick-Up Perfection offer 1, a large pizza is £5.99*

- Under Pick-Up Perfection offer 2, a large pizza is £5.99*

- On the Main Menu (see images A. and B.) the price of an 'L pizza' ranges from £16.99 to £20.99)

- People are only beginning to wake up to this fact

This is obviously impossible. If this really were the pricing at Papa John's, I would be able to buy large pizzas from Papa John for £5.99, sell them back to Papa John for ~£16.99, and repeat this process until either Papa John is bankrupt, or I am a billionaire.

But I am not a billionaire. Papa John is a billionaire. We know from the efficient market hypothesis that there is no such thing as a free lunch, and there are no special cases that I'm aware of concerning papa john's pizzas.

So what is going on?

Naive Solution:

I know what you're thinking. This is just a case of pizza ambiguity. Once we recognise that the meaning of 'pizza' is context dependent - we can dissolve the question.

The apparent paradox only occurs if we see 'pizza' as referring to the same type of object in each of pick-up perfection offer 1, pick-up perfection offer 2 and main menu.

But this isn't the case. The different pizzas mentioned are:

1. 'Large Pizza'

2. 'Large 2 Topping Pizza'

3. 'L Pizza'

But there's no more reason to think that these all refer to the same size of papa john's pizza as the following refer to the same size size john:

1. Little John

2. Little 2 Topping John

3. LB Johnson

In fact, these John's probably have quite different sizes. And likewise, the different pizzas above will be different sizes.

Why you are being naive

I admit, that I too was initially seduced by the apparently compelling logic above, and assumed that the pizzas would be different sizes.

However, I bought a large 2 topping pizza for £5.99. And it was really big. I didn't measure it at the time, but it was definitely a large pizza, and just as large as how large I imagine the other pizzas were. So in fact, there was no ambiguity.

The lesson

I wrote this post to demonstrate the first and most important lesson of economics - empiricism.

If we reason from first principles about the sizes of the pizzas, we come to the conclusion that the pizzas cannot exist.

But the pizzas do exist. I ate one. I know this because I went out into the world and collected data. Economics is a discipline founded upon data. If you don't look at the data, you aren't doing economics, you are being naive, and you don't get to eat surprisingly cheap pizza.

Remember, the map is not the territory!!!!

The opinions expressed in this essay are my own, and are not necessarily endorsed by my employers, past, present or future.

Any questions can be sent to enquiries@papajohns.co.uk