In July 2013, I wrote an article on EconLog titled “The economics of self-imposed price ceilings.” The typical example was the Costco hot dog. I pointed out that by keeping the price of a hot dog and soda with free refills at $1.50, Costco, over time, to reduce losses, reduced the quality of the product. I may have been wrong in saying that the new hot dog is inferior to the old Hebrew National brand. The brand Costco switched to is still pretty good.
But I wasn’t wrong when I said that Costco stopped letting the customer turn a crank that yielded sauerkraut and instead put the sauerkraut behind the counter.
Two other changes have occurred, one I’ve noticed over the past couple of years and one I’ve noticed today. Over the past two years, Costco has discontinued over-the-counter sauerkraut.
Today I noticed another change. Costco has ditched the onions you used to get from turning the crank. So now all you get is mustard, ketchup and relish.
In case you’re wondering, of course, I’m not advocating that a government agency regulate Costco’s hot dog choices. I am simply emphasizing the predictable consequences of freezing prices at a time of inflation even when the freezes are self-imposed.
