Wednesday, November 19, 2008

When is it cheapest to purchase a turkey?

I've been quite excited about all the traffic generated from the link in Marginal Revolution (thanks Tyler). I've probably missed the big part of the wave, but if you found me through Marginal Revolution thanks for coming.

So if you liked cupzzas, here is more on economics and food. Thanksgiving is a little over a week away. But, my wife and I couldn't wait so last weekend we roasted a whole turkey for the two of us. We had a nice dinner, a few lunches of turkey leftovers, plus a pot pie, and a bunch of turkey to make stock.

Was this optimal? Like most Americans we will also eat turkey on thanksgiving (thanks Mom and Dad). We all know that turkey has diminishing returns at some point (anyone for curry-turkey hash?). But I think our turkey allocation was optimal, because now we have a week in between, and I could kind of go for some turkey right now.

So is it optimal that we all eat turkey at the same time? If we all want turkey at the same time, then this should lead to higher prices for turkey during thanksgiving. But farmers know this and expand turkey farm operations during the holiday. If prices reflect cost in perfect competition, then this indicates that there are economies of scale, that is the cost of average turkey production falls as more turkeys are made.

As the graph below shows this is the case that turkey prices have dropped during the holidays, while whole chicken prices have not. It’s not perfect evidence, but really who wants to not eat turkey on thanksgiving?

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1 comment:

rjgitter said...

My guess, though, is that the lower price in fact represents a bit of turkey as a loss-leader.