Supply Side Economics and the McNugget

The other night my friend and I pulled into a McDonalds' drive-thru at around 11:15 PM.  It was late, we'd just gotten out of ultimate frisbee practice, and we were pretty hungry.  I ask my friend what he wants, he says "Three 4-piece chicken McNuggets."  I think this is a good idea, so I decide to order my own 4-piece box of chicken McNuggets.

We get up to the ordering box:

Box:  "Hello, welcome McDonalds, may I take your order?  We are on our late-night menu."

Me:  "What?"

Box:  "We're on our late-night menu."

Me:  "Do you have Chicken McNuggets?"

Box: "Yeah."

Me:  "Ok, we'll take four 4-piece chicken McNuggets and ..."

Box: "We only have 6 and 10."

Me:  "Huh?"

Box: "We only have 6 and 10."

Me: "..."

My Friend:  "Can you tell them to put 4 McNuggets in a 6 McNugget box?"

Me: "That doesn't make any sense."

Box (helpfully):  "We don't serve anything on our Dollar Menu right now."

Me: "So you can give us a 6- or 10-piece Chicken McNugget box, but not a 4-piece?"

Box: "Yeah."

Me (to my friend):  "What do you want to do?"

My Friend:  "I don't want to pay more for McNuggets."

Me:  "Do you want something else?"

My Friend:  "Can we just go somewhere else?"

So we determined that yes, we could go somewhere else.  So we went to the Burger King across the street.

This just serves to highlight the fact that you should never, ever buy a 6- or 10-piece box of Chicken McNuggets.  What I don't understand is McDonald's insisting on not selling their 4-piece boxes at night.  I mean, it's not like they lock up the 4-piece boxes in a safe every night.  They definitely have McNuggets.  They just don't want you to be able to take advantage of the following (illogical) prices:

4-piece Chicken McNuggets - $1.00

6-piece Chicken McNuggets - $2.59

10-piece Chicken McNuggets - $3.39

20-piece Chicken McNuggets - $6.59

(prices from the McDonalds' in the Southside Shopping Center on Fort Ave.)

These prices imply the following graph of the marginal cost of Chicken McNuggets:

So why do McNuggets 5 and 6 cost so much?  Let's put on our supply-side economist hat.  We must assume that McDonalds has a constant profit margin on McNugget because of the competitive nature of fast-food chicken product market, so price differences in McNuggets must represent the underlying cost of producing those McNuggets.  (You think I'm an idiot for making these assumptions?  Check out this ludicrous discussion of the cost of tomatoes on the vine by an actual economist.)

Another interesting aspect of the Chicken McNugget market is that you can buy in multiple of 4 McNuggets at a constant cost, but if you add two more McNuggets to that box and sell it as a 6-piece box, your costs more than double!  The science of Chicken McNugget production is a bit opaque to me, but this leads me to believe that 4 is some sort of natural unit of McNugget and that it takes a great deal of energy to split this basic McNugget unit for boxing purposes.  I think there is a lot of evidence for this theory, considering that you can not buy an odd number of Chicken McNuggets (it must be prohibitively expensive to further split the McNugget units).

It's also possible that it is much more expensive to produce a 6-pc, 10-pc, or 20-pc box.  In this case, I would propose packing additional McNuggets in the 4-pc box.  Having recently purchased a 4-pc McNugget (during research for this blog post), I can tell you that there seemed to be room for additional McNuggets in the package.

Other theories that I have considered:

1)  McDonalds employees are very bad at counting.  It takes significantly longer to count to 6 than to count to 4.  This is somewhat supported by the fact that McNuggets 11-20 cost more than McNuggets 7-10.  However, McNuggets 7-10 are the cheapest in terms of marginal cost, far cheaper than McNuggets 5 and 6.  Perhaps this supports the theory that the most basic unit of McNuggets is 4; adding multiples of 4 McNuggets costs very little, but adding 2 McNuggets is very expensive.

2)  There are some non-linear properties to McNuggets that make them very hard to cook and transport in multiples of 6.  (This does not explain why three packages of 4-pc McNuggets are cheaper than one 10-piece box).  Perhaps there is some strange effect causes the 5th McNugget to be very difficult to cook, but it dissipates quickly once you reach 6 or more McNuggets in any one location?

None of these simple economic explanations tell me exactly why I couldn't order a 4-pc McNugget late at night.  Perhaps we should be searching for a different explanation.  Perhaps there is a McNugget specialist who has one, and only one, job all day long: the production of 4-pc Chicken McNugget orders.  This explains the extremely low price of 4-pc McNuggets during the day - there is someone very, very efficient is producing them.  The regular McDonalds employees produce the other quantities of McNuggets less efficiently (hence the high price of the 6-pc McNugget), but we do see some economies of scale in the larger orders (as you would expect).

Now why doesn't McDonalds employ the 4-pc specialist at night?  Simple - they only need a few employees at night because there is lower demand for meals at night.  They want to maintain as much variety on the menu as possible, so they are forced to use employees with general fast-food preparation skills.

Well, there you have it, what might otherwise seem like a mystery explained by the application of simple economic principles.  The uneducated might simply assume that McDonalds was making more profit on a 6-pc McNugget order than on a 4-pc McNugget order because of a combination of hard-to-read menus and the assumption that marginal costs always decrease with increasing quantity, but we know better.  We know McDonalds operates in a very competitive market; we know that they do not have monopoly pricing power; so we know that the price of McNuggets reflects the true cost to produce them; therefore we can reasonably surmise the existence of the single-shift 4-pc McNugget Specialist - it's the only possible explanation!