Why Are Restaurant Lobsters Still So Expensive?

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In case you haven’t heard, New England is neck-deep in lobsters. Due to warm weather, conservation efforts, and the machinations of the wily lobster-processing Canadians, lobster prices are cheap, cheap, cheap. As the New York Times pointed out in July, prices are at a 40-year low:

“At one lobster cooperative here, the price that fishermen received for lobster last week fell to $1.35 per pound (plus a 70-cent dividend per pound, to be paid later in the year), down from about $3.80, and in some cases $4, at the same time last year.”

So, why, pray tell me, that on every trip I’ve made to Maine this summer, are lobster roll prices so high? They’re often commanding $13 to $20 a pop, which seems absurd for a “market price.” With lobster going for less than $1.50 a pound, shouldn’t rolls—and for that matter, whole lobsters—be priced more like cheeseburgers?

Thankfully, Slate‘s Matthew Yglesias, who has a far better understanding of economics than me, answered the question yesterday afternoon after a trip up to Stonington, Maine. In short, Yglesias tells us, that “market price” you see on your restaurant menu has only a little to do with the actual price the lobsters are sold at:

“The price of lobster, like the price of anything else, is set in a market. But the market price you pay is fundamentally a price determined by the restaurant market, not the market for lobsters. And the issue is a basic one of capacity and competition.

Think back to the Fisherman’s Friend and its excellent location. Stonington is a great place to visit. But it’s also a very small town. There aren’t very many places to eat. And if it’s a certain kind of coastal Maine seafood dinner experience you’re after, there aren’t anyother places in town to go. There’s a little reason to fear losing customers to the boil-at-home option as lobster prices fall but no reason to worry about a nearly identical competitor next door poaching your customers. Nor is there a nearly identical competitor next door whose customers you might hope to poach with a discount.”

Of course, whenever the price of lobster rises, restaurants are sure to jack up their prices—they’re not going to sell at a loss, after all. But until then, they’ll enjoy the cheap prices and the record profit margins they bring in.