Sheryl Kimes: “If you said it’s 20 percent cheaper to come during the week than on the weekend, people thought that was more acceptable than if you said it’s 20 percent more expensive on the weekend.”
Yes, we are mathematically illiterate, thanks for digging it in.
To belabor the point: Keeping one of the prices fixed, you should prefer that it be 20 percent more expensive on the weekend. Assume for example that the price on Saturday is $10 and the price on Tuesday is $8. It is then "20 percent cheaper to come during the week" but it is 25 percent more expensive to come on the weekend!
I disagree that this shows mathematical illiteracy. What you've overlooked is that eating at a restaurant is, in game theory terms, a repeated game. You have to analyze it in terms of multiple plays.
If I go into a restaurant on some random night, and their price list tells me a steak is $25, but they also tell me they are having a discount that night and I can have the steak for $20, then they have established in my mind that a steak at that restaurant costs $25, and that sometimes they offer discounts.
If I go in some other random night, and am charged $25, I'm OK with that. I've planned for it. I've decided my budget can handles a $25 steak. If I happen to hit some kind of discount night, great. I save some money.
Suppose instead the first time they charged me $20, but did not tell me that was some kind of discount. I see $20 printed on the menu, and no indication that the price is higher at other times. That sets in my mind that a steak at this place is $20. I expect now to be able to go in any time and get a steak for $20.
I then go in another random night, and it is $25. Now I'm not OK. I had planned on $20. They've stuck me with an extra $5 that I had not budgeted for. No I can't have popcorn at the movie I'm going to afterward. :-(
What it comes down to is that people want the "normal" price to be the highest price that the place charges. They can then plan for that, and if they happen to hit a sale, then they get a windfall. Windfalls don't screw up budgets. They are surprises--but they are pleasant surprises.
When the "normal" price is not the highest price, people get surprises, but not the pleasant kind.
When I go out to eat, I do not want unpleasant surprises. Hence it is more acceptable to me for restaurants to offer discounts on non-busy nights rather the surcharges on busy night. The former only gives me pleasant surprises, the latter only unpleasant surprises.
This is why you sometimes see retailers where literally every single item is on sale at all times, but they still get to post a nominal "full price" that no one ever pays.
Really interesting psychology involved with pricing and how we deceive ourselves when it comes to prices and anchor points. I recommend Dan Ariely's work (http://danariely.com/) - Predictably Irrational
Yes, we are mathematically illiterate, thanks for digging it in.