Will Lygon Street’s spruikers have the last shout?

I imagine economics teachers have abandoned school trips to Victoria Market and are now heading with their charges to the more exciting restaurant strip of Lygon Street. Why show them something as delicate and ephemeral as “perfect” competition when just up the road they can see how markets really work in the messy and dirty real world?

The Age reported last week that a number of restaurateurs in Lygon Street have come to the belated recognition that spruiking was bad for business. In essence they have been fighting over how big their slice of the pizza is while all the time the pizza is getting smaller and smaller because of public distaste for spruiking.

As one reviewer puts it: “If there is one thing I hate, loathe, detest with every fibre of my being, it’s restaurant spruikers. I just can’t stand them…. But if a restaurant spruiker comes and tries to get me to go inside, well…. I’m sorry. For me, that’s an automatic Permanent Rejection.”.

Last Tuesday afternoon, according to The Age, “the owners of eight Italian restaurants on the eastern side of Lygon Street between Grattan and Pelham met to discuss what to do about a practice that is both tradition and millstone. The informal gathering decided unanimously to put an end to spruiking”.

This sort of agreement is usually seen as inherently unstable because there’s an incentive to cheat (I’m refraining from labelling it a cartel because there’s presumably no damage to the public interest from abandoning spruiking, so such a pejorative term seems out of order). An individual owner would do better by breaking the agreement than by abiding by it because the short term returns from cheating are greater than the long term losses from the collapse of the cartel. Read the rest of this entry »