Chapter 68 Question 060

Why does splitting the bill evenly make people spend more in restaurants? When friends go out to eat together, they usually use the AA system to share the bill equally.This is much easier than having a waiter prepare individual bills for each diner, or remembering who ordered what and adjusting each person's portion accordingly.However, many people feel that this practice is not good, because those who order cheap dishes are forced to pay more than the actual cost of eating and drinking. AA has another unpleasant effect: it makes everyone want to spend more than they would pay individually.Why does equal sharing have this effect?

Let's say there are ten friends who pre-promise to split the restaurant bill evenly.Suppose one of them ordered a standard steak for twenty dollars, and a large steak for thirty dollars.Also assume that ordering the large steak gives the person an additional benefit of $5 more than ordering the standard steak.If he's eating by himself, he'll order the standard steak, because the five-dollar extra benefit of a larger steak isn't worth the ten-dollar extra cost.But since his friends agreed to split the bill evenly, then, for him, he only needs to pay an extra dollar for the large steak (the extra ten dollars for the large steak are divided among ten people, and he bears one of them. /ten).And since a large steak is worth five dollars more than a standard one, this person will definitely order a large steak.

In the eyes of economists, this is called an invalid decision, because the person's net gain of four dollars from ordering the large steak (the five dollars he thinks the large steak is worth, minus his final share of one dollar) is greater than that of other members of the group. The net loss for the person is less (the total amount they paid increased by nine dollars because the friend in front ordered the large steak). While splitting bills evenly is unfair and inefficient, it's unlikely to go away.After all, the losses caused by it are generally very small, and it brings a lot of convenience for everyone to have dinner together.