Domino's' block pricing fail

This week in ECONS101, we covered pricing strategy. I love this topic, not least because it covers material that you typically wouldn't see in an introductory economics textbook. One of the strategies we talk about is block pricing. A firm uses block pricing when it charges a relatively high price until the consumer reaches some threshold, then a lower price for every unit the consumer buys after the threshold. Buy-one-get-one-half-price is an example of block pricing. The idea is to price high for those consumers who don't buy much from you, and lower the average price for consumers who buy a lot (you can see how block pricing works in more detail in this post).

Also this week, we had the first ECONS101 test of the semester, and the tutors and I met up for pizza beforehand. Ordering the pizzas online, the banner ads caught my attention. First, this one:

Value pizzas for $5 each. Seems like a good deal. Then this:

Upgrade to extra large for $3 more. Sounds like an even better deal, right? The extra large gives you 50% more pizza for just $3 more (if you zoom in, you'll see that it's 50% more in the fine print). But wait! If you upgrade a value pizza to extra large, you're paying $3 more, which is an increase in price of $3/$5 = 60%! So, you pay 60% more in order to get 50% more pizza. [*]

It's not quite a two-for-the-price-of-three fail, but it clearly isn't block pricing done right. Unless Domino's is relying on it's customers being somewhat innumerate?

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[*] Once you factor in the delivery charge, then maybe this deal pays off for the consumer, because the extra $3 would be less than 50% of the cost including the delivery charge. Similarly, for more expensive pizzas, the extra $3 is less than 50% of the cost. However, for pick up customers collecting value pizzas, it clearly doesn't pay off.