The unintended consequences of a free burger promotion

In my ECONS102 class, we discuss unintended consequences in the first week. One of the aspects of that is understanding how it is that incentives lead to unintended consequences. Incentives to change behaviour arise when the relevant costs or benefits of that behaviour change. In their book Think Like a Freak (which I reviewed here), Steven Levitt and Stephen Dubner provide a useful explanation that links incentives to unintended consequences, which can be summarised in three bullet points:

• No individual or government will ever be as smart as all the people out there scheming to take advantage of an incentive plan;
• It’s easy to envision how people who think like you do will react to an incentive plan, but not everyone thinks like you do; and
• We assume that people will always behave the same way they do today. But incentives by their very nature change people’s behaviour, sometimes in unexpected ways.

Which brings me to this New Zealand Herald story from yesterday:

A Wellington burger chain has given away hundreds more burgers than expected to people taking advantage of a flaw in an online promotion.

Just over a week ago Gorilla Burger ran a 24-hour promotion where people who scanned QR codes on their posters throughout the city received a free burger voucher.

However, punters quickly discovered the vouchers could be reused, as long as they were redeemed under a different account and name each time...

A Wellington University student, who the Herald agreed not to name, said he and his flatmates ate nearly every night of the week for free through the promotion.

"Personally I just thought of it as free food, and not having too much money. Then when I found out I could do it more than once, I thought I may as well."

Thinking in terms of Levitt and Dubner's three bullet points, when you change the costs of an activity (in this case, lowering the costs of burgers to zero), you create an incentive for people to change their behaviour (in this case, to consume more burgers). That is what Gorilla Burger wanted. But what they didn't want was people getting multiple free burgers, or eating for free for a week (read the article - you will see). When you create incentives to change behaviour, you need to be careful. People will take advantage of the incentives you create, and in ways that you may not be able to anticipate. You won't anticipate them, because you can't think in the same way that everyone else does, and people are wise to taking advantage of the opportunities and potential loopholes created by incentives. One way to avoid this situation is to get a variety of people to try to anticipate how they would react to the incentives (a plug for diversity again - you probably need a group of people with 'range').

To Gorilla Burger's credit, they honoured the vouchers, although they did put a $15 minimum spend requirement in place. However, they may have learned an expensive lesson.