Dealing with the Doritos crunch externality

This story on FoodDive last month made me laugh:

While PepsiCo’s Doritos chips are popular with gamers, the loud crunch they make has long been a source of frustration.

The beverage and snacking giant estimated that 85% percent of U.S. gamers have consumed Doritos in the past three months. But at the same time, nearly a third of individuals reported that other people’s crunching distracts them from playing well and impacts their performance.

To “help gamers keep the crunch to themselves,” Doritos is debuting what it calls “Doritos Silent.” Gamers download Doritos Crunch Cancellation software and when the technology is turned on, the software detects the crunching sounds and silences it while keeping the gamer’s voice intact.

So, PepsiCo has released software that will cancel the noise from crunching Doritos that disturb other gamers. This is very overdue! [*] There is a serious side to this story though - PepsiCo has helped to reduce a negative externality problem.

An externality is the uncompensated impact of the actions of one person on the wellbeing of a third party. Externalities can be negative (they make the third party worse off) or positive (they make the third party better off). We call them externalities because they lie outside the decision that created them - that is, some of the costs or benefits are external to the person whose action creates them. In this case, the gamer eating Doritos imposes a cost on other gamers, who have to suffer the loud crunching noise over their headsets - it is a negative externality. Relative to the socially optimal level of Doritos eating by gamers, gamers will eat too many Doritos, since some of the costs of their Dorito-eating are passed onto other gamers.

Now, the Coase Theorem (named for the late Nobel prize-winner Ronald Coase) suggests that, if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own (that is, without government intervention). However, notice the key phrase here is 'without cost'. When you have many gamers interacting with each other, some (many) of whom consume Doritos, then it will be quite a complex task to get all parties to agree to a solution to this externality problem. When there are many parties to an agreement, the transaction costs (specifically, coordination costs) of arrive at the agreement will be high. So, they would hardly be bargaining without cost, we therefore can't rely on the Coase Theorem.

If private parties can't solve the externality problem themselves, that usually means we must rely on a public policy solution. That is, the government would need to step in. But not in this case. Enter PepsiCo, and their Doritos-noise-cancelling software. If gamers can't hear the Dorito crunches of other gamers, then the negative externality is eliminated.

Now the question is, will they release an update to eliminate Cheetos noise, or the noise of slurping a Pepsi?

[HT: Marginal Revolution]

*****

[*] It turns out that Discord did something similar a few years ago.