One of my favourite blogs in Felix Salmon (and not just because I have a slight, ok massive, nerd crush). I generally find him pretty insightful so imagine my delight today when I opened my google reader and found that he has started a monthly column blogging about 'gastronomics'. My two favourite topics: food and economics in one go!
In his first column he talks about why people flock to restaurants with terrible service. In my opinion he pretty much nails the answer: a part of it is about signalling. If people can see how popular you are, then they will reason that you must be good: "other people are flocking to get a table here, the food must be great". I'm sure we've all turned down restaurants because they are empty or chosen to eat in the more crowded one.
Another is a behavioural explanation: we are terrible about judging how much something is worth. The more you pay for/invest in something something the more likely you are to enjoy it . Your mind basically goes: I waited one hour, had rubbish service and paid £30 for that burger, therefore it must have been an amazing burger.
I think this is pretty true. I went to a restaurant that was pretty terrible on Saturday night. The vegetarian menu was from the dark ages, the service was awful as they repeatedly messed up the orders. There were crashes every few minutes as plates were dropped. And they gave me some lamb that was totally overcooked. I was pretty appalled that they tried to pass it off on me, and those people who know me well will not be surprised that I sent it back to the kitchen in disgust.
I had a good time because of the good company I was with but I was pretty amazed that people would ever return; but I also found myself reasoning "well it's really popular, and it was hard to get a reservation. Maybe it is because the atmosphere was nice, and those desserts were not just average but maybe they were really good" in other words trying to justify any reason why it may have been a good restaurant (it was fairly expensive although not outrageously so).
I've linked to a bonus short story on ways restaurants might exploit some of our behavioural biases to make us spend more too.