Momofuku Ko Datapoint of the Day

Momofuku Ko is the impossible-to-get-into restaurant in the East Village, where I suggested in April that the chef-owner David Chang might want to auction off reservations once or twice a week. Well, he kinda took my suggestion: for a one-off charity auction, he donated dinner for two people, reservation included. The value of the dinner, with wine pairing, is $150 per person, which for two people is $300 plus tax and tip. Call it $385 altogether. The "estimated value" of the dinner with reservation was $500, which put the value of the reservation alone at $115.

So what happened at the auction?

It started quietly: at the end of the first day, the top bid was $175. Day two saw the price rise to $245, where it stayed for four more days. On day six it went up to $275, and then on day ten it hit $315: still less than the retail price for the dinner alone. On day 13, when the auction was blogged by Eater, the bidding went a little crazy, ending at $700. A bidder named "kyanza" dropped out at $650, but reappeared on day 14 and started bidding the price up again: by the end of day 14 kyanza had the high bid of $1,250 – which would value the reservation at $865.

But the auction still had three more days to go. On day 15, kyanza was still the high bidder, at $1,501. On day 16, "srittvo" came in with a bid $20 higher, but everybody knew that there would be more activity on day 17, the final day.

The auction was due to close at 4pm, but there was a twist: it was extended by five minutes every time somebody made a new high bid. Thus were there no fewer than 24 bids between 3:55pm and 4:12pm. At 3:50pm, the high bid, from kyanza, was $1,870. By the time the auction ended, kynza was still the winner, but the final price was exactly a thousand dollars higher: $2,870. Which would put the value of the reservation at about $2,500.

What do we learn from this? For one thing, there are at least three different people willing to pay over $2,000 for a dinner for two at Momofuku Ko. And the people who reportedly have managed to work out how to game the reservations system (see the comments here) are getting something extremely valuable for free.

At the same time, David Chang recently raised the price of dinner at Ko to $100 from $85. "After a month of running the menu and seeing our costs we needed to adjust our prices for food especially as we have increased our food courses," he said, which is reasonable enough. But he didn’t need to cover his extra food courses by charging for food: he could always start charging for reservations instead, by auctioning them off occasionally. If there are 75 people willing to pay $100 each for a reservation, that’s $7,500; you’d need to charge 500 people an extra $15 for their food to get the same extra income.

Most Ko reservations should remain free. But auctioning off a few every so often? Would be a great way to avoid having to raise food prices by 18%.

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