The Dailies

Word of the Day

Winnow (v./n., WIN-oh)

To use an air current to separate the wheat from the chaff, the men from the boys, and the awkwardly feminine from the possibly Canadian.

Gif of the Day

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Link of the Day

The McRib as arbitrage

An oldie but a goodie, The Awl's breakdown of how the McRib's pricing works and what it says about us is worth reading:

Arbitrage is a risk-free way of making money by exploiting the difference between the price of a given good on two different markets — it’s the proverbial free lunch you were told doesn’t exist. In this equation, the undervalued good in question is hog meat, and McDonald’s exploits the value differential between pork’s cash price on the commodities market and in the Quick-Service Restaurant market. If you ignore the fact that this is, by definition, not arbitrage because the McRib is a value-added product, and that there is risk all over the place, this can lead to some interesting conclusions. (If you don’t want to do something so reckless, then stop here.)

The theory that the McRib’s elusiveness is a direct result of the vagaries of the cash price for hog meat in the States is simple: in this thinking, the product is only introduced when pork prices are low enough to ensure McDonald’s can turn a profit on the product. The theory is especially convincing given the McRib’s status as the only non-breakfast fast food pork item: why wouldn’t there be a pork sandwich in every chain, if it were profitable?

It's an interesting breakdown of the economics. As always, understand what you're getting into when you buy something.

TagsArticlesFoodMcRibThe AwlArbitrageThink before you eat