http://ezinearticles.com/?The-Great-Eggo-Shortage-of-2009—A-Christmas-Without-Waffles&id=3300707

FWIW.

In my particular case, I went with the store brand waffles as a substitute (though, having fewer varieties available, I couldn’t get any chocolate chip ones). My impression is that these are the primary substitute for Eggos that are available in most stores. What I don’t know is whether these are typically also made by Kellogg’s (as is the case with store brand cereals), in which case they would also be subject to the shortage. Conversely, would their makers be able to temporarily ramp up production in light of the supply problems at Kellogg’s?

In terms of pricing, keep in mind that these are one of those products that seems to be perpetually on sale using your store’s loyalty card, though it is typically limited to one or two varieties at a time. What I would expect to under shortage conditions is that such sale prices become rare or nonexistent, thereby raising the average price without necessarily changing the posted price.

Easy there, fella’. Economics points out something valid and potentially useful: that in the case of shortage at the current equilibrium price, a supplier has the choice of maintaining price and allowing the shortage (i.e., quantity demanded at that price will exceed quantity supplied) or raising price to align quantity demanded with quantity supplied. The fact that strategic considerations often outweigh the benefit of short-term profit maximization from a price increase doesn’t render what economics tells us as misguided or useless, and I don’t think many economists would suggest that short-term profit maximization is the only consideration.

Economics in this case (and generally) helps us by identifying and quantifying trade-offs; it’s up to us (managers, consumers, government, etc.) to apply some holistic and rational judgment in choosing among trade-offs, and I doubt many economists would disagree on this point.

Precisely.

“And also by the way, perhaps some of those competitors/substitutes will sell more — if I were the brand manager on a competing product or close substitute, I’d promote (via coupons) during the Eggo shortage to gain trial by new users who could end up switchers.”

Even more precisely. Consumer brand preferences are extremely sticky. A significant chunk of GDP is spent on attempts to get consumers to switch preferences.

Putting a price on a product that signals “this costs too much” can do long-lasting brand damage. Leaving an empty spot on the shelf that signals “too many people want this” may even help the brand.

“All you armchair economists will immediately recognize that the looming Eggo shortage exists not only because of Kellogg’s production problems, but also because it’s decided to ration the delectable waffles, rather than raise prices.”

It’s exactly this type of “armchair econ 101″ analysis that gives economics a bad name.

“Neener, neener, econ rulez!”

No, economics does not rule. Behavioral psychology rules. Economics is just along for the ride.