Forty years ago, when Janet Yellen, chairwoman of the US Federal Reserve, was an economist at Harvard University, she was interested in the film Five Easy Pieces. She noted the scene in which a diner waitress refuses to bring Jack Nicholson’s character an omelette with coffee and wheat toast because it serves omelettes with cottage fries and rolls. “I know what it comes with, but it’s not what I want,” he retorts.
The lesson that Ms Yellen and her co-author drew in a study of the economics of bundling was that it repays a restaurant to offer its customers an à la carte option alongside items on the set menu. Most people will be happy to choose from a fixed list, with lower prices, but “the à la carte menu is designed to capture consumer surplus from those gastronomes with extremely high valuations of particular dishes”.
For Nicholson’s restless young oil-rig worker in Five Easy Pieces, read a generation of rebellious millennials who have been angry at being forced to buy a cable subscription to watch Game of Thrones and True Detective on the HBO network. All they want are those shows, they protest, not the entire package.