Money

Harvard economist: Here's why brunch can get so expensive—and what you can do to stop it

The Kardashian sisters Kim, Khloe, and Kourtney out for lunch in 2008.
Philip Ramey Photography | Getty Images
The Kardashian sisters Kim, Khloe, and Kourtney out for lunch in 2008.

Brunch with friends can be a wonderful time. Until the check comes.

Since tallying exactly what everyone owes can become a headache, someone usually suggests just dividing the total evenly — despite the fact that not everyone had that second mimosa.

In order to keep up with the group and get your money's worth, since you're paying an equal portion, everyone orders more than they might normally. This drives the price of the check up. I've nicknamed this phenomenon "Venmo socialism" after the app, since someone always says, "Let's just split and Venmo!"

It turns out, there's some economic theory behind what happens at brunch.

The problem has to do with incentives, says Benjamin Golub, an assistant professor of economics at Harvard.

If you're splitting equally 10 ways, for example, "What you order doesn't change what you pay for others' meals," he tells CNBC Make It. "So if you are considering an extra $10 appetizer it'll only cost you $1.

"In an efficient system, you only order it if it's worth $10 to you, if you would order it eating by yourself," he continues. "But here, you order it if it's worth at least $1 to you — that's a cheap appetizer! So obviously everyone over-orders."

This kind of situation in economics is sometimes called the tragedy of the commons, Golub adds, which is when sharing something has mismatched costs and benefits.

"People abuse a common resource, in this case, the restaurant bill, because they get all of the benefits but pay only a small share of the costs," he explains.

Another example is littering, "If I litter, a tiny fraction of my tax bill goes to pay for cleanup or I enjoy the park a tiny bit less due to my litter, but I get all the enjoyment of not having to look for a trash can."

The problem gets worse with bigger, less tight knit groups.

"If you're out at a birthday dinner with 30 people, many of whom you barely know, you're more likely to take advantage of the incentives that 'Venmo socialism' sets up," he says. "If you're with a group of four of your best buddies who will give you grief about over-ordering, that social sanction keeps people in check."

But, the pattern totally stops when there is individual responsibility. As an example, "I don't litter in my house, because I absorb all the costs it creates," Golub says.

So as a solution to avoid over-ordering and therefore over-paying at brunch, he suggests defining responsibilities.

"If feasible, make a habit of giving the check to someone who feels most comfortable insisting on doing the accounting correctly (and doing the work to figure that out)," he advises.

"If you're dining out in a big group, realistically the best bet is probably to ask the waiter for a separate check and order your own meal. Then, you can watch economics in action without the pain."

Don't miss: Why I'm the jerk who says 'No' when friends ask, 'Can we just split the bill?'

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