Why do cooked rotisserie chickens cost less than fresh uncooked chickens?

Several of my students wondered how fully cooked rotisserie chickens could be so much cheaper than fresh uncooked chickens. Since rotisserie chickens involve extra labor, additional energy use, and the cost of the broiler itself, shouldn’t they be more expensive? The reason they aren’t lies in how demand and supply interact in grocery store delis and meat departments.

The daily demand for fresh chickens varies and is hard to predict. So rather than risk running out, supermarkets tend to order more than they expect to sell, on average. But when inevitable periods unexpectedly low demand occur, it is not in either the supermarket’s or the consumer’s interest to allow unsold fresh chickens to spoil. So when unsold fresh chickens begin to approach their sell-by dates, supermarkets put them in the rotisserie and offer them at discounts in roasted form, rather than simply discard them. Days of unexpectedly low demand for fresh chickens are thus also days of unexpectedly high supply of rotisserie chicken. And that’s why stores offer roasted chickens at such low prices.

And if the rotisserie chicken doesn’t sell out, the roasted meat can be used to make higher-priced items like chicken salad or chicken soup for the store’s deli counter. The incentive to reduce waste and creatively offer more items from the original fresh chicken unlocks additional value. And since all supermarkets can follow this strategy, competition ensures that the resulting value is then passed on to customers in the form of lower prices.

Questions/Discussions

1. Why are rotisserie chickens less expensive than fresh chickens?
2. How might an economically rational grocery store manager react to a day of unexpectedly low demand for both fresh chicken and rotisserie chicken?

Sources: Frank, Microeconomics and Behavior 10e (c)2021 McGraw Hill Frank/Bernanke/Antonovics/Heffetz, Principles of Economics 7e (c)2019, McGraw Hill