The "free" market — Vieje Piauwasdy

I woke up to this tweet by Mayor London Breed.

Restaurants are struggling to survive and delivery is their main option for staying open. I'm instituting a cap on the fees that delivery services can charge restaurants during this emergency, because it can make the difference between them staying afloat or laying-off staff.
— London Breed (@LondonBreed) April 10, 2020

In a city where politicians never cease to amaze, Mayor London Breed has done it again. I do believe Mayor Breed has the best of intentions here, but someone really needs to tell her to pick up an Economics 101 book. This policy is a rash decision that is going to have unintended consequences and will likely result in MORE restaurants going under.

The delivery services is a great example of the free markets at play. There are many big name delivery players including Uber Eats, DoorDash, Grubhub, Caviar, and Postmates. In the free markets, pricing takes place at the intersection of supply and demand. In other words, the free markets will set the price of delivery by itself.

This is not a monopoly where one company can set the price and gouge customers. In fact, DoorDash has actually already reduced fees to help in this crisis. If one or more of these services decides to be evil and try to price gouge customers during this crisis, then restaurants will just work with the other competitors. These delivery services are in turn forced to price their services accordingly. This is the free markets at work and the result is consumers being able to order food delivery at will at prices they are willing to pay.

Mayor Breed enacting a 15% restaurant commission cap is an unnecessary price on delivery as one already exists. What does this mean for consumers, delivery drivers, and restaurants?

There is likely going to be a shortage of deliveries. If a company’s margin on these services are now shifted, then this cost will be placed somewhere else… likely on the delivery driver’s cut. Reduced fees for the delivery driver means less delivery drivers. Less delivery drivers means less deliveries. Less deliveries means less business for these restaurants.

We’ve now come full circle. The very people Mayor Breed is trying to save are now going to be negatively impacted by silly policy. Apparently, Economics 101 is a class that isn’t required to be taken to be Mayor.