FancyFoods restaurant decided to introduce an all-you-can-eat buffet on Tuesdays and Wednesdays to increase business.They found that they acquired a whole new set of customers,most of whom were very big eaters.After a time,they increased the price of the buffet.FancyFoods suffered from the problem of:

Question

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The fact that the introduction of the all-you-can-eat buffet on Tuesdays and Wednesdays attracted a whole new set of customers, most of whom were big eaters, suggests that there was adverse selection. This means that the customers who were most likely to take advantage of the all-you-can-eat buffet were those who placed a high value on it and were likely to eat more than the average customer. As a result, when the price of the buffet increased, these customers may have been more likely to stop coming, leaving FancyFoods with a less profitable clientele.

FancyFoods Restaurant Decided to Introduce an All-You-Can-Eat Buffet on Tuesdays