Hedonic Pricing and Consumer Surplus in the Experience Economy: Why We Hire a Chef

One of the most striking examples of how our economy is moving away from goods and services and towards experiences is the emergence of platforms that connect consumers to chefs-for-hire for in-home dining experiences. At the heart of this shift is an economic principle called consumer surplus—the amount a consumer is willing to pay for a good or service minus what they actually pay. When we apply the same concepts to the experience economy, particularly from a hedonic pricing perspective, we get new insight into why people pay extra for private culinary services and what it says about income, utility, and consumption.

The Rise in Experiential Consumption

Consumer demand in high income economies has changed a lot in the last 20 years. With most physical needs met, especially for upper-income families, consumption has shifted from objects to experiences. US experience spending was growing 1.5x faster than goods between 2014 and 2019—according to a 2019 McKinsey report. From luxury vacations to custom aquarium cleaning, people are buying memories—unique, personalized, and profoundly gratifying.

Hiring a private chef is part of this trend. Providers like Take a Chef and Table at Home have had tens of thousands of global bookings, with Take a Chef having had over 60,000 successful private chef pairings since 2023. A multi-course in-home gourmet meal can cost $100 to $500 per person—more than most fancy restaurants. Yet, people are willing to pay. So obviously, they must believe it’s worth it.

Hedonic Pricing: Beyond the Tangible

The classic model of hedonic pricing theory, often taught in environmental and real estate economics courses, posits that the value of a good is determined not just by its features but also by the pleasure it generates. In other words, what you’re paying for when you hire a private chef is not just the food—it’s the atmosphere, the exclusivity, the convenience, the social cachet and yes, even the novelty of that experience. These intangibles are the service’s ‘hedonic bundle’.

For example, two identical dinners—one in a gourmet restaurant and one cooked in your own kitchen by a Michelin trained chef—are not worth the same to the diner. The latter is more expensive because it provides marginal utility. It also fills you up, not just physically but emotionally and mentally as well.

Consumer Surplus in the Luxury Service Market

Although they’re expensive, there are lots of consumer surplus for clients to derive from these experiences. This is especially true among the wealthy, who have a lower marginal utility of money and who prize time, customization, and status. A private chef dinner party may provide surplus in the form of peer admiration, stress-relief, and delicious dishes.

This dynamic echo an important insight in welfare economics—people don’t only get welfare from the good, but also from the surplus they extract from it. Here, however, the consumer is willing to pay more than the listed price—thus making the steep price still a ‘bargain.’ 

What’s Driving the Market?

There are some forces at play:

Digital Platforms Reduce Search Frictions: HireAChef.com and Cozymeal sites made it easy for us to find vetted professionals, and in so doing reduced transaction costs and asymmetries of information that once made this market inaccessible.

Post Pandemic Preferences: The pandemic has further accelerated the trend toward private, controlled experiences. Affluent households were particularly focused on finding posh alternatives to public spaces.

Increasing Inequality: A new class of global ultra-high-net-worth individuals is increasing demand for niche luxury services. As at 2023, there are 62 million millionaires in the world, and many of them are prepared to spend for something that is exclusive and unique, says Credit Suisse.

Ramifications and Broader Implications

Hiring a chef may sound like a luxury, but it is actually the microcosm of broader economic trends. It highlights the growing trend in experience-based consumption, the relevance of hedonic pricing in a post-industrial marketplace, and the dynamics of consumer surplus in niche, luxury markets.

Simultaneously, its presence in the market raises questions related to labor segmentation: are chefs opting to leave traditional work in favor of independence within the gig economy? Does this precipitate a split within the larger culinary labor market of the commodified kitchen worker-versus-personal chef? 

Ultimately, the economics of hiring a private chef reveal that some premiums are attached to the intangible benefits of perceived utility, emotional experience, and personal branding that traditional economic models simply cannot explain. Also, since experiences have become the most important thing in this era, there will be continued increase in demands for the luxury service platforms.