The Economics of the Corn Dog : The Freeman : Foundation for Economic Education

Link: http://www.fee.org/the_freeman/detail/the-economics-of-the-corndog#axzz2kwoYFu1H

"Greed" is an easy explanation for high prices. 
In fact, it's too easy.  Any time it's cited, we should be suspicious that it's a mere cop-out.

Next I thought: Maybe it's just greed? Perhaps they jacked up the price just because they could. There was clearly competition from other vendors, but their corn dogs were all similarly priced. If I'd stopped thinking here I might have assumed there's a corn dog cartel that schemes in a smoky room and agrees to their inflated prices beforehand.
That seemed unlikely, so I took a step forward in the line.
Then I wondered about the cost of paying the City of Galveston for a vendor's license for the weekend. While I don't know the exact price, it's a safe assumption that it's not cheap. A quick glance at the vendor application page shows that vendors also need to pay a fire tent fee, a health permit fee, and a state sales tax registration fee. All these sunk costs are certainly factors in the production cost and subsequent price, but also come with the effect of limiting competition, to where a local guy on a bike cannot choose to meet the sudden demand by selling cheaper corn dogs from a bicycle stand. Maybe this guy set up in a dark alley selling black-market corn dogs—but if so, I didn't see him.
I suspected most of those vendors were from out of town, maybe out of state. So the cost of transporting all their equipment, in large, fuel-guzzling trucks, must also be a factor. And these people had to sleep somewhere for the weekend, so there's another cost that has to be considered.
OK, maybe they're not so evil after all. I took another step up in line.
And then there's the cost of compensating the employees. To work in those conditions, at that pace, for that amount of time, the compensation must be worth the effort. Sure, many of these stands are probably family-owned and -staffed, but still: The profits must be greater than what this amount time and energy could be worth in other lines of employment. In other words, all this must be worth more than they could make simply flipping burgers or whatever. And how many opportunities do they get to sell to this kind of crowd? There's not a rally every day.
This line of thought stirs feelings of empathy; these people work hard, and despite their seemingly high prices, probably don't make all that much when all things are considered. Maybe they're the ones being exploited.