THE DEMAND CURVE FOR DOUBLE CHOCOLATE FRAPPUCINOS. I think that Elizabeth Kolbert overstates the extent to which the findings of behavioral economics are inconsistent with economic theory. There are a lot of highly-compensated professionals devoting full time to persuading people to pay higher prices. Economic theory has usually treated these efforts—if successful—as shifting the demand curve for the product to the right, resulting in a higher price. Take the example that Kolbert gives of a consumer being influenced to pay a higher price of a Double Chocolate Frappuccino because the other prices on the board are high. But people must know when they go in to a Starbucks that the prices on the board will be high. They are buying what is perceived to be a special coffee, not just the coffee in the first pot or two of the day. They are also buying an experience. Starbucks closed all of its American stores for three hours of training on February 26 to reemphasize the “romance and theater†of its stores. You could think of the store closures as an effort to shift the demand curve for Starbucks coffee.
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Was the main goal of the store closures to make people more desperate for it? Or was it actually just a byproduct of the training sessions they were doing? Because if a store that sold a product as easy to obtain as coffee tried to remind me of how much I needed them, I’d go elsewhere.
Starbucks certainly exists here, but places like Cafe Nero and Costa seem more popular (here = London).
Annalisa and I ran afoul of the closing when we went for late coffee. There was a guy dejectedly peering inside like they might let him in anyway. I read an article about the closing that quoted a Dunkin Donuts exec as saying they’d never “deny our customers access to our specialty coffees.”
Lee and I were pretty impressed that we happened to go to Starbucks during the only 3 hours it wasn’t open! The training session closing had another effect, which I am experiencing right now. Today I had my second espresso drink from Starbucks since the closing and to me it tasted better than usual. So did the first espresso drink I got from them since the closing. But are the drinks REALLY better? Did the training session have an effect on how well the coffee is made? Or am I, the customer who is aware of the how-to-make-better-espresso-drinks training, perceiving the same old coffee as tasting better because of the information I have? Perhaps it doesn’t really matter, as long as the coffee tastes good to me.