Division of Labour: Everyday Arbitrage: Starbucks

April 07, 2006

Everyday Arbitrage: Starbucks

Me, at a St. Louis airport Starbucks: “I’d like a ‘venti’ sized Tazo® iced tea, please.”
Barista: “Would you like it sweetened?”
Me: “Huh? Yeah, sure.”
Barista: “Okay, that will be $2.95.”
Me: “$2.95? That can’t be right. It says $2.29 before tax on the menu board.”
Barista: “But you said you wanted it sweetened. That’s extra.”
Me: “Well in that case, don’t sweeten it. I’ll sweeten it myself with the free sugar over on your side table.”
Barista: “That will be $2.47 then.”

Note: according to the menu board, Starbucks will also sell you “shaken” iced tea for an extra dollar. Why would anyone pay an extra buck just to have his iced tea shaken? Comments are open.

Posted by Lawrence H. White at 04:30 PM in Economics

Comments

I'm sure if "shaken" is written in Italian that'll attract some business.

Posted by: David Rossie at April 7, 2006 05:23 PM

I don't know about Starbucks, but in traditonal tea houses, "shaken" means shaken with a mixtrue of milk and sweetener.
Also, the sweetener that costs you an extra few pennies is such because it is in liquid form. Therefore you save effort of not violently stirring in small packets of sugar which may or may not dissolve in your massive 24 ounces of 33 degrees iced tea.
Why are you so quick to call arbitrage? These are equilibrium prices, after all.

Posted by: joshb at April 7, 2006 08:15 PM

Price discrimination. The great game...how to get those people who will pay higher prices to reveal themselves.

Chapter 2 I think in Tim Harford’s "The Undercover Economist".

Posted by: Tim Worstall at April 8, 2006 04:53 AM