THE DEMAND CURVE FOR DOUBLE CHOCOLATE FRAPPUCINOS.
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.