Chapter 55 Question 048

The capacity of an ordinary cup is eight ounces, but why is the smallest cup of coffee in Starbucks called a tall cup with a capacity of twelve ounces? (Jennifer Anderson) Starbucks is the world's largest chain of freshly brewed coffee.Since 1999, the company has sold coffee in three sizes: Tall (twelve ounces), Large (16 ounces) and Extra Large (20 ounces).But technically speaking, an ordinary cup of coffee should be eight ounces, six ounces is also acceptable.Even Starbucks' own brewing instructions say that we recommend two tablespoons of ground coffee for every six ounces of water.So why doesn't Starbucks sell standard cups of coffee?

Actually, Starbucks sells it.If you ask the waiter for a small cup, you can get a traditional eight-ounce cup of coffee.But the store's sales list does not list small cups, and few customers know this. Small cups are the company's most discounted coffee.The price of a small cup of cappuccino is 30 cents less than that of a 12-ounce tall cup, but the amount of espresso is the same, and because it contains less milk foam and has a stronger taste, many coffee fans like it all. The secretive way Starbucks markets the small cup makes it a discriminatory threshold price.The barrier that prevents less price-sensitive customers from buying discounted small cups of coffee is that most people simply don't know that small cups exist.In most markets, price-conscious shoppers will go the extra mile than others to find the best deals.If you're a price-conscious shopper, chances are you've run into a situation where at least one friend will find out about the Starbucks small cup secret and tell you about it.Meanwhile, less price-sensitive customers continue to settle for the twenty-ounce jumbo.

Not all examples of price discrimination involve discount thresholds.For example, if a restaurant offers half-price dinners to diners over the age of sixty-five, diners over the age of thirty-five will not pass the hurdle to qualify for the discount.Economists tend to treat this type of price discrimination as pure market segmentation, in this case because older adults earn less on average than other adults.