The Caffé Nero outlet in London I visited recently has different prices for take-out and in-store cups of coffee — £1.65 for take-out, £1.75 for in-store.
Given the costs of space for tables to sit at, and the need to own and wash cups and saucers, the price difference must be way too small to make this cost-based price discrimination. But it can’t be demand-based price discrimination either — I don’t see why the demand elasticity should be lower for in-store than for take-out. My guess is that it is cost-based in part, but that the difficulty in separating the two markets leads to the small price difference. The woman sitting at the next table is drinking coffee out of a take-away cup, having clearly paid the lower price, but enjoying the in-store ambience (and free Wifi). I think it just doesn’t pay for the baristas to police table usage, so that knowledgeable customers pay the lower price — whereas a gullible American like me pays the higher price!
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A few places in the UK do this; Pret a Manger is the same.
My understanding is that they have to charge value-added tax when you eat in, but not if you take your coffee away. (I’ve never seen this enforced, though; nobody has told me to take my paper cup and leave.)
There are complicated tax rules that may apply here, there may be VAT on the sit in coffee but not the take away.
Could it have something to do with tax-included pricing?
I know in my state that food “to go” is taxed differently than food for “dining in” (to go food is considered “pre-prepared” and is taxed higher).
You’re gullible just going into Caffe Nero. to buy its scalding coffee substitute.
It’s not that simple. One variable would be the demand for and the number of tables and internet availability.
The woman whp paid the “out” price and sat down — well, she was cheating — to be expected to some degree in any endeavor.
If coffee shop just opened. it would be to the advantage to create a “full” ambiance — to attract more customers.
So, it depends… In some instances, it would be a rational strategy.
“…so that knowledgeable customers pay the lower price…”
No, so that dishonest customers pay the lower price.
There seems to be a pervasive attitude throughout Freakonomics postings that if it is advantageous for me to do something, it is good to do.
Time and time again the assumption seems to be that “If you see an angle, you take it”. Disheartening, to say the least.
The price difference is due to VAT. VAT is charged when you “eat in”. It’s not charged on take-aways.
You’ll find it has to do with VAT, not cup cleaning. (why don’t you do some research before you write these pieces?) Nothing to do with being gullible or American.
http://www.ukbusinessforums.co.uk/forums/showthread.php?t=82027