Coffee in Berlin

The local coffee shop and bakery near my apartment in Berlin charges €1 for an excellent cup of coffee.  The similar shop near my office, but on a main tourist street, charges €1.99 for an equal quality cup.  Similar quality coffee can be had for €1.50 at a bakery one block from my office in another direction, in a less touristy area with many office buildings.  I can explain the €0.50 difference from my local shop to the third shop as cost-based discrimination: I assume higher real-estate prices generate it.  The €0.50 difference between the two shops near my office must be mainly due to demand-based discrimination:  Tourists are unwilling to search, implicitly have a low demand elasticity and are an easy mark for the shopkeeper.

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  1. Will says:

    If I owned the building, I’d charge higher rent for the shop on the tourist route, so there could be more cost-based discrimination than you are allowing.

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  2. Shane L says:

    Interesting! Tourists from outside the eurozone may also struggle to translate prices into their own currency, and so might buy overpriced products without realising.

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  3. James says:

    You’re drawing a conclusion from three data points?

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    • MikeM says:

      No, he’s drawing TWO conclusions from three data points.

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      • Enter your name... says:

        Well, more than that: three prices for coffee, but also three prices for real estate, three assessments 0f the tourist value for each location, three assessments of the quality of the coffee, etc.

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  4. 164 says:

    How much for the coffee you brew yourself?

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  5. 164 says:

    For a different perspective, ask your self how much does the coffee you brew your self cost?

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  6. Pedro says:

    I understand your point of view.
    Altought I think if tourist bakery increases prices to a certan limit you will see a demand elasticity inverson, assuming that tourist are racional agents.

    Obviously!

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  7. RF says:

    I’m not sure I buy the cost-based explanation – rent is an (overhead) fixed cost. They may need higher prices to cover this, but that comes back to demand as well – the area must have more affluent buyers or fewer coffee shops to support the higher markup over marginal cost.

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