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A Gullible American

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!