Coffee shop economics

One of the things I like about economics is how it can explain so many things in the world around us. For example, I’m writing this in a coffee shop on a major street by a large university. (It’s not actually a great place to do work. Too much commotion. Students are coming in and out, as are people having brief meetings in a focal location.) Like most coffee shops nowadays it has free wifi, and as expected my two nearest neighbors are also wearing headphones and typing away. But unlike most coffee shops that I’m used to—residents of New York and San Francisco might have different expectations—they charge for refills. $0.54 is not a lot, but it’s a bit of a hassle. Why would they do this?

As I mentioned, it’s a high-traffic area. While they want people to come in, they don’t necessarily want them to stay all day drinking coffee. At my undergraduate university I had a coffee shop I hung out in all the time, and I definitely stayed for hours between classes, but it was different by not being nearly so busy. Thus they didn’t need their customers to be in and out quite so fast. As this coffee shop they’d quickly reach their capacity if lingering had too low of a cost. A small change in the cost, 54 cents a refill, apparently makes all the difference. It’s fairly full at the moment, but not so full that newcomers can’t find a spot. Coffee refills are not what they’re mainly charging for. They’re charging for time in seats.

They could offer free refills, but it appears they’d lose money doing so. It costs money to run a coffee shop, and with the small refill fee they’ve struck a balance between being hospitable enough that people want to come but not so hospitable that they block other people from coming.

P.S. It was the first thing I noticed, but I forgot to add that they also don’t seem to have electrical outlets accessible to laptop users, presumably for the same reasons as above. Other locations owned by the same people do, and also don’t charge for refills.

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Author: rfmcelroyiii

Student and instructor of economics.

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