About Starbucks and Demand Curves…

I rarely drink coffee, but the other day I went with a couple of friends to Starbucks, and decided to try an iced coffee. I asked for the smallest one available. However, the woman in the counter told me: “Are you sure? You know you could get the “Grande” (medium sized) for the same price”.

Effectively, when I looked at the menu, I actually found out that both the Tall and Grande sizes (small and medium respectively in Starbucks jargon), were being selled at USD $1.95. After seeing that, I actually asked the seller, why do they even offer the small one? Who would buy the small one if they can get a medium one for the same price? Actually, she told me that some people still stick to the small, even though the price is the same. Is this rational?

Economist Tim Harford relates to Starbucks and price discrimination issues in his blog. Thanks to my friend Ussal for the link!