http://www.marcgunther.com/behavioral-economics-at-starbucks/
Very few people, including me prior to reading this article, know of the 10¢ discount Starbucks offers every time you bring in your own coffee mug. Environmental activists suggest that if Starbucks were to charge 10¢ for a paper cup instead of offering a 10¢ discount for personal mug use, the vast amount of Starbucks waste would decrease because people are more motivated by avoiding cost than gaining profit. This article evaluates the behavioral economics behind why people are more inclined to bring their own mugs if they are presented with a 10¢ paper cup charge instead of the alternative 10¢ discount when using their own mug. Since economics is really the study of decision-making, this is a really interesting behavioral economic, or even psychological, evaluation of how the habits of people change when presented with a discount versus an additional charge.
As fascinating as this is, I would like to take this economic evaluation one step further. Behaviorally, yes, many people will probably go out of their way to avoid that charge if a charge were implemented instead of a discount. Others still might find personal motivation to reduce the vast amount of Starbucks paper and plastic cup waste that accumulates every day. However, I think it is also important to note that Starbucks is a luxury good—in other words, Starbucks can be easily substituted with other cheaper coffee brands. A cup of McDonald’s coffee is a good example of a far cheaper, yet similar product (a 24 ounce McDonald’s coffee is only $1.29, yet a 20 ounce Starbucks coffee is $2.25, and millions of people have yet to give up on Starbucks). If people were looking to cut coffee cost corners, they would probably avoid Starbucks altogether.
With this in mind, a Starbucks good is definitely elastic to some degree. A serious raise in price would probably lose quite a bit of Starbucks clientele, but a tiny price increase (or an apparent price increase of 10¢ that would occur instead of the discount) on an already luxury good probably, and I’m theorizing, won’t cause a great disturbance to the number of cups Starbucks sells. Plus, this is not even technically a price increase—people would just be charged an additional 10¢ for a paper cup, which means posted coffee prices would decrease. Ultimately, I’m not sure a 10¢ charge on paper cups would change consumer behavior as much as this article implies. People buy Starbucks in part for convenience, and bringing a mug from home just doesn’t fit that bill. I would think that the price difference would have to be more drastic to save the planet from Starbucks cup waste increase. People who can afford to buy from Starbucks regularly probably won’t jump into eco-friendly mode simply due to an imposed 10¢ paper cup charge instead of a 10¢ discount.
If Starbucks really increased their prices maybe I would think twice before going but to me frappuccinos are relatively inelastic. Since you can’t put a frappuccino in a mug the discount doesn’t really affect me, and I’m not some eco-friendly hippie that cares about the environment all that much so this doesn’t affect me morally either. If Starbucks started adding a significant charge to plastic frappucino cups I would consider getting a reusable frap cup to save building costs. I wonder if they’d impose the additional charges on plastic cups as you suggested they do on paper cups. I think that would be more effective since most of their drinks come in plastic cups–then they would really see an increase in reusable cups.