Behavioral Economics and Starbucks` Cup Problem
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Case Code: ECON045 Case Length: 7 Pages Period: 2019 - 2013 Pub Date: 2014 Teaching Note: Not Available |
Price: Rs.200 Organization : Starbucks Coffee Company Industry : Beverages, Specialty Retail Countries : US Themes: Behavioral Economics, Consumer Behavior, Prospect Theory, |
Abstract Case Intro 1
Abstract
US-based Starbucks Coffee Company (Starbucks), the largest coffee chain in the world, generated 4 billion single-serve cups as waste each year that ended up in landfills or as litter. Recycling also posed some serious problems as the existing ecosystem was not “designed to take the individual Starbucks cups” due to the presence of a plastic coating inside the cup. Starbuck’s customers and other stakeholders wanted it to solve the problem.
In 2008, Starbucks took up the target of serving 25% of the beverages in its company-operated stores in reusable cups by 2015. It also committed itself to making 100% of its paper cups in company-operated stores in North America recyclable by 2015. The company took various initiatives to curb the waste including offering a long-standing discount of 10 cents to any customer who brought along a reusable cup but with little success.
Issues
The case is structured to achieve the following teaching objectives:
- Understand issues and challenges in convincing consumers to adopt reusable cups.
- Understand underlying concepts and theories in consumer behavior and behavioral economics.
- Understand consumer’s optimal choice under the budget constraints.
- Understand consumer’s benefit optimization under the environmental constraints.
- Understand behavioral economics concepts such as prospect theory.
- Explore ways in which Starbucks can address the issues related to the cups effectively.
Contents
Keywords
Behavioral economics; Pricing strategies; Managerial economics; Consumer behavior; Rational behavior; Consumer choice; Consumer preference; Budget constraint; Utility maximization; Expected utility theory; Prospect theory
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