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Without perfect information, market participants can act irrationally. This is why Ethiopian farmers sell their coffee beans for pennies/kilo, while Starbucks

• jsprogrammer 10y ago
  Why would Ethiopian farmers sell for so little if they could sell for more?
  • gherkin0 10y ago
    Some possibilities: * They don't know that their beans can actually sell for so much * They don't know how to sell their beans for higher prices (e.g. they don't have access to the right middlemen) * They aren't coordinated enough and undercut each other when dealing with the middlemen. * Starbuck's premium prices may have little to do with the beans themselves
    • jsprogrammer 10y ago
      None of those would necessarily indicate that the farmers are acting irrationally in the previously described exchanges.
• civilian 10y ago
  This is not a good example. Distribution, branding and maintaining retail outlets make most of the cost. Ethiopian farmers can't sell their beans for dollars because: * They haven't shipped them across the ocean * They don't have warehouses to store them in * They don't have a retail store to sell them in * Nobody knows the quality or consistency of Ethiopian Joe's coffeebeans, but they know that Starbucks is consistent good. A better example of irrational acting is that: MLB tickets can be sold for hundreds of dollars, even though professional baseball is the most boring thing to watch, we barely have good enough eyes to see what's happening from that far away anyway, and you'll have to pay 2x for anything you eat or drink. Also Beanie Babies. Buying beanie babies and tulip bulbs was really irrational acting.