3 ms·
Um, isn't this the definition of sunk cost? They already lost money on their bet. Trying to raise prices in the future to pay for the past is a blunder. If the
by RobertKohr 15y ago
Um, isn't this the definition of sunk cost? They already lost money on their bet. Trying to raise prices in the future to pay for the past is a blunder.
If they can get away with raising prices and not losing customers, it is irrelevant that they overpaid for coffee they already bought. They just earn more per cup. If they can't get away with it, then this is a foolish thing to do, as they can't make their previous payments vanish.
Didn't their executives go to business school?
- fennecfoxen 15y agoPerhaps this is why this annual cost increase is still the smallest yet, and why they're also limiting the price increase in stores even more?
- zacharyvoase 15y agoIt is a prime example of sunk cost (and the sunk cost fallacy), but it doesn't explain why they're only raising prices now, rather than back in October when they locked in the agreement. The linked-to WSJ article explains that Starbucks will be paying 'more than their competitors' for coffee, but they're still not paying 'more for coffee' than they expected to. That's the nature of a forward purchase agreement.