After having read the 8 chapters of Undercover Economist, but focusing on the first five, I find some of the insights very interesting at least to me. Despite some of the remedial nature of some of the book, I found unique and interesting the idea of the passing of profit margins among so many different parties. I liked the part where the coffee sellers were analysed. It discussed and dispelled the common misconception that prime-location coffee shops are "ripping us off."
Coffee that san be purchased at busy, crowded areas, like train stations, wherein people are in a hurry demands a higher price than other coffee at any quantity. This is because in such pell-mell circumstances, the costumers are effectively willing (but not neccesrily super excited about having) to purchase and pay for more services than other wise. Coffee in busy, rushed areas is more valued and price-shopping is either not possible or easy for buyers in this areas. For all these reasons coffee in these kinds of areas can (and probably will) fetch higher prices.
This begs the question. Does that mean that customers will be charged higher prices just because they can be? The answer is most likely so. But What I liked about the book was that I was surprised to find out that it is probably not the coffee shop charging this premium, and likely also that the coffee shop's profits may well be razor-thin. Because the station manager (whose job is likely to include raising revenue for the station) knows that things like a coffee shop there can charge exhorbinent revenue so it extracts these premiums revenues from the coffee shop in the form of higher rents.
What I took away from reading these passages was about how it is now my belief that, perhaps, this chain continues. Perhaps the people to whom the train station is accountable, perhaps their landlords, or their tax collectors probably. This makes me wonder how deep this chain goes. It makes me wonder if the train station can even keep any of the high profits it forces the coffee shop to earn. I wonder that with so many immediate suppliers all supporting and offering inputs goods to subsequent steps with the end result being coffee upon which a premium can be added whether or not it is even possible to discount. I wonder with such a high number of profit seeking links in such a chain if it is even possible to avoid charging for these convienience and locational charges, or if there are too many links in this train station that at least one of them will price-discriminate and thereby force each subsiquent link to do so as well.
Either way, the coffee shop, while price discriminating, is not gouging after all, a coffee shop so located is in fact offering more servicesthan an average coffee shop, in the way of locational convienience, they are merely now charging for them.