Enter the debunking article
Milking the market
You cite economist Allen Sanderson (“By
the Numbers,” August/04) in claiming that students value
their time at only $3/hour when they wait in line for a milkshake.
I think your judgment has malted. The students could value the milkshakes
at $50, rather than the $1 selling price, and the vendor could merely
be vastly underpricing the shakes relative to demand, as evidenced
by the lines. Also, you’re assuming the time spent in line
has negative, or at least no, value. It might well be part of the
fun. Delaying study might be priceless.
I marveled the other day as I paid $3.75 for
a Frappuccino, and it wasn’t even the largest size. Why is
a market-savvy university giving away these drinks for a paltry
$1, especially considering the shakes include what sounds like enormous
quantities of ice cream? (Somewhere between 10 and 20 shakes per
tub, by your numbers.) Something tells me the fair market price
would be in the $2.50 to $4 range. Looks like an arbitrage opportunity
with whipped cream on top.
Howard Stolar, MBA’92
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