Starbucks Cup Prices: How Our Decisions Are Influenced by the Decoy Effect

My friend and I have observed an odd trend at the Broadway Shopping Center Starbucks: hardly anyone orders a tall. Typically, patrons opt for the grande or even the venti right away. The decoy effect is a clever application of behavioral economics that makes it appear as though people are simply wanting more coffee.

Consider the latte. At first glance, the tall appears to be reasonably priced. However, when compared to the grande, it's actually a bad deal when you consider the cost per ounce. The grande seems like the "smart" option because it costs only slightly more but provides you with almost 50% more coffee. The venti, which is slightly more costly than the grande but has a notably larger volume, is the next item on the menu to your right. All of a sudden, the grande begins to appear to be a compromise, and you are tempted to go all the way. The tall is essentially the sacrificial choice in this arrangement; it serves to make the grande appear to be the best deal.

This psychological nudge is ingrained in the way orders are taken and is not limited to pricing. Baristas at Broadway hardly ever ask, "Do you want a tall?" Rather, they will instinctively ask, "Grande or venti?" The barista even chuckled when I insisted on a tall, saying, "Grande is just a little more, and you get an extra 200 milliliters!" I realized then that I wasn't truly making a free decision. Starbucks used a subtle combination of language and numbers to guide me to the cup size they wanted me to choose.