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> Deadweight loss happens when a person who is willing to pay more is charged less than the amount they're willing to pay. > Tom is willing to pay $6 for coffe
by lenzm 4y ago
> Deadweight loss happens when a person who is willing to pay more is charged less than the amount they're willing to pay.
> Tom is willing to pay $6 for coffee and the shop only charges him $4, the deadweight loss is $2.
That is a consumer surplus, not deadweight loss.
- foxbarrington 4y agoCame here to point that out as well. Deadweight loss is when the consumer surplus is lost because they are eaten by additional costs like taxes.
- jihadjihad 4y agoIndeed. Some credibility has been lost as well, given the source of TFA.
- ulber 4y agoThe argument the article makes is indeed a bit blunt. The idea here is that tipping enables better price discrimination, which in turn allows a higher "quantity" of coffee to be produced. With coffee shops that "quantity" will translate to things like 1) higher density or 2) more attractive placement of coffee shops, both of which increase coffee consumption by making it easier to pick one up, or 3) higher quality (think small batch) coffee being produced, which increases the quantity of labor being sold in a cup. I still don't enjoy this tipping culture, but the argument being made makes sense when you fill in the details.
- KptMarchewa 4y agoPlaces without enforced tipping culture still seem to have decent amount of coffee places.