On the first of the warm Memorial Day weekend days, there’s an interesting thread on Quora about why ice coffee is more expensive than hot.

I initially made a cost-plus pricing assumption, arguing the following reasons:

1) Labor: It’s brewed, cooled, placed in a storage pitcher, and placed in storage (not served in real time)
2) Storage: It’s stored in a fridge
3) Time: Takes longer to make because it needs to be cooled.
4) Scarcity: Time + Storage
5) Cup: the plastic cups cost a few cents more

I then read several of the answers, including Chris Dixon’s, and realized that I needed to add a caveat up front:

Namely because they can and believe they are revenue maximizing by doing so. However, if they chose to argue on the basis of cost, vendors could argue:

Cost typically only impacts price in heavily competitive markets.  This why you often hear a service provider, installer, or retailer tell you they are selling you something just above cost, or “hardly making any profit” on a particular item.

The ice coffee market has a lot of competition, but given that prices are still with in a fairly small band, it’s unlikely someone will leave one shop for another on the basis of price.  What’s more, in most markets with four seasons, ice coffee is in fact a seasonal treat, making people willing to pay more.

With that said, cost does play a role to the extent that sellers can use it as the basis for an argument to charge higher prices.  If ice coffee does in fact take longer to make and require theoretical storage costs, merchants can justify a higher price, even if these arguments are shaky.

What’s perhaps most surprising is that in the highly fragmented coffee market, no vendor or chain has “broken ranks” and set ice coffee prices at parity with hot coffee.  Perhaps this industry is tacitly in coordination.  Why hasn’t Peets or Dunkin challenged Starbucks by running a “same price as hot” campaign.

These and other mysteries…