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Starbucks or McDonald’s?

Jun 10, 2010 • Behavioral Economics, Businesses • 1031 Views    No Comments

A recent Pew Research Center survey asked 2260 adults whether they would, “prefer to live in a place with more McDonald’s or more Starbucks.” 43% said McDonald’s; 35% said Starbucks; 22% had no preference. According to the study, a key variable is your political inclination. Liberals tend to favor Starbucks over McDonald’s.

More specifically, if you are female, politically liberal, 18-29 years old, earn more than $75,000 a year, a college graduate, or religiously unaffiliated, you probably prefer Starbucks. On the other hand, a McDonald’s loyalist tends to be male, to earn less than $30,000, to have a high school degree but not college, and/or to be Protestant or Catholic.

The Pew survey reminded me of research about economics majors that was in the news. Discussing the connection between education and civic behavior, a New York Fed Staff Report concluded that students who majored in economics tended to be Republicans. Taking a huge analytic leap, does that means that economists prefer McDonald’s?

The Economic Lesson

McDonald’s and Starbucks compete in monopolistically competitive markets. The characteristics of monopolistic competition include many sellers with a similar product, sellers creating an individual, unique identity, and sellers having some control over price. The competitive behavior of beauty salons, supermarkets, and clothing manufacturers is also shaped by a monopolistically competitive market structure.

From most competitive to least competitive, the four basic competitive market structures are: perfect competition, monopolistic competition, oligopoly, monopoly.

 

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