The Perils of Private Provision of Public Goods

42 Pages Posted: 2 Mar 2020

See all articles by Umit Gurun

Umit Gurun

University of Texas at Dallas

Jordan Nickerson

Boston College

David H. Solomon

Boston College - Carroll School of Management

Date Written: January 31, 2020

Abstract

In May 2018, in response to protests, Starbucks changed its policies nationwide to allow anybody to sit in their stores and use the bathroom without making a purchase. Using a large panel of anonymized cellphone location data, we estimate that the policy led to a 7.3% decline in store attendance at Starbucks locations relative to other nearby coffee shops and restaurants. This decline cannot be calculated from Starbucks’ public disclosures, which lack the comparison group of other coffee shops. The decline in visits is around 84% larger for stores located near homeless shelters. The policy also affected the intensive margin of demand: remaining customers spent 4.1% less time in Starbucks relative to nearby coffee shops after the policy enactment. Wealthier customers reduced their visits more, but black and white customers were equally deterred. The policy led to fewer citations for public urination near Starbucks locations, but had no effect on other similar public order crimes. These results show the difficulties of companies attempting to provide public goods, as potential customers are crowded out by non-paying members of the public.

Keywords: Public Good, Socially Responsible Investment, ESG investment, Homeless, Starbucks, Location data

JEL Classification: A11, A13, C55, D02, D22, D61, D62, D63, D64, H23, G30, L21, I15, G34

Suggested Citation

Gurun, Umit and Nickerson, Jordan and Solomon, David H., The Perils of Private Provision of Public Goods (January 31, 2020). Available at SSRN: https://ssrn.com/abstract=3531171 or http://dx.doi.org/10.2139/ssrn.3531171

Umit Gurun (Contact Author)

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

HOME PAGE: http://www.umitgurun.com

Jordan Nickerson

Boston College ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

David H. Solomon

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

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