[dandelany]

Yes, it's economically rational for the barista/bartender, but it's not necessarily bad business for the bar/coffeeshop either. If the bartender is smart about when and how often she hands out these freebies, she can convert one-time or occasional customers into loyal, regular customers, which is much better for the bar in the long run.

It reminds me of the Apple store - 9 times out of 10, if you go in there with something broken that's out of warranty, you have to pay the full price to repair it. However, Apple geniuses are given a little bit of leeway, and often offer "unnecessary" free out-of-warrany replacements that, while costly to Apple in the short-term, generally pay handsome returns in the long run by encouraging loyalty.

[BobbyH]

Yeah, I agree. What I was trying to articulate is that this is a good example of a principal/agent problem, as the Principal (owner) has interests that differ from those of his Agent. Solutions to this generally either decrease information asymmetry or involve a better incentive system for the Agent. However, as you point out, it's possible that the Agent will act in his interest and still benefit the Principal.

Wow, I just looked and this exact example is actually featured on the Wikipedia page for Principle-agent problem. http://en.wikipedia.org/wiki/Principal-agent_problem#Employm...

[whatusername]

My wife took her dropped/broken iPhone into the apple store. She's too honest and didn't realise when the genius was asking her if it was broken/having issues before she dropped it that he was wanting to put it through under warranty.

[philwelch]

Fun story--I had a dropped/dented PowerBook once that I never got fixed because it was my fault, but it had another issue due to a manufacturing fault that I did send it in for. They sent it back with apparently a brand new, undented case.