The Business Ethics Blog

The always-useful Consumerist brings us this story, with a self-explanatory title: A Lone Dunkin’ Donuts Sort Of Abolishes Pennies

One donut shop is taking a stand against the bacteria-ridden zinc disks of suck that are pennies. Reader Tom sent us [a photo of a sign] from a store he recently visited. In a policy change that was probably born during an 8 AM rush, this franchise appears to be are rounding customer totals up or down to the nearest five cents, and only providing pennies to those annoying people who actually want them….

Setting aside paranoia about pennies causing germs, what should we say about this policy, from an ethical point of view?

First, the efficiency argument is worth noting. Lines are annoying. Lining up (i.e., standing behind other people) to get something you’re anxious for (like coffee) is doubly annoying. Speeding things up is good. So, improving the efficiency of the payment system is good.

Second, it’s worth pointing out that the system intends to treat everyone equally. Every customer is subject to the same system of rounding. In principle, no customer is disadvantaged relative to any other customer, and indeed (importantly) the customer is not disadvantaged relative to the coffee shop. Round up or round down — it’s all just a matter of math.

Third, in practice, this system may not actually end up treating everyone equally. As one person (with the pseudonym “Pecan”) who commented on the Consumerist piece pointed out, regulars who buy the exact same thing every day are going to be either systematically advantaged or systematically disadvantaged. If their change is “supposed” to be 27 cents, they’re only going to get 25 cents — every time. If they don’t realize that, then they’re going to lose money, time after time, in a way that will add up. Clearly, it would take a long time to add up to an amount that most of us might care about, but it’s still worth noting.

Finally, it’s worth pointing out that such a system allows the coffee shop a new way of acting unethically. Not that the rounding is itself unethical — it’s not. But if accepted by customers, the rounding offers the shop the opportunity to set its prices so that, on average, it ends up rounding in its own favour more often than it rounds in customers’ favour. Prices that end in “8”, for example (such as $1.38) will always result in exact change ending in “2”. For example, a price of $1.38 results in 62 cents expected back from two dollars. When the exact change is an amount ending in “2”, that will always be rounded down to zero, resulting in 2 cents’ extra profit on every transaction. On low-priced items like coffee and donuts, that could mean a significant increase in the store’s profit margin.