Fresh Beer at Market Prices

Roland Fryer is a very enterprising young economist at Harvard whose early work, much of it in collaboration with Steve Levitt, is featured in Freakonomics.

Roland’s creativity is not limited to academic economics. A while back, he told me his idea for opening a bar in Cambridge where an electronic tote board would list the prices of the beers and each beer would rise or fall in price throughout the night depending on demand.

Well, someone beat him to it. It’s in Berlin and is called the Broker’s Bier Borse; here’s a blog entry about it.

How do you think the market would play out in such a bar? If you were spending the night there with friends, how would you behave? Would you behave differently if you were drinking alone?

(Hat tip: Nils Thingvall)


JordanO

If you were spending the night there with friends, how would you behave?

We would evaluate various light-colored lagers throughout the night using Price-to-Inebriation ratios, then at last call we would attempt a hostile takeover to corner the market on Guinness.

All on margin, if the barkeep allows.

Jonathan Harford

Dang! I had this idea in High School! 'Cept it was for coffee.

Misha

As a grad student in Cambridge at the moment, of course I'd love this sort of place to open.

But the fella also got beat to the punch by a place called Brau House in Ulaanbaatar, Mongolia that I discovered with a buddy while traveling. Not only was the beer even cheaper if you timed it right but where else can you get fermented horse milk vodka whenever you like?!

beglen

This was quite common in Student bars in England around 1995. There were a couple of companies that had systems that bars could rent out for the night.

fin_economist

He was also beat to the punch by "Wall Street" a bar in Barcelona, Spain. In addition to the electronic tote board listing the prices of the beers based on supply and demand, "Wall Street" also had random "crashes" that would send the price of certain beers falling.

wesleyb41

I love it. I am a huge nerd, but I love it.

I am very curious (as the article indicated) as to whether the bar will let you sell beer you purchased at a lower price. What market efficiency...

kerplunk

Melbourne has a similar bar called Traders, which is located next to the Australian Stock Exchange building!

http://www.melbournepubs.com/v/1185/

dan

excellent.

i experienced one of these places in offenburg, germany. it was more then just a pub... it was a huge club.

but all i did was sit and watch the board to see when hefeweizen would go back down below 2.

good times.

meomaxy

I'm not getting this exactly. This is just like a market system, buying and selling, supply and demand, etc. except for the fact that there is only demand and there is only buying.

Kjohrf

This isn't new. Many years ago, there was a story about a restaurant in Paris near the bourse that altered prices based on supply and demand for the day.

I don't know why this model isn't used more often.

Here's a question... Some prices (e. g., gas) go up or down possibly every day. Others (e. g., restaurant prices) generally stay the same for a year or more. Why the vast difference? Just the cost of re-printing menus and such? Grocery stores changes prices all the time and have tens of thousands of items. A fast food place with tens of items keeps prices steady for weeks or months at least, and has no printed menu. Go figure.

nma

Back in 1996, when I was a freshman, a system like this was already up and running for quite a few years in a bar called 'De Beurs' ('stock market') in Utrecht, The Netherlands. Demand for attractive girls was much higher than supply in this place so any price for a beer was too high....

scott cunningham

meomaxy - there is supply too, but it is fixed (ie, a vertical line).

I did something like this a few years ago in a class of mine, only it was with absences. I treated absences as a well-defined property right. Students were endowed with 3 absences apiece, and told that they could skip class as much as they wanted so long as they had "absence permits" to cover the skips. The only other condition was that students had to buy and sell the absences in class. We held an auction weekly. It was fascinating to watch - absences were initially selling for $3-5 apiece, but by mid-semester were selling for $25 apiece. Several students were speculating that the price would keep rising, and so withheld their absences. But the nature of the good being traded was such that as we approached the end of the semester, students demanded fewer and fewer of them, and ultimately the bottom fell out of the market. Prices fell all the way down to $0.50. But in the end, everyone had enough "absent permits" to cover their skips, and in a follow-up survey, everyone expressed gratitude over having the option. Crude evidence, but I took it as showing that the market was Pareto improving.

Read more...

sophistry

This has already been done for video games. The popular game "Half Life:CounterStrike" calibrates
the price of weapons/armor you buy when you play online multiplayer based on the global demand for them in the previous week.

Look here for the description:
http://www.steampowered.com/stats/csmarket/algorithm.html

Look here for actual pricing data:
http://www.steampowered.com/stats/csmarket/

synapticmisfires

I love the absent permit idea. It's a lot more efficient than some schools that allow only not tradeable cuts. Too bad they didn't have that at my school, I could have used the money.

smashingn

I live in a decent sized college town, and often frequent bars. After going out several nights each for a summer I started to develop a theory about why people went to certain bars on certain nights. The theory may sound somewhat misogynistic, but I think it is based in empirical fact.

The particular NIGHT in which bar activity takes place varies with the preference of females. Females, on average, drink less alcohol and less often, and likely recover more slowly from nights out. Therefore, while males are generally willing to out about any night, females are more selective. Ultimately, females, on average, select a few particular nights of the week and go out most often on those nights.

Males, being indifferent with respect to the day of the week, would prefer to go out on a day when the most females are out. Therefore, they will follow the patterns set by the females. However, the particular BAR that is most frequented is dictated by males, who are driven by a simple motive: to drink cheaply. Therefore, whatever bar has the CCBA (cheap, cold beer advantage) on a particular night is going to have the most business. Women, having chosen the night, must yield to the preferences of males with respect to the bar. That is because women are ALSO after the cheapest drink possible (remind: college students are poor). And where will women find the cheapest drinks? More likely than not, women will pay the least for their drinks where the most men are.

It is a little rough around the edges, but I think it is a simple way to describe the drinking habits of poor college students.

Read more...

mjsonline

My students' union had a stock exchange bar night every week during my last year there; it was guaranteed to be an entertaining evening, and always popular among the economists!

See www.barfootsie.co.uk for details of the system

Dr. Vino

The creators of EasyJet in the UK also have dynamic pricing based on current user demand for their internet cafes..

JordanO

If you were spending the night there with friends, how would you behave?

We would evaluate various light-colored lagers throughout the night using Price-to-Inebriation ratios, then at last call we would attempt a hostile takeover to corner the market on Guinness.

All on margin, if the barkeep allows.

Jonathan Harford

Dang! I had this idea in High School! 'Cept it was for coffee.

Misha

As a grad student in Cambridge at the moment, of course I'd love this sort of place to open.

But the fella also got beat to the punch by a place called Brau House in Ulaanbaatar, Mongolia that I discovered with a buddy while traveling. Not only was the beer even cheaper if you timed it right but where else can you get fermented horse milk vodka whenever you like?!