There are three convenience stores in the student area west of the University of Texas campus. Store A sells the most beer, and barely looks at student IDs; but it also charges the highest price of the three. Store B is a bit stricter on fake IDs, refuses some underage students, and charges a lower price. Store C has the best prices, but its clerks inspect IDs thoroughly. My student reports that nobody makes it through with a fake ID. This near-campus oligopoly defines a new pricing strategy: lenience on IDs that is unsurprisingly related to the stores’ pricing policies. I wonder about differences in the characteristics of the patrons of the different stores.
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When Jason Childs and his colleagues went about devising a new course in economics at the University of Regina, they wanted to find a focus that didn’t involve the overused and fictitious widget.
What they arrived at was a product that was historic and central to people’s lives – and something most undergraduate students are familiar with: beer.
Childs, an associate professor of economics, said the Economics of Beer course had 80 seats, and they were filled in about two weeks. The course began in early May and finishes near the end of June.
“Basically, it’s an exploration of some economics concepts, in particular microeconomic concepts, and the brewing industry,” he said. “Beer is a really neat example because it allows you to talk about just about every fundamental concept in economics.”
Touring Bamberg, northern Bavaria, our tour leader mentions the local 1907 Beer War. The town’s three brewers announced that they were joining to raise suggested retail prices from 10 to 12 pfennigs and charge retailers commensurately more. The pub owners felt the public would be angry and refused to buy from the cartel. After one dry day they instead began “importing” beer from nearby towns. The public’s thirst was slaked — still at 10 pfennigs a glass. After a week of no beer sales, the local brewers caved in and cut their asking price to 10 pfennigs a glass. Moral of the story: even with just three players, it’s hard to maintain a cartel if there are ready substitutes for the product. (HT to MP)
Belgium prides itself on being “The Land of Beers.” A Belgian student tells me that this pride leads to some unusual pricing policies among the less well-known breweries. Apparently, many charge a higher price for their products when they are sold within the local area around the brewery, since people are proud of their local brand. This is a clear example of demand-based price discrimination. The average cost of selling locally is probably below that of selling elsewhere (lower transportation costs); but locals’ pride in the native tipple gives the brewers some monopoly power, which they are happy to exploit. The brewers are made better off (higher profits) by the locals’ behavior; and the local people must be better off, otherwise they would choose different brews.
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Gosset (1876–1937) aka “Student” – he of Student’s t-table and test of statistical significance – rejected artificial rules about sample size, experimental design, and the level of significance, and took instead an economic approach to the logic of decisions made under uncertainty. In his job as Apprentice Brewer, Head Experimental Brewer, and finally Head Brewer of Guinness, Student produced small samples of experimental barley, malt, and hops, seeking guidance for industrial quality control and maximum expected profit at the large-scale brewery. In the process Student invented or inspired half of modern statistics.
At one Manhattan pharmacy, you can buy more than just cold medicine. DNAinfo reports that at one Upper West Side Duane Reade, “[y]ou can also replenish your beer supply at the pharmacy’s Brew York City, a service counter that pours out ‘growlers’ of beer, 64-ounce screw-top glass jugs.” Read More »
North Korea has come out with its first beer commercial for Taedong River Beer, “the pride of Pyongyang,” which shows both Western businessmen and a sweaty worker in uniform enjoying a cold one. Read More »