College Campus Beer Pricing

(Photo: Patricia Low)

(Photo: Patricia Low)

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.

(HT: JZ)


Is this the University of Texas at Austin?

Voice of Reason

But how long until Store A gets shut down by the cops? I lived in a college town, and these days, places that don't play by the rules don't last very long. Once you get on their watch list, it's over.

Enter your name...

It kind of depends on the place. Some places shut these down. Others support them. I lived in a college town for a few years during the 1990s. The police department did "random" checks for underage patrons.

The owner of bar #1:
* served alcohol in the bar to high schoolers and some younger college students every day of the week
* was a lifelong friend of the police chief
* was never, ever the subject of one of these "random" checks.

The owner of bar #2:
* served beer only to older people, mostly middle-aged truck drivers
* knew the names of every patron, and so could instantly spot any outsider
* had a reputation for being the "tough" bar, and cultivated that reputation to keep the kids away
* was frequently checked

The owner of the wine shop (no drinking on the premises):
* had long hair and was a political liberal
* sold wine mostly to doctors and professors
* had posters about ID requirements covering nearly every square foot of the walls
* was the subject of a sting operation every single time.

The three grocery stores in town had similar fates: the expensive gourmet-food-for-professors store was a frequent target. The cheap one where the cops bought their own beer was never on the list.

What they should have done, but never did:

* Go to the high school and ask the football coach where his players were drinking. (Coach did not approve of his players drinking.)

Someday, I hope that some aspiring investigative journalist-student will film the doorway to that bar, label the video with the names of their fellow high school students as they walk in and out, and post it online along with a list of where the sting operations have—and haven't—been conducted in the past five or ten years. (The list can be easily constructed in the local newspaper's morgues, since they publish the entire list every time.)



Seems simple to A is charging the highest beer prices because their product is in high demand- the product being "beer that underage students can easily buy". Have a great day, everyone!


I don't know if demand is greater but is supply curve is more to the left on each different product. As the risk of punishment increases, the costs increase and therefore less of a willingness to supply at a given price.


When i was in high school in Montgomery, AL (in the pre-MADD days), one of the underage-friendly vendors would ask for ID, and demand a $2 surcharge if you couldn't produce one. It was good while it lasted.


Meanwhile, the econ department preaches perfect competition and ignores these three everyday monopolies.

Enforce the liquor laws more strictly, and you can guarantee prices will go down at all three stores.


But how much would we - the uninvolved taxpayers - be paying to provide stricter enforcement? Seems like for most of us, who don't care if college kids drink beer* or not, this is a dead weight loss. It's really amazing, the amount of money that can be saved, just by getting over the desire to run other people's lives.

*Over the years, I've attended or visited a number of universities, here and abroad. Some (including several American ones, in the days when many states had 18 as legal drinking age), sold beer & wine on campus. Never noticed any difference in academic standards deriving from that.


Right, so we have to figure out if the dead weight loss from government intervention is greater than the externality related to drinking. But in either case no enforcement or strict enforcement are better than weak enforcement.

Caleb B

For at least 7 years, a store by my HS in Oklahoma would sell to underage kids, but you had to double (or more) the price with the clerk pocketing the difference.

A nony mouse

Store A faces an inelastic demand curve similar to that seen among black market goods such as elicit drugs.

Voice of Reason

It's the same reason that illegal drugs are so expensive, and that drug dealers risk their lives to be in the industry (although Freakonomics proved that this industry is unprofitable): it's illegality has increased its barrier to entry and thus made it so that they can name their price.


The real issue here is - why is the US spending so much money/effort in preventing adults drinking beer?

And in encouraging young adults to get fake id?

Especially when you can now purchase marijuana for recreational use in one state...

Social and economic benefits to US reducing drinking age to 18 would be enormous...

tempo dulu

You can get laid but can't have a beer? How silly.