Friday, September 26, 2008

The Economics of Happy Hour: Why Beer is Cheaper During Happy Hour

I went to the Brewers Art last night for a happy hour with my fellow Towson professor pals. I’m not positive, but I believe the beers were cheaper during happy hour than during regular hours, same deal at Capital City Brewery in DC (where I happy houred on Wednesday).

Why is beer cheaper during happy hours? The supply of bars hasn’t changed from happy hour to post happy hour (dinner time), but the demand of the patrons probably has. The happy hour crowd tends to be younger and poorer, they tend to have a thirst for cheap drinks. So to attract this crowd before the dinner crowd arrives, bars lower prices.

In Madison, Wisconsin many drink specials were to be found where students ventured out for cheap drink specials. However, due to problems with people who got a little too happy, the local bars banded together to eliminate happy hour specials. A clear case of collusion, happy hour lovers sued the tavern league. The state supreme court of Wisconsin, ruled that it was OK since the tavern league had immunity.


Less Than a said...

Hmm, and what about loosening pocketbooks, increasing customer numbers (i.e. coworkers going out together) and extending visits, thereby improving revenue? Isn't Happy Hour like a coupon or a loss-leader, getting you in the door to spend more?

Seth Gitter said...

I could see having a few drinks loosening your wallet.

The idea of loss-leader may work too. You get the cheap people to buy whatever drink, while those who want a specific drink pay more.

In DC though most come to happy hour order the cheap drink and the disscounted appetizer then leave.