Monday, February 23, 2009

Beeronomics: Experiments

This poster from Rogue's Green Dragon Pub in Portland, where they propose raising prices to post-tax levels for a day, made me think of a scheme I thought about and quickly dismissed as too hard to pull off. How could we know the real impact of a beer tax on Oregon's breweries? Run an experiment. Have Rogue, Deschutes, McMenamins, Full Sail and a number of independent pubs raise prices in a randomly selected half of their pubs for a week (by how much to replicate the effects of the tax is a matter of debate). Then switch back to old prices and raise them in the other pubs for a week. Examine sales data for all the different types and prices of beers to understand the price and cross-price elasticity of demand (how sensitive quantity demanded is to price). Not a perfect experiment, but far better than any other data we have. If you could get retailers to do it as well, then we would really be cookin'.

If any brewery owners want to give it a try, I volunteer my expertise in studying the data...

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