Monday, October 24, 2011

The Economics of Craft Beer in DC

This was a really great article by Tammy Tuck on the high price of craft beer in DC. For one thing it was just a good outline of the business and the relationship between brewers, wholesalers, and retailers. But it also had a lot of good discussion of regulation, product differentiation, purchasing power in different markets, and a lot of other good points that would make it very instructive for an intro economics class.

One of the things that struck me was the attitude of a lot of the interviewees toward the market. The manager of a Dupont Circle retailer said "When I first started getting crazy beers that weren't yet on most people's radar, the temptation was strong to jack the prices up. The logic was that the people who wanted them would pay for them. The few shops around town who had them would charge a whole lot. So we figured the market could bear it, and we aligned our prices accordingly. After a while, a spirit of fairness settled in. We've come back from the dark side."

A wholesaler who is described as practically having a monopoly in DC said "Just because I'm the only one who can sell it, I'm not going to jack up the price. That's just ethically wrong."

Some of this could simply be posturing, of course. But we shouldn't discount the extent to which market activity itself has utility or disutility. A lot of people ignore the social import of market institutions when they talk about economics. Non-market allocation is considered automatically suspect, as are allegedly "non-market" motivations in markets.


  1. Well, beer and alcohol generation and distribution in general is riddled with some classic public choice problems, as well as with a whole host of non-market decisions about what is "appropriate" to serve, when it is "appropriate" to serve, etc. For example, I don't know if it is still the case but as of a few years ago Sangria was illegal to serve in Virginia. You see similar laws against making bitters in house throughout the U.S.

    You also have to ask, why is the wholesaler in the position that he or she is in?

  2. And of course in a number of states it remains illegal to make your own beer, mead, etc. That number is thankfully shrinking.

  3. There are of course certain aspects that people should always need to see that's why certain states in the US requires certification to be an Alcohol Seller.

    "When you undergo TABC Certification Online, you will gain an extensive understanding of the various aspects involving the sale and service of alcohol. For instance, you will learn how alcohol affects your customers and how to recognize the effects of alcohol on them. You will also learn how to keep your customers from getting intoxicated and how to spot the early signs of intoxication."

    A lot of things can happen when you have an Alcohol store. That's why the certain states give certification and training to those people who wants to be in this industry.


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