Discount Logic

Nearly every time I sit down at a bar, I ask the barkeep the same question: are there any beer specials on at the moment? Admittedly, the motivation behind this question is pinching pennies. But as Confucius said,“Waste begets self-will; thrift begets meanness: but better be mean than self-willed.” So I’d rather be thrifty than wasteful. And anyway, if I save a dollar per drink, that can quickly add up to another drink.

Another important feature of the question is its ability to narrow down my choices. There are so many beers out there, that I often appreciate the opportunity to rely on the daily specials to help me decide. I have sampled a great number of beers that I might otherwise have overlooked this way.

But discounts are more than they seem. Discounts can reveal a number of motivations. They can be implemented for the purpose of new customer acquisition. They can also be used to move inventory that is growing stale. But the main sale prices offered by bars are designed to drive sales, particularly at times when demand is low. Compare, for example, the deals that you can get Tuesday afternoon compared to Saturday night. The traditional notion is that the retailer will reduce the price to encourage a greater volume of sales. The increased number of sales hopefully offsets the decreased profit margin on each unit (and then some.)

But those Saturday night customers might have a gripe against the Tuesday happy hour crowd. Arguably, discounts are essentially subsidies paid by one group of patrons for the benefit of another. Everybody who drinks at the bar outside of happy hour is subsidizing the drinks of the happy hour drinkers. For the bar to remain profitable, base prices have to go up in order to cover the revenue lost due to discounts. So by accepting a discount, thrifty patrons are externalizing a portion of their tab and the rest of the customers share the cost in the form of higher prices later.

But there is nothing very novel about this notion. The idea has been around for a long time. A classic example is the expression “there’s no such thing as a free lunch.” The “free lunch” in question is the time-honored tradition/marketing scheme whereby public houses offer free food with purchase of a drink. (An arrangement that fed me and my friends more than a few times during our college years.) As more than a few people have observed, those who buy a single drink and eat well get a great bargain. While those who buy multiple drinks or eat little essentially subsidized the feeding of others.

Once this situation has been recognized, one must ask whether there is a moral imperative not to accept discounts on the grounds that doing so is to the disadvantage of those customers who do not receive a discount. The answer, I think, is no.

The bars that I frequent sell cans of PBR or Hamms for as much as $3 per can. And some people make the free choice to pay that price. After all, each and every transaction at the bar is made freely by both the bar owner and the customer. The bar owner is free to set his prices and if the customer finds the prices too high, he may return during happy hour or take his business elsewhere. What does it matter to me if the bar makes more money off of some other patron than he does off of me? If the bar owner is actually losing money on me, let him raise his prices or discontinue his discounts. In a free market, one has little right to complain that somebody else got a better deal.

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Beer of the week: Revolution Rosa – I have complained before about the fact that bars in Boston are prohibited from offering happy hour specials. Chicago no longer has such a prohibition. And this Chicago beer may now be seen at a discounted price, because summer beers are finished and autumn seasonals have hit the shelves. It is hard to tell from the photo, but this beer has a color unlike any other beer have ever seen. It is brewed with hibiscus, which gives the beer a distinctly floral taste and a pink hue. The aroma of the beer is very sweet and malty. The taste follows the smell closely: sweet, malty, flowery. I think that this beer is very good, but I would understand if anybody complained that there is not enough hops to balance all of the sweetness.

Reading of the week: The Sayings of Confucius – To be honest, I am not sure how to read Confucius. I have made a couple of attempts but not as seriously as I might. This section seems like a more or less random smattering, but it contains quite a few lovely thoughts. Of particular interest to me is the line “Were shouldering a whip a sure road to riches, I would turn carter: but since there is no sure road, I tread the path I love.”

Question of the week: Do discounts to some really disadvantage others? Is this a case of the workers in the vineyard?

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