Saturday, January 31, 2009

Why Open Bar is Bad (for You)

Here's a quick little economic lesson about why you drink too much if alcohol is free:

Say you're at a place where drinks cost $5. You will consume up until you get to q5. Likewise, if drinks cost $3 then you'll consume q3 > q5. Assuming that the optimal amount to drink is about q3 and that demand elasticity is as drawn, then you'll drink qfree if it's open bar. Consuming this much makes you puke and forces your friends to take care of you. You regret it the next morning.

To wrap it up, you won't drink too much in a club where you have to pay $10 for a drink, because you'd be at q10 > q5. If you don't want to get ├╝ber-blitzed, then you must set exogenous limits on yourself in order to stay away from qfree.
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