by Tyler Cowen
on September 24, 2011 at 5:25 pm
1. Are we now in a pure credit economy?
2. Exploding markets in everything, law clerks edition.
3. www.timetravelfund.com. “Morlocks aside…”
4. One theory of cocktail prices.
5. Department of unintended consequences, Star Wars edition.
The REAL story of cocktail prices begins with the liquor licenses and the monopolies of distribution, both of which are controlled by government.
The margins on cocktails are so large, the price is determined not by input prices but by customer willingness to pay. Bartenders are generous with their pours and are allowed to be. They’ll make additional profit by encouraging top shelf or call drinks that add a buck profit to every glass.
Contrary to CW, the customer isn’t buying a cocktail. Rather, they are buying the social scene. The sexual lubricant called alcohol is either a signal of sophistication or a security blanket, depending on your skill and confidence.
But like movie theater drinks and popcorn, you’re paying FAR above marginal price because you are captive to the venue. Movie theaters cover operating expenses (the nut) and get about 5% of the box in the first week, 10% the second week, and 15% the third week. The movie is pretty much a loss leader with the concessions serving up the profits.
When a club has a live band and charges a cover, the band usually takes the door. The club gets only the liquor sales. If margins were thin, why would the venue give up 100% of the door?
The dive bars have smaller margins and thus try to make it up on volume, primarily with draft or cheap bottled beer. They are usually in low rent districts. They don’t serve many cocktails, and people who order liquor usually take it straight. The clentele won’t order a martini, and if they do it won’t be sent back for not being dry enough. They’ll give a long pour on the first round and progressively weaken the drink. Managers will measure bottles and monitor pours. The idea is to empty the alcoholic’s wallet shearing the sheep through pay day.
Prolonged periods of negative real rates may trigger increased savings
That’s an interesting point. Like most people who read this blog probably do, I have a rough map of my planned financial future in Excel going out a decade or two. The lower real interest rates get, the more I have to plan to put in bonds to secure a given income level — if real rates fall by a certain proportion, my capital requirements go up by a similar proportion, in order to be able to retire at the same income.
There’s also, I think, for the same reason an underappreciated relationship between the attraction of gov’t jobs (which are virtually the only defined benefit retirement plan jobs anymore) and real interest rates.
Maybe you ought to research which blog posts get the most comments and why.
Is it timing or topic? For some reason, M. Night Shyamalan did very well as does basketball and taxes. What topics do poorly?
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