Peak-Load Pricing

Pelican Brewery in Pacific City, Oregon is among the very best Oregon breweries (as evidenced by their many, many national and international awards) and yet it is very hard to find their beers in the store. This something that I wondered about: why aren't they more available in Portland (and other parts of Oregon)?

An answer immediately suggests itself when one visits the brewery. It is located at a wonderful spot on the coast, but Pacific City is a little out of the way as it is off US 101 a bit. It is also on the Oregon coast which is wonderful in summer but can be...er...damp in winter. One expects then that they have a familiar problem in economics: a fixed supply capacity (the brewery) and a variable demand. Electric utilities are the most common example given of this: there is high demand during the day and low demand overnight. For Pelican, one imagines that they sell lots of beer during the summer and have a lot of excess capacity in the winter. So they could increase capacity to sell more bottles in Portland but this would potentially exacerbate the overcapacity in the winter (or may not if demand for bottles is seasonal in the other way).

The economics answer to this problem is what is known as peak-load pricing, an extra charge for buying at a peak time. Perhaps Pelican should charge $6 for pints in May-October and $3 in November-April, for example. This would even out the demand during these periods and help solve the excess capacity problem.

Okay, so perhaps this is a bit fanciful, but I sure hope to find more Pelican Beer in Portland, it is great stuff.

Search Costs

Economists describe the cost of having to search (for a product, a low price, a mate, etc.) as, you guessed it, search costs. The result in equilibrium is that the higher the cost of searching the less you will do. So, for example, I was much more inclined to buy a CD, say, at whatever price I saw it for it the store I happened to be at than I am now that I can search for low prices easily on the internets. (Yes, I know, I am a dinosaur, I still buy the occasional CD) This leads to more intense competition, lower prices and, ironically, less of a need to search in the end because price disparities will be lower.

It is for this reason I celebrate the release of Beer Signal, a new free iPhone app that allows you to search the current tap lists of Portland-area pubs. I'll let Jeff of Beervana explain it in detail. My first try, based on first hand knowledge of a neighborhood pub I patronized yesterday with an end of school year celebratory fish and chips with my son suggests it has some work to do to become very accurate (which will be helped along by users so I am acting in a self-interested way in publicizing it). Still, it lowers search costs, enhances consumer welfare and will promote diverse and often rotating taps.

Better living through technology indeed...

Drink Beer not Gatorade!

Via John Foyston (from whom I shamelessly stole this beautiful picture) come some wonderful news: beer is a better rehydration agent than water, or so say Spanish researchers:

Researchers at Granada University in Spain have come across a discovery that will undoubtedly please athletes and sports enthusiasts - a pint of beer post workout or match is better at rehydrating the human body than water.

Professor Manuel Garzon, a member of Granada's medical faculty, made the finding after tests on 25 students over several months. Researchers believe that it is the sugars, salts, and bubbles in a beer that may help people absorb fluids more quickly.

My soccer team will be so pleased to hear that they were right all along...

Friday Notes

Oregonians, your wait is over! Boundary Bay's extraordinary IPA is pouring at the Concordia Ale House, as is their oatmeal stout. Get thee some!

UPDATE! Ack, the IPA has now be dropped from their tap list - and I haven't even had a chance to get myself there (I was planning a trip tonight). Someone else needs to start pouring BB in Portland. Come to think of it, we are pretty short on Washington beers in general...

The Honest Pint Project's Jeff Alworth testified to the Senate Business and Transportation committee yesterday about the honest pint bill in consideration. Shortly thereafter, it was killed in committee. I am/have been ambivalent about the bill so I am not too sad but feel bad for the supporters of it. Time for the "Beaver Pint!" ^(TM)

Beer prices are soaring at my local grocery. I grabbed a sixer of Full Sail because it was the cheapest at $7.99, Deschutes' offerings were $8.99 and Rogue $10.99. Wow. Is this everyone's experience?

An Economist's Preferred Honest Pint at Belmont Station

This escaped my attention until now. Via John Foyston, a message from Belmont Station:

A FULL 16 ounce PINT EVERY TIME. You asked for it, we're delivering. We are now using oversize glasses with a 16 ounce line. Be patient. Let it settle a moment. If it's not 16 ounces we'll top it up. More beer for you. Less waste!

Yeay! Kudos to them for going to marked glassware. I have not seen them, but I can only hope that the mark looks a little something like this:

Ingredients

I had a fascinating conversation with a brewer recently about beer ingredients. It started with a talk about a possible impending shortage. This time in malted barley as, he claims, the ethanol market and subsidization is making more and more acreage go to corn. Plus, he said, growing barley for malting is risky because if the quality is not there, it is no good for malting and the price of non-malting barley is very low. There is also continuing concern about hops as well as the acreage of hops apparently continues to shrink. All this suggests that we may be paying even more for beer in the future.

But what really interested me was the claim that we should also expect the average quality of ingredients to suffer. Makes sense: with smaller amounts of barley and hops, even marginal crops will make their way into beers that they might not have before. Apparently there is also a pecking order for ingredients whereby bigger brewers get the best stuff and smaller brewers get ingredients of lesser quality. [That means home brewers are getting the real crappy stuff, I said, and he concurred] I have never noticed quality differences from smaller breweries, so does this means that they are especially good at overcoming poor quality ingredients to produce great beer?? Any brewers out there like to refute this assertion or concur with it?

Switching gears, because it is Friday and because where else would you turn for beer reviews than an economist, Beervana? Ha! I don't know where Full Sail is in the pecking order (probably pretty high) but either way, John Harris continues to produce remarkable beers. His latest, Keelhauler, is a Scottish ale meaning a malt-forward beer. I don't tend to like these very much as I am a bit of an incorrigible hop-head, but John's is, predictably, magnificent. It retains the traditional rich malty body but is nicely rounded with hops giving it a delightful scent and making it a more flavorful beer than most. Kudos. The spring season also brings out my favorite of the seasonals: Full-Sail's Prodigal Sun, new faves Ninkasi's Spring Reign and Deschutes' Red Chair. All three are worth the price of admission a few times over. Get ye some.

Making the pub rounds: Deschutes Bitter (on cask at the PDX pub), Fish Organic IPA (on cask at Belmont Station), Ninkasi Tricerahops (on cask at Bailey's Taproom) and how about an old classic served Real Ale style: Deschutes Mirror Pond (on cask at Horse Brass). Do you see a pattern? Yes, Portland needs more casks...please!

A Story of Honest Pints and Poor Pours

In which the Beervana blogger and Honest Pint Project mastermind is told by his economist friend (guru really) that he should not be upset at this pathetic pour at the Deschutes Portland Pub because it is a full information game - the glass is 20oz. but the pour is about, what, 16?!? The point is you know it is a lousy pour. And there is a solution: tip not, says I, though our server is great - but she needs to be on top of the bartender who is lazy. After a nice beer, however, everyone relaxes, the server is tipped well and the sun breaks through the clouds on a wonderful spring day in Portland.

And the beer is fantastic - XPA on cask. Wow. Go now. Just ask them to give you a full pour.