Question

Ten Cent Beer Night On June 4, 1974, a promotion at Cleveland's Municipal Stadium went awry, producing one of the rare instances in modern major league history where umpires ruled a game as a forfeit. That night, 25,134 paying customers showed up to Municipal Stadium, about twice the Indians' season average. The marquee attraction at the cavernous ballpark wasn't the matchup between two.500-ish teams, the Rangers and Indians, but rather the Cleveland front office's ploy to goose attendance by offering customers of drinking age 10 ounces of Stroh's beer for 10 cents. For some reason, common sense took a vacation, as even a Cleveland Press pregame writeup gleefully proclaimed, "Rinse your stein and get in line. Billy the Kid and his Texas gang are in town and it's 10-cent beer night at the ballpark.'" The Cleveland Indians ran an experiment in 1974 where they lowered the price of a beer at a baseball game from $0.65 to $0.10, and the quantity of beer consumed increased from 8,000 beers to 65,000 beers. Attendance increase from a season average of 13,756 to 25,134 on ten-cent beer night. • Does the experiment allow an observe to identify whether the change in sales was due to a change in the supply of beer or a change in the demand for beer or both? Why? • Did the law of demand hold during this experiment? • What is the estimated own-price elasticity of demand for beer at Cleveland Indians games in 1974? • What is the estimated cross-price elasticity of demand tickets to Cleveland Indians games with respect to the price of beer in 1974 • Are Indian tickets substitutes or complements to ballpark beer? Why? Additional Information: A mistake by the lake: Remembering the 10-cent Beer Night riot (Sports Illustrated, June 4, 2013)

Answer 1

Q1 - Change in sales of beer was definitely due to the reduction in the price of beer. Change in sales of game tickets were also due to a reduction in the price of beer. Both of these factors relate to demand for beer.

Q2 - Yes, it did. Demand for beer went up as its price went down. The demand for game tickets also went up as a result of reduction of beer price (beer and game tickets being complementary in this case).

Q3 - Own price elasticity of beer = % change in beer demand / % change in beer price

= ((65000 - 8000)/8000) / ((0.10 - 0.65) / 0.65) = -19.93

Q4 - Own price elasticity of game tickets = % change in game ticket demand / % change in beer price

= ((25134 - 13756) / 13756) / ((0.10 - 0.65) / 0.65) = -0.98

Q5 - Complements. Beer could not be bought (the beer available at the ballpark) without the game ticket.