The big idea: A bar where the price of a drink increases exponentially

A big idea to align incentives at the bar

A bar where the price of a drink increases exponentially

Most businesses want their customers to buy as much as possible. But at a bar, over-consumption has negative externalities: drunk customers can be loud, disrupt other patrons, and in the end may need to be escorted out. A frugal drinker could easily be a nightmare client, requiring time and attention from bartenders and bouncers, while only purchasing a string of Bud Lights.

What if we could make them internalize the cost of excessive consumption? At Externality’s, the price of a drink increases by 50% for your first 3 drinks, and 100% per drink afterwards.

Not only are we internalizing the economic cost of overconsumption, we’re also setting ourselves up to price discriminate based on intoxication. Willingness to pay goes up as people drink more - we already see this at bars where people start buying rounds as they get drunker.

There’s lots of obstacles to implementing this in real life. Even if you had a reliable way to track how many drinks a patron had…they’d probably leave after their second or third drink.

So can we make this viable?

How can we avoid cheating?

Our first obstacle is operational. How do we charge the right price to the right customer? I typically close out after every drink I buy, obscuring my identity for any price discrimination. The average American has 3.8 credit cards; a savvy drinker could switch every two drinks, avoiding our surcharge.

I’d love to set up an iPourIt self-pour tap wall, but good luck keeping people from gaming the system by swapping cards.

My low tech solution is a sharpie - put a mark on the buyer’s arm when they get a new drink. Count the number of marks and charge accordingly. For the aggressive bar owner, have somebody go mark every person taking a drink when a round is bought - we care about the number of drinks per person!

How do we stop people from leaving?

Opening night is going great - your sharpie team is properly marking your customers, and the price per drink is shooting up. Then, at 9:24pm, everybody leaves - Externality’s is a great pregame spot, but people know better than to stay for that third drink and let their inhibitions out the window.

That third drink is key - how do we guarantee that they get there? What if we required customers pre-pay for 2.5 drinks - the additional half drink acts as a tax for those leaving early, and a sunk cost that gets them to pay for drink 3 for those who stay.

I’d imagine this is illegal in many states, but for the right location we’re starting to roll.

Who would even drink here?

Why would anyone choose to come here? It’s explicitly a trap designed to get you to overpay for your later drinks. One solution is to make people think there’s a way to beat the system - start with below average prices for the first drink, which escalates over time. This sort of defeats the original idea - people drawn in by low drink prices are probably over-consumers, the exact people you’re trying to tax with this insane pricing scheme.

Beyond that, you have lots of competition in the bar space - there’s plenty of places to go that have clear prices for a clear service. I don’t know much about designing a bar that people want to spend time at, but I think that challenge will be enhanced when we’re charging $300 for a Negroni.

A solution: Maybe a $300 Negroni is the future of charitable giving.

How can we get people to follow the rules, drink multiple drinks, and not file a credit card dispute when they get a $500 bill? What if we make the price part of the point, and do this as a charity fundraiser? The more you drink, the more you pay, and the more gets raised for the nonprofit of your choice.

All of a sudden, your intoxication fee is going to a good cause. Let’s flip the goal: how do we raise as much money as possible?

Do it for the kids

Imagine Externality’s is hosting a fundraiser with Save the Children, and want to maximize donations. Instead of aggressive tracking with a marker, we can use social pressure to stop cheating and raise more money.

What if we had a giant leaderboard of everyone in attendance with their name, number of drinks, and current price per drink? All of a sudden, those with the highest price - who have drunk the most - are at the top. Not only are we glamorizing the biggest drinkers, we’re enlisting other guests to encourage drinking - that pressure to do a shot with your friends will escalate to new heights.

You could even encourage binge drinking in other ways. Give trophies to people who spend more than $300 on a drink, pay bounties to customers who get a high roller to buy a marginal drink, and publicly shame people who leave before their third drink.

We’ve gotten pretty far from our goal of internalizing the costs of drinking, but maybe we’ve found a greater calling: making drinking tax deductible.

Official idea rating:

3 out of 5 stars. I can’t imagine it’s legal to change drink prices like this in many places, and the audience for this type of fundraiser seems pretty limited (do people really want to puke at a charity function?). But I think you could take the social aspect of this and actually raise some money, maybe at a fraternity or something? Frat presidents among our readers, the idea is yours.