A local street festival that previously sold bracelets in exchange for unlimited alcohol consumption is now concerned about overconsumption. If the festival providers decide to instead sell tickets for each drink, will overall alcohol consumption at the next festival decrease?

Question

Quizplus · Accepted Answer

Selling tickets for each drink will increase the marginal cost per additional drink for consumers, which will likely decrease overall alcohol consumption at the festival. With unlimited alcohol consumption, consumers have no incentive to limit their consumption because the marginal cost of each additional drink is essentially zero. However, with tickets for each drink, consumers will have to weigh the cost of each additional drink, which could lead to decreased consumption.

A Local Street Festival That Previously Sold Bracelets in Exchange