What is the Cross Price Elasticity of Demand between Beer and University?

Researchers have found that when university tuition fees increase, students drink less beer. One possible explanation is that they substitute within a given budget. Another possible explanation is that students must work more, and more students must take on part-time work, when tuition fees increase (and as a result have less time and inclination to drink). Either way, it looks as if education and drunken stupors tend to be weak substitutes in the utility functions of students.

A recent study led by Nick Foskett, professor of education at the University of Southampton, looked at the experience of fee-paying students in Australia and New Zealand, as well as asking British students about their plans and expectations. Among a number of broader conclusions, they expect an outbreak of sobriety in the student body.



This is partly for social reasons. As students pay higher fees, they become more likely to have some kind of job and more likely to be living at home. Neither trend is conducive to heavy boozing.



But there is another, more direct, channel of causation. Booze costs money, even at the Leeds student union bar. Students with less disposable income may, rather than mugging old ladies or turning to prostitution, simply drink less.

[see Tim Harford for details]



But if the price of beer changes, will university enrolments change by much? Probably not. “Gee, beer is cheaper now, so I think I’ll sign up for university.” That’s probably not a very strong effect, is it?



And all my colleagues this summer thought my field trips to study pub pricing were just a joke (or an excuse to go drinking more often)…