A Simple Hedonic Model of Beer Prices for Major Cities around the World
We present a simple empirical model of beer pricing in 40 major cities around the world. Data by patrons having visited a city and reporting actual prices paid for a pint of beer are used to estimate their willingness to pay. Key explanatory variables are the city's attractiveness being measured by Anholt's City Brand Index (CBI), a full-day per diem reimbursement rate without lodging costs, and an indicator of the relative price level being measured by the Big-Mac Index (The Economist). We estimate that a one point increase in the CBI raises patron's willingness to pay by about 8 cents or 2.2% at average prices. A 10 Euro increase in the per diem rate will raise patron’s willingness to pay for a pint by 16 cents or 4.3% at average prices. Moreover, one point increase in the Big-Mac Index will on average raise patron’s willingness to pay for a pint by 23 cents or 6.3%.