It has been a persistent phenomenon in many societies that a large proportion of alcohol consumption takes place in company of other people. While the phenomenon of social or public drinking is well discussed in disciplines such as social psychology and anthropology, economists have paid little attention to the social environment of alcohol consumption. This paper tries to close this gap and explains social drinking as a trust facilitating device. Since alcohol consumption tends to make some people (unwillingly) tell the truth, social drinking can eventually serve as a signaling device in social contact games.
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The figure D is assumed to include all costs of drinking, including possible external costs as well as the risk of becoming addicted. If we assume that individuals directly receive utility from alcohol consumption, D might be interpreted as the difference between the costs of drinking and the utility received. Hence, D can take positive as well as negative values.
Since we assumed that δ = ω, a type-L individual is at best indifferent between not drinking and staying alone.
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For helpful discussions and comments we want to thank Björn Frank, Tobias Just, Mike Murphy, Christian Wey and an anonymous referee of this journal as well as conference participants of the Beeronomics 2011 conference in Munich. A very first version of this paper was written in 1997 while Justus Haucap was a visiting scholar at the Institute of Management, Innovation, and Organization (IMIO) at the Haas School of Business, University of California, Berkeley, the hospitality of which is most gratefully acknowledged.
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Haucap, J., Herr, A. A note on social drinking: In Vino Veritas. Eur J Law Econ 37, 381–392 (2014). https://doi.org/10.1007/s10657-013-9412-1
- Public drinking
- Alcohol consumption
- Social contact games