Posted by: Tobias | October 20, 2008

Oktoberfest Economics

Some economic aspects of the festival that us Germans are know for the world over (via Mark Thoma):

One of the most interesting things about the Oktoberfest, from an economist’s point of view, is the form of the contractual relationship [the waitress] has with the owner/operator of the tent in which she works. She is employed just for the duration of the Oktoberfest, and has probably the most high-powered incentive contract you will find anywhere. She has no fixed wage, but receives 9 per cent of the revenue on the beer she … brings to the table, as well as tips of course. Thus she has the incentive to maximise sales revenue as well as give good service.

And also this:

The price of an Oktoberfest Mass, the litre mug of beer which is the standard unit of consumption, is regulated, and is set each year by a committee consisting of representatives of the tent operators and of the City Council. Its announcement is always followed by a storm of protest — the increases are usually above the rate of inflation. For waitresses, the crucial numbers are those after the decimal point. Apparently, customers almost always round up to the nearest Euro, so a price of €7.80 is bad news, €8.20 good. For a waitress serving around 1000 Mass per Oktoberfest, this would make a difference of about €600 in tips.

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Responses

  1. Very interesting post. I would have expected however that the tipping behaviour of customers is much more complex than that.

    For instance, it might be typical to round up to the nearest 50 cents only in case of low decimals, or in the opposite case of high decimals to give a tip of just above EUR 1,- rather than giving barely no tip at all (the latter phenomenon might be more common for friendly/attractive waitresses…).

    Also, I would be surprised if every customer pays separately for each Mass he orders, even though I must admit that I have never been to the Oktoberfest myself. If payments are however aggregated up over time or across individuals, the simple rule of small decimals being good for business does not apply anymore.

  2. Basti, you seem to miss one basic point: after sufficient amounts of beer (can be already for some of us after one or two pints) you won’t take notice of rounding to the nearest 50 cents, actually you are lucky if you keep it to next full Euro figure.


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