good points. one thing that i think is interesting about the prices of craft beers, that i didn't mention earlier, but is related to what you say and this conversation in general, is the idea of exclusivity. what i mean by that is, certain products and types of products are believed to be priced at seemingly exorbitant levels by producers, because just by setting a price so high for a given product, the price contributes to an aura of exclusivity that the producer is trying to establish in the consumer mind around that product (usually along with other clever marketing and advertising schemes). for certain products, it may be that keeping prices very high contributes to establishing this aura of exclusivity. it works and economists have demonstrated it look up the reason why trendy restaurants DON'T expand when they sell out every night...this is intentional...expanding and lowering menu prices eliminates that restaurant's competitive advantage over other almost identical restaurants: popularity...people go there because other people do...if people see open tables in a bigger expanded restaurant, they start to go elsewhere. economists have documented this many times. if that restaurant expands and lowers menu prices to attract more people, it loses its core group of consumers.
the producer knows every tom dick and harry won't buy a craft beer, but for the demographic he is targeting (usually young, professional, urban males who aren't married and have the disposable income), that product is worth paying a premium for. that 1% of all consumers is willing to pay extra to feel special- like many things in life, it's about a sense of elitism and part of the "American" character, which has taught us to place a high value on rugged individualism and being a unique. we seek products that provide tangible evidence of our individuality. if craft makers LOWERED prices, they would not necessarily sell more. in the short term, perhaps sales would increase, but by lowering prices, the core group of buyers would be lost. they would no longer derive the satisfaction of exclusivity from that product and would go elsewhere, because they see that every tom dick and harry now can and does buy that same product. this product would then be in a lot of trouble, in the long run, because it loses its competitive advantage- uniqueness and appeal to a specific though concentrated and very real group of consumers with enough buying power to keep the firm afloat. at a lower price, these craft beers must now compete on price and scale with the big guys. at a lower price, the craft beer maker is now competing with huge commercial brewers for the business of tom dick and harry...not for the business of joe the 28 yr old urban professional with no wife and kids, who likes beer. they lose their competitive advantage in the beer market because they've lowered their price. in the long run, that product cannot compete and will disappear.
there is more to pricing than most people think. it's not as simple for every product as: lower the price, sell more, make more money. when it comes to say, bleach, yes, that is true: no one cares who makes their bleach. but not for every product and definitely not beer.
