Is liquor an efficient market?

You’re shopping for liquor and looking at prices.  The price you are looking at doesn’t include the taxes.  How do you find the lowest prices?  As a rational buyer, you will want the most for your money.

The model most used by economists and politicians is called the “Efficient Market.”  When they are talking about markets, this is the market they are talking about. The efficient market model was developed using data from horse racing.  An efficient market uses all available information to find the true price.

If you have complete information, you get an efficient market.  If you have less information, you may not get the most for your money.  According to the theory, markets adjust pricing to the best price: you will get more for your money if you have more information.  Current pricing at the stores leaves people scratching their heads and getting sticker shock.

Information wants to be free and efficient markets are supposed to deliver the best prices.  One way to get the best pricing is to let the public in on the price structure.  Many liquor sellers and advertisements don’t show the complete cost.  Unlike other items, there is a 20.4% sales tax and a flat tax of $2.83 for 750 ml.

Here’s some help - a handy tax table that shows the final cost to you, the consumer.