Abstract
Price formation in the domestic market has not been widely studied in spite of the importance of the Italian wine market in terms of sales. We use a unique dataset to estimate the hedonic price function for Italian wine sold on the Italian market in the period 2005–2011. For each bottle considered, the dataset records several characteristics such as the price by retail channel (on the mass market and in wine shops), label characteristics, chemical analysis, sensory evaluations and experts’ opinions. The objective of the analysis is to examine price setting on the mass market and in wine shops and to explore the differences in price formation for red and white wines. Our results have been obtained using an innovative technique that consists of combining hedonic price techniques with dimensionality reduction tools.
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