Analyzing the pricing to market behavior of the New World on EU wine market

Abstract

In recent decades, New World has increased their wine export to European markets and became considerable market players. Therefore, it is important to investigate whether the major New World wine producers are able to exploit its market power at the Old World s markets. The paper investigates the pricing behavior of major New World wine exporters in their most significant European destination markets using a pricing-to-market (PTM) model in respect of asymmetric effect of exchange rate changes between 2000 and 2016. First, the results suggest that Chile was able to apply price discrimination across Danish, German, Dutch, the UK wine markets. Second, South Africa set their prices in Belgian, Dutch and Swedish markets while the USA discriminated their wine prices in Denmark and Sweden. In contrast, this advantage was not observable in a case of Argentina, Australia. Third, the local-currency price stability was explored in case of Belgium, the Czech Republic and France (Chilean wine prices), Denmark, Germany (South African wine prices) and Germany, UK (US wine prices). Furthermore, the analysis of the asymmetric effects of exchange rates suggests that depreciation of the exporter s currency relative to the Euro had not a significant impact on wine import prices. Acknowledgement :