Cumulative information on quality and willingness to pay: a study on wine evaluation

Abstract

ABSTRACT Availability of information about a good with uncertain quality can influence the way consumers perceive its quality, hence, their willingness to pay (WTP) for it. We present a study to investigate whether and to what extent WTP is impacted by the degree of information available to consumers who are exposed first to extrinsic and then intrinsic information regarding a variety of Italian wines. We implement linear mixed models in a Bayesian framework, which provides a flexible tool to account for different sources of heterogeneity, e.g. correlation within groups of observations and spatial correlation between participants sitting nearby. Based on data collected in Italy, results show that the availability of extrinsic and intrinsic information yields relevant changes in WTP, but this effect also depends on age, gender, drinking habits, wine quality, and connoisseurship of the agents. According to the findings, the analyzed wines cannot be considered search goods, although this might not hold for more experienced consumers.