Effect of region of origin on willingness to pay for wine: an experimental auction

Abstract

ABSTRACT The purpose of this paper is to examine the effect of the region of origin on wine consumers’ preferences and willingness to pay for wine together with other determinants, using an incentive compatible tool. Data were collected through an experimental auction mechanism in different Portuguese wine regions. Consumers’ willingness to pay for wines from three regions of origin was elicited under two information scenarios: i) blind tasting followed by extrinsic information regarding the region of origin and ii) full information provided at once. Wine consumers characteristics were also collected from a sample of 168 wine consumers. Results reveal that, the region of origin influences the hedonic evaluation of consumers.Consumers are willing to pay higher prices in full information condition, on average. Purchase frequency and less self-reported wine knowledge have a negative effect on the willingness to pay, while taste has a positive effect. Controlling for organoleptic attributes, and the importance of extrinsic cues, the region of origin has a significant influence on willingness to pay, as well as on the hedonic rating, and purchase frequency. This study offers important insights for policy makers regarding the existence of significant preference heterogeneity and the role of the region of origin.