Hedonic Decomposition of Beer Prices: Consumer Ratings and Quantity Discounts

Abstract

A hedonic regression framework is proposed for evaluating the determinants of beer prices and consumer ratings. This study specifically addresses the endogeneity problem associated with the impact of consumer ratings on beer prices using a set of beer sensory and chemical characteristics as instrumental variables in the estimation procedure. The results suggest that beer prices tend to be influenced by consumer ratings and the objective characteristics of beers, while consumer ratings tend to be influenced by the sensory and chemical characteristics of beers. Also, limited evidence is found for the use of quantity discounts by beer producers.