How much is a bottle of conventional, organic or biodynamic wine worth? Results of an experimental auction

Abstract

Today, worldwide, we note a growing demand for wines made following techniques with an eye to environmental sustainability. Consumers readily find organic wines at sales outlets, along with other products made following techniques that comply with even more restrictive environmental constraints, such as biodynamic techniques. While on one hand, winemakers are encouraged to market products obtained in respect of certain environmental standards, on the other, they are asked to evaluate the economic convenience of this operation. In view of structuring coherent company strategies, and faced with clearly higher production costs, understanding the premium price consumers are willing to pay for sustainable wines assumes fundamental importance. Our paper focuses on this problem, attempting to analyse consumer preferences and willingness to pay for wines produced following conventional, organic, and biodynamic methods. Implementing a second-price experimental auction, we elicited the willingness to pay for the three types of wine and assessed premiums based on scenarios that considered both information and tasting. We found that the willingness to pay for biodynamic wines was lower than for organic wines, and higher than for conventional wines. With organic wines, credence attributes play a much more important role than experience attributes in determining consumer preferences. Moreover, familiarity with biodynamic wines positively affects the willingness to pay for them. Our study highlights interesting management and marketing implications for producers and retailers of organic and biodynamic wines: in particular, the importance of increasing knowledge about the production technique adopted and, specifically, developing information campaigns that target the biodynamic production technique.