Wine price determinants. Is there a homogeneous international standard?

Tânia Gonçalves,João Rebelo,José Caldas,Lina Lourenço-Gomes

doi:10.36253/wep-8879

Tânia Gonçalves, João Rebelo + Show 2 more

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https://doi.org/10.36253/wep-8879

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Abstract

This article presents an international comparison of the main determinants of wine prices in specialist online wine shops. Hedonic price functions were estimated for 9624 wines spread among four datasets from France, Italy, Germany and Australia. To explain price variation data was collected on wine classification, closure type, wine origin, medals or awards, vintage, alcohol content, color, and grape variety. Results from quantile regression models show that the wine vintage is a common price driver in all markets and quantiles. A quite similar effect was found for alcohol content. In terms of color, the implicit prices for red and white wines are also structurally different between countries, particularly in origin, blend, closure, awards and age. Thus, the markets should be assumed as heterogeneous, and the extrapolation of the results from one market to another may lead to erroneous management decisions.

Highlights

Inherent to globalization, in the last two decades, the wine industry has undergone profound changes, highlighting the entrance of new firms in the international market, especially from new producing countries, the decrease in wine consumption in traditional ones, and changes in consumer habits and behavior
In light of this finding, the wine prices are typically studied using a hedonic pricing model based on Lancaster’s approach, which associates the price of a good to its various objective and subjective attributes or characteristics taken by consumers when facing a buying decision
For the European samples, age, medals, Chardonnay variety and alcohol content are significant in Germany and France, while in the Italian sample the Sauvignon Blanc variety has a negative effect in the formation of higher price ranges

Summary

Introduction

In the last two decades, the wine industry has undergone profound changes, highlighting the entrance of new firms in the international market, especially from new producing countries, the decrease in wine consumption in traditional ones, and changes in consumer habits and behavior. Since the wine market is characterized by a large number of firms with different sizes and supplying different wines, the winesprices are affected by the quantity demanded but most importantly by a set of attributes considered by consumers. In light of this finding, the wine prices are typically studied using a hedonic pricing model based on Lancaster’s approach, which associates the price of a good to its various objective and subjective attributes or characteristics taken by consumers when facing a buying decision

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