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Estimating the Demand for Wine Using Instrumental Variable Techniques

Steven Cuellar and Ryan Huffman

No 44085, Working Papers from American Association of Wine Economists

Abstract: The demand for wine is generally estimated on an aggregate level as a single commodity. However, as recent history shows us, the demand for wine not only varies considerably by varietal, but also by price point within each varietal. As a result, although estimates of the demand for wine may be beneficial to the wine industry as a whole, they provide little benefit to individual wine producers. This paper seeks to overcome the limitations of prior research on the demand for wine by providing estimates for the demand for wine by varietal and price point. We also provide estimates of own price effects, income effects as well as cross price effects by color, varietal and price point. Problems of endogeneity inherent in demand estimation are corrected by utilizing a novel instrumental variable technique using grape prices as the instrument.

Keywords: Demand and Price Analysis; Research Methods/ Statistical Methods (search for similar items in EconPapers)
Pages: 34
Date: 2008-10
New Economics Papers: this item is included in nep-cul
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aawewp:44085

DOI: 10.22004/ag.econ.44085

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