Identifying the effect of unobserved quality and experts' reviews in the pricing of experience goods: empirical application on Bordeaux wine
Pierre Dubois and
Celine Nauges
Economics Working Paper Archive (Toulouse) from French Institute for Agronomy Research (INRA), Economics Laboratory in Toulouse (ESR Toulouse)
Abstract:
We propose a structural empirical approach à la Levinsohn and Petrin (2003) to disentangle the effect of experts' grades from the effect of unobserved quality on the pricing of experience goods. Using a panel data set of 108 châteaux selling wine on the Bordeaux "en primeur" market, we provide some empirical validation for the theoretical result that the price set by wine producers is used as a signal for wine quality. We confirm that experts' grades affect producers' choice of "en primeur" price above the effect of unobserved wine quality. Our empirical results also show that failing to control for endogeneity caused by the omission of unobserved quality leads to over-estimate the influence of experts" grades on the "primeur" price. ...French Abstract : Lorsqu'un bien d'expérience est délivré sur le marché, l'opinion des experts est supposée donner de l'information sur la qualité du bien aux futurs consommateurs. Cependant, savoir si l'opinion des experts affecte la formation des prix par elle-même reste une question empirique difficile à répondre. En effet, la vraie qualité inobservée du bien rend l'opinion des experts nécessairement endogène dans une équation de prix hédonique pour des biens d'expérience. En utilisant un panel de données sur les vins de Bordeaux, les auteurs proposent une approche structurelle permettant de séparer la valeur de l'information sur la qualité donnée par les experts de l'effet de la vraie qualité.
Keywords: EXPERIENCE GOOD; EXPERTS' GRADES; QUALITY; WINE; IDENTIFICATION; STRUCTURAL ECONOMETRICS; ECONOMETRIE; EXPERT; QUALITE DES PRODUITS; VIN DE BORDEAUX; PANEL; BIEN D'EXPERIENCE (search for similar items in EconPapers)
JEL-codes: C51 D82 L15 Q11 (search for similar items in EconPapers)
Pages: 34 p.
Date: 2006
New Economics Papers: this item is included in nep-agr and nep-mkt
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Related works:
Journal Article: Identifying the effect of unobserved quality and expert reviews in the pricing of experience goods: Empirical application on Bordeaux wine (2010)
Working Paper: Identifying the Effect of Unobserved Quality and Expert Reviews in the Pricing of Experience Goods: Empirical Application on Bordeaux Wine (2007)
Working Paper: Identifying the Effect of Unobserved Quality and Experts' Reviews in the Pricing of Experience Goods: Empirical Application on Bordeaux Wine (2006)
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