-What Drives Market Prices in the Wine Industry ? Estimation of a Hedonic Model for Italian Premium Wines

Luigi Benfratello, Massimiliano Piacenza and Stefano Sacchetto ()
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Stefano Sacchetto: London Business School, Regent´s Park, London NW1 4SA, United Kingdom.

CERIS Working Paper from CNR-IRCrES Research Institute on Sustainable Economic Growth - Torino (TO) ITALY - former Institute for Economic Research on Firms and Growth - Moncalieri (TO) ITALY

Abstract: The aim of this paper is to provide new evidence on the factors affecting wine prices on both methodological and factual grounds. On the methodological ground, this study is the first to apply a general Box-Cox transformation within the context of hedonic models which exploit all the variables (objective and sensorial characteristics, reputation) pointed out by previous literature as relevant in driving market prices. On the factual ground, the paper fills the lack of empirical evidence on the issue for Italy, one of the leading wine producers, by using a large dataset on two premium quality wines (Barolo and Barbaresco) covering the 1995-1998 vintages. Our results support the evidence obtained using data from other countries, showing that sensorial traits, the reputation of wines and producers, as well as objective variables are all important factors influencing the consumers’ willingness to pay. More importantly, by resorting to a non-nested statistical test (Vuong, 1989) we compare two alternative specifications (taste vs. reputation) and find that the reputation model significantly outperforms the one containing the taste variables. In turn, this result suggests that the reputation model is closer than the taste one to the true model that generated the data

Keywords: Hedonic pricing; Box-Cox estimation; Sensorial characteristics; Reputation; Vuong test (search for similar items in EconPapers)
JEL-codes: C52 D43 L66 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2004-12
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:csc:cerisp:200411

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