Random Utility Models, Wine, and Experts

Sofia Villas-Boas, Céline Bonnet and James Hilger
Additional contact information
James Hilger: SWFSC - Southwest Fisheries Science Center - NMFS - NOAA National Marine Fisheries Service - NOAA - National Oceanic and Atmospheric Administration

Post-Print from HAL

Abstract: We empirically investigate the welfare effects of providing product quality information to consumers in the form of expert opinion scores in a setting of asymmetric information. Identification of the effects of the provision of information comes from a field experiment in the retail wine market. We use a monthly‐product‐store panel scanner data set, collected before and during the field experiment, which involves treating a random subset of wine products by displaying expert scores in one store and comparing sales in similar non‐treated stores. Using a structural random utility model of demand, we show that, on average, consumers significantly value one score point increase due to the treatment by about 0.5 to 0.7 cents. As a consequence, for a bottle featuring an average score of 83, consumers would be willing to pay additionally between twenty and sixty cents more due to the treatment. Using counterfactual scenarios, we find that adding expert opinion shelf labels increases consumer surplus. In addition, allowing for strategic price reactions by retailers would lead to an overall significant welfare improvement given that (a) consumers significantly value the score information albeit facing higher prices, and (b) the profits increase with the market power of firms.

Keywords: Counterfactual simulations; Expert opinion; Field experiment; Information; Labels; Market power; Product attributes; Product differentiation; Random utility models; Structural random coefficients discrete choice models; Structural supply models; Welfare changes; Willingness-to-pay; Wine (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Published in American Journal of Agricultural Economics, 2021, 103 (2), pp.663-681. ⟨10.1111/ajae.12129⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02960411

DOI: 10.1111/ajae.12129

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().