TY - JOUR
T1 - Taste or reputation
T2 - What drives market prices in the wine industry? Estimation of a hedonic model for Italian premium wines
AU - Benfratello, Luigi
AU - Piacenza, Massimiliano
AU - Sacchetto, Stefano
PY - 2009
Y1 - 2009
N2 - The aim of this article 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 article fills the lack of empirical evidence on the issue for Italy, one of the leading wine producers, by using a large data set 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 nonnested statistical test (Vuong, 1989) we compare two alternative specifications (taste vs. reputation) and find that the reputation model significantly outperforms the taste one, whereby suggesting that a greater amount of information on how the wine price is formed is contained in the reputation specification.
AB - The aim of this article 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 article fills the lack of empirical evidence on the issue for Italy, one of the leading wine producers, by using a large data set 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 nonnested statistical test (Vuong, 1989) we compare two alternative specifications (taste vs. reputation) and find that the reputation model significantly outperforms the taste one, whereby suggesting that a greater amount of information on how the wine price is formed is contained in the reputation specification.
UR - http://www.scopus.com/inward/record.url?scp=78649708477&partnerID=8YFLogxK
U2 - 10.1080/00036840701222439
DO - 10.1080/00036840701222439
M3 - Article
SN - 0003-6846
VL - 41
SP - 2197
EP - 2209
JO - Applied Economics
JF - Applied Economics
IS - 17
ER -