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The price premium for wine quality signals: does retailers' information provision matter?

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Purpose ‐ This research aims to explore whether quality signals, such as grape variety names explicitly used by "quality wines produced in specified regions", affect wine retail prices in different ways in large-scale retail and specialised shops. Design/methodology/approach ‐ Tocai wine, which is produced in Northeastern Italian regions and is involved in a dispute with the Hungarian geographical indication Tokaj, is taken as a case study. A hedonic price model has been estimated based on retail prices observed in local markets. Findings ‐ The research shows that consumers buying at large-scale retailers are willing to pay a higher price premium for quality signals than those buying in specialised shops, ceteris paribus. For the latter, willingness to pay for quality signals is reduced by the information provided by the specialised shop retailer, which decreases the customer's uncertainty about wine quality; quality signals appearing on wine labels generally have a more relevant positive effect on wine price than brand reputation, confirming the findings available in the current literature. Originality/value ‐ This paper contributes to the literature by proving, in a real market situation, that consumers are willing to pay a higher price premium for quality signals when information is supplied only by wine labels, as in a large-scale retail environment, than when it is provided by the assistance of a knowledgeable seller, as in specialised shops. The paper confirms that the information transmitted to the consumer during purchase affects price in a way similar to that reported in the literature for simulated markets in the case of expert consumers.
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Keywords: Premium pricing; Product quality; Wines

Document Type: Research Article

Publication date: 2011-05-17

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