What to show on the wine labels: a hedonic analysis of price drivers of Sicilian wines

Authors: Roma, Paolo; Di Martino, Giuseppe; Perrone, Giovanni

Source: Applied Economics, Volume 45, Number 19, 1 July 2013 , pp. 2765-2778(14)

Publisher: Routledge, part of the Taylor & Francis Group

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Abstract:

Unlike previous literature, we construct a hedonic model of wine price that incorporates all the main categories of variables simultaneously to enable a better evaluation of their importance on wine price formation. A comprehensive model has the advantage of providing more reliable estimates of the attributes' implicit prices thereby facilitating firms' pricing and improving effectiveness of wine production and marketing decisions. We utilize two different datasets of Sicilian wines collecting data from influential wine guides. Our results suggest that wine price strongly depends on objective features such as vintage, alcoholic content, geographical origin, grape variety, producer size and cellaring potential. In addition, use of containers like tonneaux and barrique positively affects prices, whereas use of concrete containers has a negative influence. No univocal indications emerge with regard to the effect of the type of company, type of viticulture and firm age. As for sensorial characteristics, our analysis provides novel evidence of the importance of olfactory variables such as aroma intensity and the presence of particular smells in the wine. Finally, current guides’ grades and firm reputation play a crucial role in determining wine prices as well.

Keywords: C50; D40; Q13; econometric analysis; experience goods; hedonic price; labelling; wine industry

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036846.2012.678983

Affiliations: DICGIM РManagement Research Group,Università degli Studi di Palermo, Palermo, Italy

Publication date: July 1, 2013

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