Date of Award

8-2011

Degree Name

MS in Agribusiness

Department

Agribusiness

Advisor

Christiane Schroeter

Abstract

Many economists have estimated hedonic price models for wine. The price of wine is thought to represent the various characteristics that differentiate each bottle, assuming that the majority of consumers use price as a signal of quality. The objective of this paper is to identify and examine what factors impact cool climate wine varietals by region based on various attributes. It uses two datasets, one from the Wine Spectator and the other from Beverages and More, an outlet of a liquor store chain in San Luis Obispo, California. The analysis aims to determine which variables impact the price of wine and by what magnitude. Variables include variety, region, quality ratings by price category, number of cases and gallons produced, vintage, alcohol content, cork type, and various label attributes.

This study is unique as hedonic price analysis is used as an extension of a unique product category. Past literature has shown a growing interest in cool climate wine production and that cool climate regions are preferred to other regions.

This study examines an emerging varietal, Riesling, in addition to other popular varieties including Chardonnay, Sauvignon Blanc and Pinot Noir. As Riesling thrives in cooler climates, it is becoming an increasingly popular variety among both producers and consumers.

Unlike other studies that tend to incorporate mostly New World regions, this study is expanded to include more regions and other attributes that may be important when making wine purchasing decisions. It also considers the possibility that there is a consumer demand difference between Old World and New World cool climate regions. Specifically for both red and white varietals, New World wines have increased in volume sales, whereas Old World wines volume sales have decreased. In addition, many economists have estimated hedonic price functions using expert scores. However, this study is unique to others as it expands the use of quality ratings by including interaction terms to express both wine-quality and price-quality relationships.

The study confirms the results of previous literature, concluding that the majority of all variables identified significantly influence the price of wine. Previous economic and statistic research related to wine focuses on topics that are important for warm climate wines, while issues concerning cool climate wines are understudied. Thus, there is a need for research that focuses exclusively on cool climate wines.

Share

COinS