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Don't Judge a Wine by Its Closure: Price Premiums for Corks in the U.S. Wine Market

Author

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  • Bekkerman, Anton
  • Brester, Gary W.

Abstract

For many purchases, consumers often possess only limited information about product quality. Thus, observable product characteristics are used to determine expected quality levels when making purchase decisions. We use more than 1 million weekly scanner-level observations from grocery stores across ten U.S. markets between September 2009 and August 2012 to examine how consumers value a wine bottle's closure type (i.e., cork or screw cap). We focus on lower-priced wines—those with sale prices less than $30 per 750 milliliter bottle—to more accurately evaluate decisions of consumers for whom seeking additional information about wine quality is likely more costly than the benefits derived from that information. Using both pooled ordinary least squares and quantile regressions to estimate price premiums for bottles with corks or screw caps, we find that U.S. consumers are willing to pay, on average, approximately 8% more (about $1.00) for a bottle of wine that has a cork closure. In addition, we show that the size of this premium increases as wine prices decline. (JEL Classifications: D81, M31, Q11)

Suggested Citation

  • Bekkerman, Anton & Brester, Gary W., 2019. "Don't Judge a Wine by Its Closure: Price Premiums for Corks in the U.S. Wine Market," Journal of Wine Economics, Cambridge University Press, vol. 14(1), pages 3-25, February.
  • Handle: RePEc:cup:jwecon:v:14:y:2019:i:01:p:3-25_00
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    Citations

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    Cited by:

    1. Orlowski, Marissa & Lefebvre, Sarah & Back, Robin M., 2022. "Thinking outside the bottle: Effects of alternative wine packaging," Journal of Retailing and Consumer Services, Elsevier, vol. 69(C).
    2. Oczkowski Edward, 2022. "Price Premiums and Discounts for Australian Sparkling Wines," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 20(1), pages 25-38, May.

    More about this item

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices

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