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Critical Exposure and Price-Quality Relationships for New World Wines in the U.S. Market

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  • Roberts, Peter W.
  • Reagans, Ray

Abstract

Notwithstanding the observed positive correlations between critics' quality ratings and wine prices, the range of these correlations is quite high. In light of this, researchers must consider the factors that either strengthen or weaken the association between quality ratings and prices. In this paper, we propose that the slope of the relationship between quality ratings and wine prices is moderated by the amount of attention that producers receive. Because attention increases with a producer's critical exposure (i.e., its history of critical coverage), price-quality relationships will be steeper for producers with more critical exposure. This prediction is confirmed in an analysis of New World wines selling into the U.S. market over the 1987 to 2001 period. While a wine's price is a positive function of its own quality rating, the strength of the price-quality relationship increases with a producer's critical exposure (JEL classifications: L11, L13, L15).

Suggested Citation

  • Roberts, Peter W. & Reagans, Ray, 2007. "Critical Exposure and Price-Quality Relationships for New World Wines in the U.S. Market," Journal of Wine Economics, Cambridge University Press, vol. 2(1), pages 84-97, April.
    • Handle: RePEc:cup:jwecon:v:2:y:2007:i:01:p:84-97_00
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    Cited by:

    1. Saens, Rodrigo & Berríos, Rodrigo, 2012. "The country brand trap," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    2. Outreville, J. François, 2017. "Wine Production In Québec: A Restatement," Working Papers 253852, American Association of Wine Economists.
    3. Jérôme Barthélemy, 2017. "The impact of technical consultants on the quality of their clients' products: Evidence from the Bordeaux wine industry," Strategic Management Journal, Wiley Blackwell, vol. 38(5), pages 1174-1190, May.
    4. Greta Hsu & Peter W. Roberts & Anand Swaminathan, 2012. "Evaluative Schemas and the Mediating Role of Critics," Organization Science, INFORMS, vol. 23(1), pages 83-97, February.
    5. Maxim Voronov & Dirk De Clercq & C. R. Hinings, 2013. "Conformity and Distinctiveness in a Global Institutional Framework: The Legitimation of Ontario Fine Wine," Journal of Management Studies, Wiley Blackwell, vol. 50(4), pages 607-645, June.
    6. Ricardo Sellers†Rubio & Francisco Mas†Ruiz & Franco Sancho†Esper, 2018. "Firm reputation, advertising investment, and price premium: The role of collective brand membership in high†quality wines," Agribusiness, John Wiley & Sons, Ltd., vol. 34(2), pages 351-362, March.
    7. Bicknell, Kathryn & MacDonald, Ian, 2009. "How Important is Reputation for New Zealand Wine Makers?," 2009 Conference, August 27-28, 2009, Nelson, New Zealand 115717, New Zealand Agricultural and Resource Economics Society.
    8. Dubois, Magalie, 2021. "The market for wine quality evaluation: evolution and future perspectives," Working Papers 321855, American Association of Wine Economists.
    9. Katherine C. Kellogg & Jenna E. Myers & Lindsay Gainer & Sara J. Singer, 2021. "Moving Violations: Pairing an Illegitimate Learning Hierarchy with Trainee Status Mobility for Acquiring New Skills When Traditional Expertise Erodes," Organization Science, INFORMS, vol. 32(1), pages 181-209, January.
    10. Edward Oczkowski, 2016. "Analysing Firm-level Price Effects for Differentiated Products: The Case of Australian Wine Producers," Australian Economic Papers, Wiley Blackwell, vol. 55(1), pages 43-62, March.
    11. Giacomo Negro & Ming D. Leung, 2013. "“Actual” and Perceptual Effects of Category Spanning," Organization Science, INFORMS, vol. 24(3), pages 684-696, June.
    12. Jean Desrochers & J. Francois Outreville, 2013. "Uncertainty, Ambiguity and Risk Taking: an experimental investigation of consumer behavior and demand for insurance," ICER Working Papers 10-2013, ICER - International Centre for Economic Research.

    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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