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Globalization, Superstars, and Reputation: Theory & Evidence from the Wine Industry

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  • Gibbs, Michael
  • Tapia, Mikel
  • Warzynski, Frederic

Abstract

We develop a simple model of the effects of reputation on prices. An increasing fraction of consumers who are “naive†(less informed about quality) results in a stronger sensitivity of prices to ratings of quality. We then argue that this may be a factor in price dynamics for goods that become more widely traded as a result of globalization. We then provide some empirical analysis of these ideas using data on prices and Robert Parker's ratings of wines. Wine prices are strongly related to ratings, and even more so for higher quality wine categories. In addition, changes in Parker ratings for the same wine result in large price changes. Price elasticities with respect to ratings have risen dramatically since 1993. One plausible explanation for this is the growing globalization of the fine wine market, which increases the prevalence of naive wine consumers. (JEL Classification: D8, F1, L1, Q1)

Suggested Citation

  • Gibbs, Michael & Tapia, Mikel & Warzynski, Frederic, 2009. "Globalization, Superstars, and Reputation: Theory & Evidence from the Wine Industry," Journal of Wine Economics, Cambridge University Press, vol. 4(1), pages 46-61, April.
    • Handle: RePEc:cup:jwecon:v:4:y:2009:i:01:p:46-61_00
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    Citations

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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. Stephen BAZEN & Jean-Marie CARDEBAT & Magalie DUBOIS, 2022. "From Gurus to Geeks? The Role of Customer and Expert Ratings in a Hedonic Analysis of French Red Wine Prices," Bordeaux Economics Working Papers 2022-17, Bordeaux School of Economics (BSE).
    3. Clarissa Laura Maria Spiess Bru, 2023. "Does the Tasting Note Matter? Language Categories and Their Impact on Professional Ratings and Prices," Working Papers Dissertations 105, Paderborn University, Faculty of Business Administration and Economics.
    4. Castriota, Stefano & Corsi, Stefano & Frumento, Paolo Dyno & Ruggeri, Giordano, 2021. "Does quality pay off? “Superstar” wines and the uncertain price premium across quality grades," Working Papers 321846, American Association of Wine Economists.
    5. Corsi, Alessandro & Strøm, Steinar, 2013. "The Price Premium for Organic Wines: Estimating a Hedonic Farm-Gate Price Equation," Journal of Wine Economics, Cambridge University Press, vol. 8(1), pages 29-48, May.
    6. Alex Albright & Peter Pedroni & Stephen Sheppard, 2018. "Uncorking Expert Reviews with Social Media: A Case Study Served with Wine," Department of Economics Working Papers 2018-03, Department of Economics, Williams College.

    More about this item

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • F1 - International Economics - - Trade
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture

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