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

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  • Paolo Roma
  • Giuseppe Di Martino
  • Giovanni Perrone

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.

Suggested Citation

  • Paolo Roma & Giuseppe Di Martino & Giovanni Perrone, 2013. "What to show on the wine labels: a hedonic analysis of price drivers of Sicilian wines," Applied Economics, Taylor & Francis Journals, vol. 45(19), pages 2765-2778, July.
    • Handle: RePEc:taf:applec:v:45:y:2013:i:19:p:2765-2778
    DOI: 10.1080/00036846.2012.678983
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    Cited by:

    1. Fabien Candau & Florent Deisting & Julie Schlick, 2017. "How Income and Crowding Effects Influence the World Market for French Wines," The World Economy, Wiley Blackwell, vol. 40(5), pages 963-977, May.
    2. Guenter Schamel & Anna Ros, 2021. "Indicators of Individual Wine Reputation for Friuli Venezia Giulia," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 7(2), pages 323-339, July.
    3. Fabien Candau & Florent Deisting & Julie Schlick, 2017. "How Income and Crowding Effects Influence the World Market for French Wines," The World Economy, Wiley Blackwell, vol. 40(5), pages 963-977, May.
    4. Vincent Hoang & Takao Iida & Shigeru Matsumoto & Natsuki Watanabe & Clevo Wilson, 2016. "Consumer’s comparison between local and imported organic products: a hedonic analysis of the Japanese table wine market," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 6(3), pages 405-415, December.
    5. 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.
    6. Eugenio Brentari & Rosella Levaggi & Paola Zuccolotto, 2015. "A hedonic price analysis for the Italian wine in the domestic market," Quality & Quantity: International Journal of Methodology, Springer, vol. 49(3), pages 999-1012, May.
    7. Dakshina De Silva & Caroline Elliott & Robert Simmons, 2013. "Restaurant wars," Working Papers 44312700, Lancaster University Management School, Economics Department.
    8. B. Faye & E. Le Fur & S. Prat, 2015. "Dynamics of fine wine and asset prices: evidence from short- and long-run co-movements," Applied Economics, Taylor & Francis Journals, vol. 47(29), pages 3059-3077, June.
    9. Samuel Garrido, 2022. "The Fruit of Regulation: Wine, Regulations, Subsidies, Quality and Cooperatives in Franco's Spain and Beyond," Documentos de Trabajo (DT-AEHE) 2204, Asociación Española de Historia Económica.
    10. Oczkowski, Edward, 2021. "Estimating supply functions for wine attributes: a two-stage hedonic approach," Working Papers 321856, American Association of Wine Economists.
    11. Oczkowski, Edward, 2019. "The relation between Australian wine show results and prices," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 60(2), July.
    12. Bouri, Elie & Gupta, Rangan & Wong, Wing-Keung & Zhu, Zhenzhen, 2018. "Is wine a good choice for investment?," Pacific-Basin Finance Journal, Elsevier, vol. 51(C), pages 171-183.
    13. Pennerstorfer, Dieter, 2017. "Can competition keep the restrooms clean? Price, quality and spatial competition," Regional Science and Urban Economics, Elsevier, vol. 64(C), pages 117-136.
    14. Roma, Paolo & Zambuto, Fabio & Perrone, Giovanni, 2014. "Price dispersion, competition, and the role of online travel agents: Evidence from business routes in the Italian airline market," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 69(C), pages 146-159.
    15. Samuel Garrido, 2022. "Buffer stocks, wine quality, and wine cooperatives in Franco’s Spain and beyond," Working Papers 2022/11, Economics Department, Universitat Jaume I, Castellón (Spain).
    16. Carew, Richard C. & Florkowski, Wojciech J. & Meng, Ting, 2016. "Segmenting Wine Market: California Red and White Wine Retail Prices in British Columbia," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235253, Agricultural and Applied Economics Association.
    17. Salomien Boshoff & Petro-Mari Malherbe, 2016. "South African Perspective of Extrinsic Wine Label Cues," Athens Journal of Business & Economics, Athens Institute for Education and Research (ATINER), vol. 2(2), pages 181-194, April.
    18. Dieter Pennerstorfer, 2014. "Price and Quality Competition in Spatial Markets. The Case of Camping Sites," WIFO Working Papers 466, WIFO.
    19. Vincent Hoang & Takao Iida & Shigeru Matsumoto & Natsuki Watanabe & Clevo Wilson, 2014. "Market penetration of imported agricultural products: A hedonic analysis of the Japanese table wine market," Working Papers e083, Tokyo Center for Economic Research.
    20. Peter Gal & Attila Jambor, 2020. "Geographical Indications as Factors of Market Value: Price Premiums and Their Drivers in the Hungarian Off-Trade Wine Market," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 12(2), June.

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