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The Use of Quality and Reputation Indicators by Consumers: The Case of Bordeaux Wine

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Author Info
Landon, Stuart
Smith, Constance

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Abstract

The absolute and relative impact of current quality and reputation variables on consumer decisions are examined using data from the market for Bordeaux wine. The estimates indicate that a model of consumer decision making which incorporates information on reputation (past quality) and collective reputation (average group quality) rejects alternative models that include current quality. The results also indicate that reputation has a large impact on the willingness to pay of consumers, that long term reputation is considerably more important than short term quality improvements, and that consumers react slowly to changes in product quality. Collective reputation is shown to have an impact on consumer willingness to pay that is as large as that of individual firm reputation. If reputation and collective reputation effects are ignored, the estimated impact of current quality and short term changes in quality on consumer behaviour are overstated.

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File URL: http://mpra.ub.uni-muenchen.de/9283/
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 9283.

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Date of creation: Mar 1997
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Handle: RePEc:pra:mprapa:9283

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Find related papers by JEL classification:
M3 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising
D8 - Microeconomics - - Information, Knowledge, and Uncertainty
L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Godfrey, L G & Orme, C D, 1994. "The Sensitivity of Some General Checks to Omitted Variables in the Linear Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(2), pages 489-506, May. [Downloadable!] (restricted)
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  2. Tirole, J., 1993. "A Theory of Collective Reputations with Applications to the Persistence of Corruption and to Firm Quality," Working papers 93-13, Massachusetts Institute of Technology (MIT), Department of Economics.
    Other versions:
  3. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb.. [Downloadable!] (restricted)
  4. Rogerson, William P, 1987. "The Dissipation of Profits by Brand Name Investment and Entry when Price Guarantees Quality," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 797-809, August. [Downloadable!] (restricted)
  5. Kwoka, John E, Jr, 1992. "Market Segmentation by Price-Quality Schedules: Some Evidence from Automobiles," Journal of Business, University of Chicago Press, vol. 65(4), pages 615-28, October. [Downloadable!] (restricted)
  6. Mendelsohn, Robert, 1984. "Estimating the Structural Equations of Implicit Markets and Household Production Functions," The Review of Economics and Statistics, MIT Press, vol. 66(4), pages 673-77, November. [Downloadable!] (restricted)
  7. Linneman, Peter, 1980. "Some empirical results on the nature of the hedonic price function for the urban housing market," Journal of Urban Economics, Elsevier, vol. 8(1), pages 47-68, July. [Downloadable!] (restricted)
  8. MacKinnon, James G. & White, Halbert & Davidson, Russell, 1983. "Tests for model specification in the presence of alternative hypotheses : Some further results," Journal of Econometrics, Elsevier, vol. 21(1), pages 53-70, January. [Downloadable!] (restricted)
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  9. Franklin Allen, 1984. "Reputation and Product Quality," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 311-327, Autumn. [Downloadable!] (restricted)
  10. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-41, August. [Downloadable!] (restricted)
  11. Jarrell, Gregg & Peltzman, Sam, 1985. "The Impact of Product Recalls on the Wealth of Sellers," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 512-36, June. [Downloadable!] (restricted)
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  12. Shapiro, Carl, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, MIT Press, vol. 98(4), pages 659-79, November. [Downloadable!] (restricted)
  13. Stanley, Linda R & Tschirhart, John, 1991. "Hedonic Prices for a Nondurable Good: The Case of Breakfast Cereals," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 537-41, August. [Downloadable!] (restricted)
  14. Fred Mannering & Clifford Winston, 1985. "A Dynamic Empirical Analysis of Household Vehicle Ownership and Utilization," RAND Journal of Economics, The RAND Corporation, vol. 16(2), pages 215-236, Summer. [Downloadable!] (restricted)
  15. Borenstein, Severin & Zimmerman, Martin B, 1988. "Market Incentives for Safe Commercial Airline Operation," American Economic Review, American Economic Association, vol. 78(5), pages 913-35, December. [Downloadable!] (restricted)
  16. Halvorsen, Robert & Pollakowski, Henry O., 1981. "Choice of functional form for hedonic price equations," Journal of Urban Economics, Elsevier, vol. 10(1), pages 37-49, July. [Downloadable!] (restricted)
  17. Archibald, Robert B & Haulman, Clyde A & Moody, Carlisle E, Jr, 1983. "Quality, Price, Advertising, and Published Quality Ratings," Journal of Consumer Research: An Interdisciplinary Quarterly, University of Chicago Press, vol. 9(4), pages 347-56, March.
  18. Davidson, Russell & MacKinnon, James G, 1981. "Several Tests for Model Specification in the Presence of Alternative Hypotheses," Econometrica, Econometric Society, vol. 49(3), pages 781-93, May. [Downloadable!] (restricted)
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  19. Cropper, Maureen L & Deck, Leland B & McConnell, Kenneth E, 1988. "On the Choice of Functional Form for Hedonic Price Functions," The Review of Economics and Statistics, MIT Press, vol. 70(4), pages 668-75, November. [Downloadable!] (restricted)
  20. Palmquist, Raymond B, 1984. "Estimating the Demand for the Characteristics of Housing," The Review of Economics and Statistics, MIT Press, vol. 66(3), pages 394-404, August. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Egon Franck & Martin Kukuk & Stefan Winter, 2004. "Weininvestment- Profitieren Anleger von der Berücksichtigung öffentlich zugänglicher Informationen?," Working Papers 0030, University of Zurich, Institute for Strategy and Business Economics (ISU). [Downloadable!]
  2. DUBOIS, Pierre & NAUGES, Céline, 2006. "Identifying the Effect of Unobserved Quality and Experts' Reviews in the Pricing of Experience Goods: Empirical Application on Bordeaux Wine," IDEI Working Papers 395, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
    Other versions:
  3. James J. Fogarty, 2002. "Why is Expert Opinion on Wine Valueless?," Economics Discussion / Working Papers 02-17, The University of Western Australia, Department of Economics. [Downloadable!]
  4. Egon Franck & Stefan Winter, 2002. "Zur Effizienz des Marktes für feine Bordeauxweine," Working Papers 0012, University of Zurich, Institute for Strategy and Business Economics (ISU). [Downloadable!]
  5. Claudia Keser, 2002. "Trust and Reputation Building in E-Commerce," CIRANO Working Papers 2002s-75, CIRANO. [Downloadable!]
  6. Landon, Stuart & Smith, Constance, 1998. "Quality expectations, reputation, and price," MPRA Paper 9774, University Library of Munich, Germany. [Downloadable!]
  7. Sanja Lutzeyer, 2008. "Estimating Hedonic Prices for Stellenbosch wine," Working Papers 15/2008, Stellenbosch University, Department of Economics. [Downloadable!]
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