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International Wine Trade: Analyzing The Value Of Reputation And Quality Signals


  • Schamel, Guenter


This research examines the factors behind price differentials based on regional origin. For this purpose, we estimate a hedonic pricing model of premium wines sold in the U.S. We hypothesize that numerous quality signals affect wine prices including expert opinions about sensory quality, maturing potential, and special selections as well as derived indicators that signal a high or low quality producer. After correcting for variety, regional origin, and age, the data confirms that a wine's price is related to producer quality signals, which may even negate regional effects. We conclude that it is problematic to interpret regional premiums as brand value (as opposed to quality premiums) without adjusting them for producer quality signals. Estimated brand values may then be biased. Moreover, a strong positive producer quality signal receives a larger percentage price premium than a comparable negative signal which warrants important marketing implications for producers and entire regions.

Suggested Citation

  • Schamel, Guenter, 2003. "International Wine Trade: Analyzing The Value Of Reputation And Quality Signals," 2003 Annual meeting, July 27-30, Montreal, Canada 22157, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  • Handle: RePEc:ags:aaea03:22157

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    References listed on IDEAS

    1. Nerlove, Marc, 1995. "Hedonic price functions and the measurement of preferences: The case of Swedish wine consumers," European Economic Review, Elsevier, vol. 39(9), pages 1697-1716, December.
    2. Arguea, Nestor M. & Hsiao, Cheng, 1993. "Econometric issues of estimating hedonic price functions : With an application to the U.S. market for automobiles," Journal of Econometrics, Elsevier, vol. 56(1-2), pages 243-267, March.
    3. Edward Oczkowski, 1994. "A Hedonic Price Function For Australian Premium Table Wine," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 38(1), pages 93-110, April.
    4. Jean Tirole, 1996. "A Theory of Collective Reputations (with applications to the persistence of corruption and to firm quality)," Review of Economic Studies, Oxford University Press, vol. 63(1), pages 1-22.
    5. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, July.
    6. Landon, Stuart & Smith, Constance, 1997. "The Use of Quality and Reputation Indicators by Consumers: The Case of Bordeaux Wine," MPRA Paper 9283, University Library of Munich, Germany.
    7. Oczkowski, Edward, 2001. "Hedonic Wine Price Functions and Measurement Error," The Economic Record, The Economic Society of Australia, vol. 77(239), pages 374-382, December.
    8. Combris, Pierre & Lecocq, Sebastien & Visser, Michael, 1997. "Estimation for a Hedonic Price Equation for Bordeaux Wine: Does Quality Matter?," Economic Journal, Royal Economic Society, vol. 107(441), pages 390-402, March.
    9. 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..
    10. G¸nter Schamel & Kym Anderson, 2003. "Wine Quality and Varietal, Regional and Winery Reputations: Hedonic Prices for Australia and New Zealand," The Economic Record, The Economic Society of Australia, vol. 79(246), pages 357-369, September.
    11. Landon, Stuart & Smith, Constance, 1998. "Quality expectations, reputation, and price," MPRA Paper 9774, University Library of Munich, Germany.
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    Cited by:

    1. Monica Fait & Antonio Iazzi & Paola Scorrano, 2014. "La brand experience nelle strategie commerciali delle imprese vitivinicole," ECONOMIA E DIRITTO DEL TERZIARIO, FrancoAngeli Editore, vol. 2014(2), pages 285-304.
    2. José Cadima Ribeiro & José de Freitas Santos, 2004. "Portuguese olive oil and the price of regional products: does designation of origin really matter?," NIPE Working Papers 3/2004, NIPE - Universidade do Minho.
    3. Santos, J. Freitas & Ribeiro, J. Cadima, 2005. "Product Attribute Saliency and Region of Origin: Some Empirical Evidence from Portugal," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24667, European Association of Agricultural Economists.

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    International Relations/Trade;


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