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Experts, Reputation and Umbrella Effects: Empirical Evidence from Wine Prices

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  • Dieter Pennerstorfer
  • Christoph Weiss
  • Andreas Huber

Abstract

We investigate the relationship between external quality evaluation via experts, firm reputation and product prices and extend the existing empirical literature in three dimensions. First, we empirically account for endogenous reputation effects. An increase in quality has an immediate positive impact on product prices but also improves the reputation of a firm, which contributes to higher prices in the future. Secondly, we analyse umbrella effects of reputation: investments in product quality of the ’top product‘ are particularly profitable as they also generate a ’ reputational dividend‘ for other products with lower quality. And finally, we investigate selection effects in expert evaluations. Experts typically evaluate a selection of products only and we find endogenous selection effects to be important for analysing product quality empirically.

Suggested Citation

  • Dieter Pennerstorfer & Christoph Weiss & Andreas Huber, 2019. "Experts, Reputation and Umbrella Effects: Empirical Evidence from Wine Prices," Economics working papers 2019-08, Department of Economics, Johannes Kepler University Linz, Austria.
  • Handle: RePEc:jku:econwp:2019_08
    Note: English
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    References listed on IDEAS

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    More about this item

    Keywords

    experts evaluations; hedonic pricing; wine quality; endogenous reputation; sample selection; umbrella branding;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices

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