IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Estimating Hedonic Prices for Stellenbosch wine

  • Sanja Lutzeyer

    ()

    (Department of Economics, University of Stellenbosch)

This paper estimates a hedonic price function for Stellenbosch wines to determine the association between market value and different characteristics of these wines. In such a hedonic price function, the price of a bottle of wine is ascribed to the implicit value of its attributes. Besides contributing to both South African and international wine pricing literature, the benefits of developing a hedonic wine pricing model extend to numerous players in the wine industry. Consumers are provided with guidelines on how to utilize their wine purchasing budget more efficiently, while producers are able to use estimates of the function to guide future investment decisions. The hedonic price function estimated in this paper includes numerous ‘objective’ characteristics, appearing on the label of the bottle, as well as subjective characteristics in the form of expert wine ratings. In an effort to address possible heterogeneity of wine as a product, separate regressions are run for red and white wines. The estimation of the hedonic price equation shows that, in general, wine quality (as modelled by blind and sighted wine ratings) and age of the wine are relevant in accounting for price deviations from average red wine prices. Further, it is found that only limited numbers of red wine varieties and sub-districts of production significantly influence the average price of Stellenbosch red wines. For white wines, only sighted wine ratings as well as age of the wine were found to significantly account for deviations from average white wine prices. While blind wine ratings and white wine varieties were not found to significantly influence average white wine prices, certain regions of production where found to be relevant in accounting for deviations from average white wine prices.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.ekon.sun.ac.za/wpapers/2008/wp152008/wp-15-2008vers2.pdf
File Function: First version, 2008
Download Restriction: no

Paper provided by Stellenbosch University, Department of Economics in its series Working Papers with number 15/2008.

as
in new window

Length:
Date of creation: 2008
Date of revision:
Handle: RePEc:sza:wpaper:wpapers63
Contact details of provider: Postal: Private Bag X1, 7602 Matieland
Phone: 021-8082247
Fax: +27 (0)21-808 2409
Web page: http://www.ekon.sun.ac.za
Email:


More information through EDIRC

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.:

as in new window
  1. 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, 04.
  2. 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.
  3. Arguea, N.M. & Hsiao, C., 1992. "Econometric Issues of Estimating Hedonic Price Functions- with an Application to the U.S. Market for Automobiles," Papers 9203, Southern California - Department of Economics.
  4. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132.
  5. 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.
  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. Lecocq, Sébastien & Visser, Michael, 2006. "What Determines Wine Prices: Objective vs. Sensory Characteristics," Journal of Wine Economics, Cambridge University Press, vol. 1(01), pages 42-56, March.
  8. A. Golan & H. Shalit, 1993. "Wine Quality Differentials In Hedonic Grape Pricing," Journal of Agricultural Economics, Wiley Blackwell, vol. 44(2), pages 311-321.
  9. Oczkowski, Edward, 2001. "Hedonic Wine Price Functions and Measurement Error," The Economic Record, The Economic Society of Australia, vol. 77(239), pages 374-82, December.
  10. Brachinger, Hans Wolfgang, 2002. "Statistical Theory of Hedonic Price Indices," DQE Working Papers 1, Department of Quantitative Economics, University of Freiburg/Fribourg Switzerland, revised Aug 2003.
  11. 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..
  12. Terry Baker, 1997. "Quality-adjusted price indexes for portable computers," Applied Economics, Taylor & Francis Journals, vol. 29(9), pages 1115-1123.
  13. Marco Costanigro & Jill J. McCluskey & Ron C. Mittelhammer, 2007. "Segmenting the Wine Market Based on Price: Hedonic Regression when Different Prices mean Different Products," Journal of Agricultural Economics, Wiley Blackwell, vol. 58(3), pages 454-466, 09.
  14. Bartik, Timothy J, 1987. "The Estimation of Demand Parameters in Hedonic Price Models," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 81-88, February.
  15. Halvorsen, Robert & Palmquist, Raymond, 1980. "The Interpretation of Dummy Variables in Semilogarithmic Equations," American Economic Review, American Economic Association, vol. 70(3), pages 474-75, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:sza:wpaper:wpapers63. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Melt van Schoor)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.