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

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  • Landon, Stuart
  • Smith, Constance

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.

Suggested Citation

  • 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.
    • Handle: RePEc:pra:mprapa:9283
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    More about this item

    JEL classification:

    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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