Consumer sorting and hedonic valuation of wine attributes: exploiting data from a field experiment

The U.S. and global beer industries include a great many smaller-scale craft breweries supplying numerous differentiated products as well as a few macro-breweries with less diverse beer portfolios. The craft and macro segments of this industry have become quite distinct, with little substitutability between the two types of beer. Furthermore, since the early 2000s the craft segment has realized consistent growth whereas large breweries have seen a steady decline in sales. Macro-breweries have responded by acquiring smaller breweries to capture a share of the craft market. This study implements an experimental approach to measure consumers’ willingness to pay (WTP) for locally produced and independently owned beer. Regression analysis clearly indicates that consumers prefer locally owned and independently produced beer, and how much they are willing to pay for those attributes. (JEL Classifications: D12, L66)

Section: Experimental Designmentioning

confidence: 99%

Drink Beer for Science: An Experiment on Consumer Preferences for Local Craft Beer

Hart

2018

“…In a recent study by Gustafson et al (2011) a novel procedure to measure consumer WTP was developed and applied to an experimental situation in retail stores. The researchers find that when supply-side contamination and individual effects are eliminated from the WTP estimates, the valuation that consumers placed on wine varieties increases significantly and much of the WTP for appellations disappears.…”

Section: Price Willingness To Pay and Buying Behaviormentioning

confidence: 99%

“…Our interpretation of the industry crisis, which we discuss in the concluding section of the paper, hinges on the proposition that for wine consumers there exists a relationship between price and their willingness to pay (WTP) for wine. Even though the relationship between wine characteristics and WTP has received considerable attention in recent years (e.g., Combris et al, 2006; Gustafson et al, 2011; Oberfeld et al, 2009; Yang et al, 2009), the relationship between price (as the independent variable) and WTP for wine (as the dependent variable) has not been empirically studied. Our study addresses this relationship and thus makes a contribution to the body of literature seeking to more fully explain wine consumers’ buying behavior.…”

Section: Introductionmentioning

confidence: 99%

Strategic Implications of the Relationship Between Price and Willingness to Pay: Evidence from a Wine-Tasting Experiment

Lewis

Zalan

2014

We empirically examine the relationship between price and willingness to pay (WTP) for wines by conducting a wine-tasting experiment with a manipulation of price similar to that used by Plassman et al. (2008); that is, with the same wines being presented at different prices. We find that for non-expert wine consumers a complex interaction exists between wine appreciation, price and WTP. The key conclusions from the study are that for non-expert wine consumers (1) there is no relationship between intrinsic wine character and enjoyment (individuals rated the same wines quite differently), and (2) price influences both appreciation of wine and WTP, but the latter more strongly. Buying decisions are determined by consumer surplus (the difference between WTP and price), and yet, for non-expert wine drinkers, WTP is itself strongly influenced by price. This complex interaction between the factors that determine buying behavior has strategic implications for competitors in the wine industry. We suggest an understanding of the relationship between WTP and price can be used to shed light on the crisis recently experienced by the Australian wine industry. (JEL Classifications: C91, D03, M30)

“…The work in this paper relates to several disparate strands of literature, including the more general literature on the economics of food labeling and labeling regulations (e.g., Golan et al, 2001), and other strands of marketing and behavioral economics as they pertain to consumer responses to packaging and labeling as sources of information about product quality (see, e.g., Cheskin and Ward, 1948; Woolfolk et al, 1983; Hine, 1995; Dimara and Skuras, 2005; Costanigro et al, 2007; Masson et al, 2008). But our findings are of more direct relevance to work on hedonic pricing and other work on consumer perceptions of the quality attributes of wine, as represented by information conveyed on the label and from other sources (e.g., see Gustafson, 2011). While connecting to this broader literature, the purpose of the work here is more specifically focused 2 .…”

Section: Introductionmentioning

confidence: 56%

“…Many studies have estimated hedonic price functions to quantify the effects of various attributes of wine, as displayed on the label, on consumers' willingness to pay for the wine. Gustafson (2011) reviewed this literature. Costanigro, McCluskey, and Mittelhammer (2007, p. 455) noted that “ … when regressing objective and sensory characteristics on wine price, the objective cues (such as expert rating score and vintage) are significant, whereas sensory variables (such as tannin content and other measureable chemicals) are not.” Our work suggests two points to be raised in interpreting this literature.…”

Section: Resultsmentioning

confidence: 99%

Splendide Mendax: False Label Claims About High and Rising Alcohol Content of Wine

Alston

Fuller²,

Lapsley³

et al. 2015

Many economists and others are interested in the phenomenon of rising alcohol content of wine and its potential causes. Has the alcohol content of wine risen-and if so, by how much, where, and when? What roles have been played by climate change and other environmental factors compared with evolving consumer preferences and expert ratings? In this paper we explore these questions using international evidence, combining time-series data on the alcohol content of wine from a large number of countries that experienced different patterns of climate change and influences of policy and demand shifts. We also examine the relationship between the actual alcohol content of wine and the alcohol content stated on the label. The systematic patterns here suggest that rising alcohol content of wine may be a nuisance by-product of producer responses to perceived market preferences for wines having riper, more-intense flavours, possibly in conjunction with evolving climate.