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Don't Judge a Wine by Its Closure: Price Premiums for Corks in the U.S. Wine Market

  • Anton Bekkerman (a1) and Gary W. Brester (a2)
Abstract

For many purchases, consumers often possess only limited information about product quality. Thus, observable product characteristics are used to determine expected quality levels when making purchase decisions. We use more than 1 million weekly scanner-level observations from grocery stores across ten U.S. markets between September 2009 and August 2012 to examine how consumers value a wine bottle's closure type (i.e., cork or screw cap). We focus on lower-priced wines—those with sale prices less than $30 per 750 milliliter bottle—to more accurately evaluate decisions of consumers for whom seeking additional information about wine quality is likely more costly than the benefits derived from that information. Using both pooled ordinary least squares and quantile regressions to estimate price premiums for bottles with corks or screw caps, we find that U.S. consumers are willing to pay, on average, approximately 8% more (about $1.00) for a bottle of wine that has a cork closure. In addition, we show that the size of this premium increases as wine prices decline. (JEL Classifications: D81, M31, Q11)

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The authors thank Kate Fuller, Hamish Gow, Carly Urban, Clint Peck, and participants of the economics seminar series at Lincoln University (Lincoln, New Zealand) as well as Karl Storchmann and an anonymous reviewer for helpful comments on this project. This work was partially supported by the National Institute of Food and Agriculture, U.S. Department of Agriculture, Hatch Multi-state project MONB00095.

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Journal of Wine Economics
  • ISSN: 1931-4361
  • EISSN: 1931-437X
  • URL: /core/journals/journal-of-wine-economics
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