In vino veritas : wine prices in Slovenia

Burger, Anže (author), Kunčič, Aljaž (author)

Wine market reveals some interesting truths about the pattern of international trade in dierentiated goods. We examine a large sample of domestic and foreign wines sold in Slovenian supermarkets and specialized wineshops in 2009. In our sample, imported wine is on average more expensive and of better quality than domestic wine. Higher quality wines sell at higher prices and quality-adjusted prices increase in quality. We present a heterogeneous rms model with endogenous quality choice and non-constant mark-ups that matches the above mentioned stylized facts. The model incorporates quality competition among the dierentiated products into the Melitz and Ottaviano (2008) framework and predicts that more productive wine producers choose higher quality upgrade and charge higher prices because they are able to raise their mark-up by more than their marginal cost advantage. Several implications of the theoretical model are empirically tested on the data, using product-, rm-, and country-level information and employing hedonic price function analysis for complete market and predetermined segments of the market. Empirical analysis conrms the existing evidence in the literature that quality, objective factors as well as reputation factors aect wine prices. Segmentations of the wine market on the basis of origin, variety and price are examined as well, and we conrm the ndings of Costanigro et al. (2007) that price segmentation seems to be the most appropriate judging on explanatory power.

• Language: English
• Work type: Not categorized
• Typology: 1.08 - Published Scientific Conference Contribution
• Organization: FDV - Faculty of Social Sciences
• Year: 2010
• PID: 20.500.12556/RUL-33299
• UDC: 634.8(497.4):339.5
• COBISS.SI-ID: 29696605
• Publication date in RUL: 10.07.2015