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Non‐linearity in the hedonic pricing of South African red wines

Non‐linearity in the hedonic pricing of South African red wines Purpose – Proceeding from the van Rensburg and Priilaid (“An econometric model for identifying value in South African red wine”, International Journal of Wine Marketing , Vol. 16 No. 1, 2004, pp. 37‐53) econometric valuation methodology mapping out the relationship between wine price and value, this paper seeks to explore the relationship between wine value and value‐for‐money. Design/methodology/approach – A series of regression models are developed from a database of some 537 South African red wines available during the 2004 period. Five cultivars are included here: cabernet, merlot pinotage, pinot noir, and shiraz. Findings – This research finds that successive increments in wine quality ratings are not equally priced. As a result, the relationship between value and price can be better modelled when increments in wine quality (as measured in stars) are proxied by dummy variables. Originality/value – Allowing for the possibility of the non‐linear hedonic pricing of wine avoids the bias of value‐for‐money misleadingly being identified excessively at the bottom end of the quality spectrum and neglected at the top end. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Wine Marketing Emerald Publishing

Non‐linearity in the hedonic pricing of South African red wines

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Publisher
Emerald Publishing
Copyright
Copyright © 2006 Emerald Group Publishing Limited. All rights reserved.
ISSN
0954-7541
DOI
10.1108/09547540610704747
Publisher site
See Article on Publisher Site

Abstract

Purpose – Proceeding from the van Rensburg and Priilaid (“An econometric model for identifying value in South African red wine”, International Journal of Wine Marketing , Vol. 16 No. 1, 2004, pp. 37‐53) econometric valuation methodology mapping out the relationship between wine price and value, this paper seeks to explore the relationship between wine value and value‐for‐money. Design/methodology/approach – A series of regression models are developed from a database of some 537 South African red wines available during the 2004 period. Five cultivars are included here: cabernet, merlot pinotage, pinot noir, and shiraz. Findings – This research finds that successive increments in wine quality ratings are not equally priced. As a result, the relationship between value and price can be better modelled when increments in wine quality (as measured in stars) are proxied by dummy variables. Originality/value – Allowing for the possibility of the non‐linear hedonic pricing of wine avoids the bias of value‐for‐money misleadingly being identified excessively at the bottom end of the quality spectrum and neglected at the top end.

Journal

International Journal of Wine Marketing – Emerald Publishing

Published: Sep 1, 2006

Keywords: Wines; value analysis

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