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

Abstract

If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -Proceeding from the van Rensburg and Priilaid (''An econometric model for identifying value in South African red wine''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.

Nonlinear hedonic pricing: a confirmatory study of South African wines

“…The approach of this paper is similar to the customer-facing orientation used in a subsequent study by Priilaid and van Rensburg, 19 though here with a more recent and nonoverlapping dataset of red and white wines, two-and-a-half times the size of its predecessor. While the 2006 study 19 was merely based on some 537 wines drawn only from red grape cultivars, this study employs a dataset of 1358 red and white wines tasted during the 2007 period; a significant difference.…”

“…Accordingly, such models would eschew chemical and climatic factors, concentrating rather on objective and sensory wine characteristics (notably professional sighted and blind ratings) to develop consumerfriendly hedonic models. (See Priilaid and van Rensburg, 19 Siegrist and Cousin, 34 and Priilaid et al 35 for an elaboration of the arguments on how and why consumers deploy wine expert ratings as risk-reducing proxies to guide buying and consumption behavior. )…”

“…31,32 Lastly, chemical characteristics like sugar and alcohol content have also been applied to hedonic price functions. 3 In 2004 and subsequently in 2006, van Rensburg and Priilaid 18,19 used the link between business and consumer costs to introduce a consumer-facing orientation to wine price hedonics. The rationale for this link is not new 33 and notes that, together with profit, business costs sum to the seller's price (so often a construct in itself).…”

“…While the 2006 study 19 was merely based on some 537 wines drawn only from red grape cultivars, this study employs a dataset of 1358 red and white wines tasted during the 2007 period; a significant difference. With this substantially updated and upgraded database, we thus seek to confirm that the dummy approach negates the possibility of value-for-money markers misleadingly being notified at the bottom end of the quality spectrum and neglected at the top.…”

“…Employing the conventional multiple regression framework, Oczkowski's study demonstrated how the relative price of a particular wine could thus be constituted as the summation of each of the constituent subprices that they attached to each of these attributes. Since then, numerous studies [1][2][3][4][5][6][7][8][9][10][11][12][13][14][15][16][17][18][19] have seen hedonic modeling gain recognition as a form of wine price analysis.…”