Search characteristics, online consumer ratings, and beer prices

Abstract

Experience and credence characteristics are hard to assess when consumers select food products. Therefore, consumers who are unfamiliar with specific products typically use search characteristics as a proxy for product quality. As search characteristics are pivotal in consumers' decisions, we expect them to be reflected in the resulting product prices in the beer market. Besides traditional search characteristics such as beer color or fermentation type, new search characteristics such as online consumer ratings are emerging in beer markets all over the world. Thus, we use a hedonic price estimation to learn about the relative importance of traditional versus new search characteristics in the Belgian beer market. Specifically, the beer prices for 1517 different beer products of two large beer retailers are investigated to compare the role of traditional beer characteristics—color, fermentation type, beer style, origin, brewery type, and alcohol percentage—with the role of online beer ratings from the platform RateBeer.com. We find that while traditional characteristics still play a key role in the beer market, the role of online ratings seems dependent on the retail context [EconLit Citations: C36 Instrumental Variables Estimation, D83 Search—Communication, Q11 Agriculture—Prices, Q18 Food Policy].