The Hedonic Price for Italian Red Wine: Do Chemical and Sensory Characteristics Matter?

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ABSTRACT

In this article, we study the main determinants of price for Italian red wine sold on the domestic market via the estimation of a hedonic price function for the period 2005–2009. For each bottle considered, our dataset contains several characteristics, such as the price by retail channel (price in supermarkets and in wine shops), label characteristics, chemical analysis and sensory and experts’ evaluations. The unique features of the dataset allow us to study the price formation in the different market segments.

The analysis shows that in the large-scale retail trade consumers value most what is written on the label, but only if it is a verifiable characteristic; label characteristics are also important in wine shops, but a selection process exists to enter this market. Finally, selling wine via both channels appears to be a winning strategy: it allows the price to be increased in the large-scale retail trade, but it does not reduce the price in wine shops.

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