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An Empirical Analysis of the Effect of Sub-Divisions of American Viticultural Areas on Wine Prices: A Hedonic Study of Napa Valley

Published online by Cambridge University Press:  13 October 2020

Grant Bartlett Keating
Grant Bartlett Keating*
Affiliation:
Department of Economics, Princeton University, 20 Washington Rd, Princeton, NJ08540; e-mail: [email protected].
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Abstract

American Viticultural Areas (AVAs) are descriptors of where wine grapes are grown that are designed to capture qualities unique to the wine and to influence its price. Sub-AVAs are sub-divisions of well-known AVAs designed to have the same effect. In this paper, I study the impact of the Napa Valley Sub-AVA system on the pricing and rating of Napa Valley wines. The analysis utilizes a primary hedonic pricing model to isolate both the individual Sub-AVA's price effect and the system's cumulative price effect. This study uses a unique dataset of 5,017 Napa Valley wines reviewed by the Connoisseurs’ Guide to California Wine over the 10-year period from 2004–2013. Estimated price effects persist even after controlling for rating differences, implying that consumers value the wines of sub-AVA's independently of critics’ ratings. These results indicate that Sub-AVAs deliver a more substantial price effect than previous literature has suggested. (JEL Classifications: C01, L10, L66, O13)

Keywords

American Viticultural AreaAVANapa ValleySub-AVA
Type
Articles
Information
Journal of Wine Economics , Volume 15 , Issue 3 , August 2020 , pp. 312 - 329
Copyright
Copyright © American Association of Wine Economists, 2020

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Footnotes

I am indebted to Karl Storchmann and two anonymous reviewers for their very useful comments. I would also like to thank Orley Ashenfelter, for all his help and tireless input as my advisor, Princeton University for the research grant that made this paper possible, and Axel Borg and UC Davis enabling the collection of the dataset used.

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