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Critical Exposure and Price-Quality Relationships for New World Wines in the U.S. Market*

Published online by Cambridge University Press:  08 June 2012

Peter W. Roberts  and
Ray Reagans
Peter W. Roberts
Affiliation:
Goizueta Business School, Emory University, Atlanta, GA 30306,[email protected]
Ray Reagans
Affiliation:
Tepper School of Business, Carnegie Mellon University, Pittsburgh, PA 15213,[email protected]
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Abstract

Notwithstanding the observed positive correlations between critics' quality ratings and wine prices, the range of these correlations is quite high. In light of this, researchers must consider the factors that either strengthen or weaken the association between quality ratings and prices. In this paper, we propose that the slope of the relationship between quality ratings and wine prices is moderated by the amount of attention that producers receive. Because attention increases with a producer's critical exposure (i.e., its history of critical coverage), price-quality relationships will be steeper for producers with more critical exposure. This prediction is confirmed in an analysis of New World wines selling into the U.S. market over the 1987 to 2001 period. While a wine's price is a positive function of its own quality rating, the strength of the price-quality relationship increases with a producer's critical exposure (JEL classifications: L11, L13, L15).

Type
Articles
Information
Journal of Wine Economics , Volume 2 , Issue 1 , Spring 2007 , pp. 84 - 97
Copyright
Copyright © American Association of Wine Economists 2007

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