We empirically examine the relationship between price and willingness to pay (WTP) for wines by conducting a wine-tasting experiment with a manipulation of price similar to that used by Plassman et al. (2008); that is, with the same wines being presented at different prices. We find that for non-expert wine consumers a complex interaction exists between wine appreciation, price and WTP. The key conclusions from the study are that for non-expert wine consumers (1) there is no relationship between intrinsic wine character and enjoyment (individuals rated the same wines quite differently), and (2) price influences both appreciation of wine and WTP, but the latter more strongly. Buying decisions are determined by consumer surplus (the difference between WTP and price), and yet, for non-expert wine drinkers, WTP is itself strongly influenced by price. This complex interaction between the factors that determine buying behavior has strategic implications for competitors in the wine industry. We suggest an understanding of the relationship between WTP and price can be used to shed light on the crisis recently experienced by the Australian wine industry. (JEL Classifications: C91, D03, M30)

We use experimental data to disentangle the signaling and budgetary effects of price on wine demand. The experimental design allows us to isolate the two effects in a simple and intuitive way. The signaling effect is present and nonlinear: it is strongly positive between 3 euros and 5 euros and undetectable between 5 euros and 8 euros. We find a similar nonlinear price–quality relationship in a large sample of wine ratings from the same price segment, supporting the hypothesis that taster behavior in the experiment is consistent with rationally using prices as signals of quality. Price signals also have greater importance for inexperienced (young) consumers. (JEL Classification: D11, D12, D82)

We developed a partial equilibrium model to examine the welfare impacts of bird damage and its control in California wine grape production. The model incorporates the impacts of pest damage and its control and allows the impacts to vary regionally. Importantly, the model requires minimal information to apply; only elasticities, current market price and production data, and information on the cost and effectiveness of the pest control methods are needed. We rely on data from a recent survey of California growers and use the model to estimate changes in wine grape prices, production levels, and consumer and producer surplus that result from both bird damage and its control in three grape-growing regions of California. Results suggest that eliminating the threat of bird damage and control costs results in an increase in producer and consumer surplus of 1.3% and 3%, respectively. Furthermore, eliminating current bird control and allowing any resulting damage would decrease producer and consumer surplus by 6.6% and 11.5%, respectively. (JEL Classifications: Q11, Q18, Q57)

Economic theorists maintain that wine is an experience good, a product whose quality can be evaluated only after purchase and consumption. Theory holds that consumers often rely on the price of experience goods as one cue to judge their quality. In this paper, however, I provide evidence that an important segment of wine consumers do not consider price a useful cue to quality. Specifically, I test the robustness of Goldstein et al.,'s (2008) finding that, in blind tastings, average wine drinkers consider less expensive wines to taste better than more expensive wines. Four blind tastings of 2006 red Bordeaux and 2009 white Burgundy with a price range of $20–$119 were conducted, in which members of a wine club rated their extent of enjoyment of each wine. In three of the tastings, there was no relationship between price and enjoyment, while in the other the relationship was negative, lending additional credibility to the contention that an important segment of wine consumers do not find enjoyment to increase with price. (JEL Classification: C91)

This study investigates factors influencing coordination of the California grape and wine supply chain. Results corroborate prior findings that quality considerations and needs to protect investments in specialized or durable assets significantly increase usage of more formal coordination mechanisms, such as formal contracts and vertical integration or ownership. Consistent with findings for other industries, such investments are associated with greater contract complexity and inclusion of enforcement provisions, while trade partners' prior experience working together decreases contract complexity. Furthermore, our results suggest that quality considerations extend to greater use of formal contracts further downstream. (JEL Classifications: L1, L2, Q13)

There has been ongoing interest in studying wine judges' performance in evaluating wines. Most of the studies have reached a similar conclusion: a significant lack of consensus exists in wine quality ratings. However, a few studies, to the author's knowledge, have provided direct quantification of how much consensus (as opposed to randomness) exists in wine ratings. In this paper, a permutation-based mixed model is proposed to quantify randomness versus consensus in wine ratings. Specifically, wine ratings under the condition of randomness are generated with a permutation method, and wine ratings under the condition of consensus can be produced by sorting the ratings for each judge. Then the observed wine ratings are modeled as a mixture of ratings under randomness and ratings under consensus. This study shows that the model can provide excellent model fit, which indicates that wine ratings, indeed, consist of a mixture of randomness and consensus. A direct measure is easily computed to quantify randomness versus consensus in wine ratings. The method is demonstrated with data analysis from a major wine competition and a simulation study. (JEL Classifications: C10, C13, C15)