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Does quality pay off? “Superstar” wines and the uncertain price premium across quality grades

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  • Castriota, Stefano
  • Corsi, Stefano
  • Frumento, Paolo Dyno
  • Ruggeri, Giordano

Abstract

We use data from Wine Spectator on 266,301 bottles from 12 countries sold in the United States to investigate the link between the score awarded by the guide and the price charged. In line with the literature, the link between quality and price is positive. In a deeper inspection, however, hedonic regressions show that the price premium attached to higher quality is significant only for “superstar” wines with more than 90 points (in a 50-100 scale), while prices of wines between 50 and 90 points are not statistically different from each other. Furthermore, an analysis performed through normal heteroskedastic and quantile regression models shows that the dispersion of quality-adjusted prices is described by an asymmetric U-shaped function of the score; that is, products with the lowest and highest quality have the highest residual standard deviation. Pursuing excellence is a risky strategy: the average price is significantly higher only for wines that achieve top scores, and the price premium becomes more volatile.

Suggested Citation

  • Castriota, Stefano & Corsi, Stefano & Frumento, Paolo Dyno & Ruggeri, Giordano, 2021. "Does quality pay off? “Superstar” wines and the uncertain price premium across quality grades," Working Papers 321846, American Association of Wine Economists.
    • Handle: RePEc:ags:aawewp:321846
    DOI: 10.22004/ag.econ.321846
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    References listed on IDEAS

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    Agribusiness; Demand and Price Analysis;

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