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Is the second-cheapest wine a rip-off?

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  • De Meza, David
  • Pathania, Vikram S.

Abstract

The second-cheapest bottle on a restaurant wine list is widely thought to be priced to exploit naïve diners embarrassed to choose the cheapest option. This paper investigates whether this behavioral theory holds empirically. We find that the mark-up on the second-cheapest wine is significantly below that on the four next most expensive wines. It is therefore an urban myth that the second-cheapest wine is an especially bad buy.

Suggested Citation

  • De Meza, David & Pathania, Vikram S., 2021. "Is the second-cheapest wine a rip-off?," LSE Research Online Documents on Economics 110874, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:110874
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    References listed on IDEAS

    as
    1. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    2. David A. Jaeger & Karl Storchmann, 2011. "Wine Retail Price Dispersion in the United States: Searching for Expensive Wines?," American Economic Review, American Economic Association, vol. 101(3), pages 136-141, May.
    3. de Meza, David & Pathania, Vikram, 2021. "Is the Second-Cheapest Wine a Rip-Off? Economics vs. Psychology in Product-Line Pricing," Working Papers 321852, American Association of Wine Economists.
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    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics

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