Non‐linearity in the hedonic pricing of South African red wines

Abstract

Purpose

Proceeding from the van Rensburg and Priilaid (“An econometric model for identifying value in South African red wine”, International Journal of Wine Marketing, Vol. 16 No. 1, 2004, pp. 37‐53) econometric valuation methodology mapping out the relationship between wine price and value, this paper seeks to explore the relationship between wine value and value‐for‐money.

Design/methodology/approach

A series of regression models are developed from a database of some 537 South African red wines available during the 2004 period. Five cultivars are included here: cabernet, merlot pinotage, pinot noir, and shiraz.

Findings

This research finds that successive increments in wine quality ratings are not equally priced. As a result, the relationship between value and price can be better modelled when increments in wine quality (as measured in stars) are proxied by dummy variables.

Originality/value

Allowing for the possibility of the non‐linear hedonic pricing of wine avoids the bias of value‐for‐money misleadingly being identified excessively at the bottom end of the quality spectrum and neglected at the top end.

Citation

Priilaid, D.A. and van Rensburg, P. (2006), "Non‐linearity in the hedonic pricing of South African red wines", International Journal of Wine Marketing, Vol. 18 No. 3, pp. 166-182. https://doi.org/10.1108/09547540610704747