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A hedonic price analysis for the Italian wine in the domestic market

Abstract

Price formation in the domestic market has not been widely studied in spite of the importance of the Italian wine market in terms of sales. We use a unique dataset to estimate the hedonic price function for Italian wine sold on the Italian market in the period 2005–2011. For each bottle considered, the dataset records several characteristics such as the price by retail channel (on the mass market and in wine shops), label characteristics, chemical analysis, sensory evaluations and experts’ opinions. The objective of the analysis is to examine price setting on the mass market and in wine shops and to explore the differences in price formation for red and white wines. Our results have been obtained using an innovative technique that consists of combining hedonic price techniques with dimensionality reduction tools.

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Notes

  1. 1.

    http://www.telegraph.co.uk/foodanddrink/wine/8571222/Italy-overtakes-France-to-become-worlds-largest-wine-producer.html.

  2. 2.

    http://www.confcommercioverona.it/index.php?option=com_content&view=article&id=1868:vinitaly-2012-cambiano-i-consumi-di-vino-nei-supermercati-o-il-prezzo-o-la-qualita&catid=52&Itemid=22.

  3. 3.

    For further information see http://www.assaggiatori.com. The authors wish to thank Altroconsumo, the main and most widespread Italian consumer association with over 300,000 members, and Luigi Odello, chairman of Centro Studi Assaggiatori, for the datasets used in this work.

  4. 4.

    For a log-linear specification, Halvorsen and Palmquist (1980) propose estimating the effect of a binary variable on the price as follows: \(\Delta p/p=e^{c }- 1\), where \(c\) is the coefficient of the parameter obtained through OLS. When two variables interact, their combined effect is: \(\Delta p/p=e^{c+d }- 1\).

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Correspondence to Eugenio Brentari.

Appendix

Appendix

See Tables 3, 4 and 5.

Table 3 Descriptive statistics of the sample for red wines
Table 4 Descriptive statistics of the sample for white wines
Table 5 Choice of the functional form

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Brentari, E., Levaggi, R. & Zuccolotto, P. A hedonic price analysis for the Italian wine in the domestic market. Qual Quant 49, 999–1012 (2015). https://doi.org/10.1007/s11135-014-0102-z

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Keywords

  • Price formation mechanism
  • Hedonic price function
  • Canonical correlation analysis
  • Latent factors