Scandinavian Working Papers in Economics

Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

No 182: Determinants of Demand for Wine – price sensitivity and perceived quality in a monopoly setting

Tobias Dahlström () and Erik Åsberg ()
Additional contact information
Tobias Dahlström: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden
Erik Åsberg: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden

Abstract: The purpose of this paper is to characterise the demand for wine. In contrast to the majority of current research efforts this paper treats wine as a heterogeneous good with a range of inherent characteristics. Each wine included in the study is described by twelve variables including, among others, price, quality, sensory attributes and country of origin. Using unique data that cover 90 percent of all wines sold in Sweden we conclude that consumers do recognise quality in wine, that price elasticity is non-constant and decreasing with price and that consumers put a great deal of weight on the country of origin of the wine.

Keywords: consumer preferences; wine; quality; price elasticity; heterogeneous goods

JEL-codes: D12; D42

40 pages, June 4, 2009

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