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Hedonic Wine Price Functions and Measurement Error

Edward Oczkowski
Charles Sturt University - Faculty of Commerce

November 2000

Charles Sturt U. Economics Working Paper No. 24

Abstract:
Accumulated theoretical and empirical evidence suggests that wine prices depend upon quality, reputation and objective characteristics. Unlike previous studies, we recognize that quality and reputation are latent constructs and therefore employ factor analysis and 2SLS techniques to consistently estimate hedonic prices in the presence of attributes measured with error. The application to Australian premium wines points to significant reputation effects but insignificant quality effects. It is also illustrated that inappropriately using standard OLS procedures can seriously distort the statistical significance of attributes; the implicit marginal attribute prices; and the predictions of 'average' prices for a given set of characteristics.

Keywords: wine, hedonic pricing, measurement error

JEL Classifications: C52, D40, L66

Working Paper Series

Date posted: April 16, 2001 ; Last revised: December 06, 2004

Suggested Citation

Oczkowski, Edward, Hedonic Wine Price Functions and Measurement Error (November 2000). Charles Sturt U. Economics Working Paper No. 24. Available at SSRN: http://ssrn.com/abstract=265024 or doi:10.2139/ssrn.265024

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Contact Information

Edward Oczkowski (Contact Author)

Charles Sturt University - Faculty of Commerce ( email )

Wagga Wagga NSW 2678
Australia
061 02 69332521 (Phone)
061 02 69332125 (Fax)