Globalization, Superstars, and the Importance of Reputation: Theory & Evidence from the Wine Industry

Gibbs, Michael; Tapia, Mikel; Warzynski, Frederic

doi:10.2139/ssrn.1343732

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Globalization, Superstars, and the Importance of Reputation: Theory & Evidence from the Wine Industry

Chicago Booth School of Business Research Paper No. 09-13

20 Pages Posted: 15 Feb 2009 Last revised: 25 Mar 2009

See all articles by Michael Gibbs

Michael Gibbs

University of Chicago Booth School of Business; Institute for the Study of Labor (IZA)

Frederic Warzynski

Aarhus University - Department of Economics and Business Economics

Date Written: February 14, 2009

Abstract

We develop a simple model of the effects of reputation on wine prices. An increasing fraction of consumers who are "naive" (less well informed about wine quality) results in a stronger sensitivity of wine prices to ratings of quality. We then use data on prices and Robert Parker's ratings of wines, to show that prices have become more related to Parker ratings over time. In addition, we find that a change in Parker rating has a stronger effect on price, the stronger is the wine's reputation.

Keywords: Reputation, Globalization, Wine

JEL Classification: L15, L66, Q11, F14

Suggested Citation: Suggested Citation

Gibbs, Michael and Tapia, Mikel and Warzynski, Frederic, Globalization, Superstars, and the Importance of Reputation: Theory & Evidence from the Wine Industry (February 14, 2009). Chicago Booth School of Business Research Paper No. 09-13, Available at SSRN: https://ssrn.com/abstract=1343732 or http://dx.doi.org/10.2139/ssrn.1343732