Popping the Cork: Why the Price of Champagne Falls During the Holidays
Kilts Center for Marketing at Chicago Booth – Nielsen Dataset Paper Series 1-006
25 Pages Posted: 17 Jun 2014 Last revised: 29 Aug 2016
Date Written: June 16, 2014
We document countercyclical prices in the sparkling wine market during the holiday season. While quantity peaks, increasing more than 100%, prices uniformly decrease, by 16% in average. We investigate the role played by changes in aggregate elasticity when demand spikes. Using Nielsen retail data from the Portland market, we find that price elasticity for sparkling wine increases by 50% during the holidays. Then, using household level data, we are able to document how the change is demand is, for a large share, driven by the entrance in the market of a new segment of consumers. These consumers are responsible for a quarter of sales during the holidays and they exhibit more price sensitive behaviors: for instance, they spend less in average on other alcoholic beverage such as beer and wine, and are more likely to use coupons for their purchases or buy generic products. These suggestive facts are confirmed by the results of our household level demand estimation - where we find that changes to aggregate elasticity is driven by the entry of a more elastic segment.
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