What Determines the Future Value of an Icon Wine? New Evidence from Australia

Abstract

To what extent can the future price of icon wines be anticipated from information available at the time of their initial sale by wineries? Using a hedonic model, we show that weather variables and changes in production techniques, along with the age of the wine, have significant power in explaining the secondary market price variation across different vintages of each of three icon Australian red wines. The results have implications for winemakers in determining the prices they pay for grapes and charge for their wines, and for consumers/wine investors as a guide to the prospective quality of immature icon wines.

Keywords: Wine quality, investment under certainty, hedonic pricing model

JEL Classification: C23, D12, D44, D80, G12