Wine Quality and Regional Reputation: Hedonic Prices for Australia and New Zealand

Abstract

We estimate hedonic price functions for premium wine from Australia and New Zealand, differentiating implicit prices for sensory quality ratings, wine varieties, and regional as well as brand reputations over the vintages 1992 to 1998. For Australia, the results suggest regional reputations in general are becoming increasingly significant through time, indicating an intensifying regional quality differentiation. As well, some specific cool-climate regions (e.g. Adelaide Hills, Tasmania) are becoming increasingly preferred over other regions. Price premiums based on brand reputation also are shown to be significant. For New Zealand, regional quality differentiation is considerably less significant than is the case in Australia, which raises the question as to why. (Is there scope for more regional promotion there?) In both countries, price premiums for James Halliday’s sensory quality ratings are highly significant and have remained so over time.

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