Analysis of the Bordeaux red wine industry using the hedonic pricing model

In this paper, the hedonic pricing model was applied to the industry of premium red wines produced in Bordeaux, France. The analysis included auction data from England and the United States from 2000-2007 and from France, Switzerland, and the Netherlands from 2003-2007. The data consisted of all available auction prices of 300 châteaux for their 1982-2003 vintages. The characteristics included in the hedonic pricing model included the quantity of bottles produced, the age of the wine, the Parker Score awarded, the region where the wine was produced, the wines ranked in the 1855 classification, the wines ranked in the Saint-Émilion Classification, whether the wine was classified in the Graves Classification, the sugar/acid ratio of the wine, whether the wine was Merlot or Cabernet Sauvignon dominated, and key weather variables during the grape growing season. The estimation of the hedonic pricing function revealed that the auction price of wine was essentially determined by readily available data. Consumers in all five countries were willing to pay price premiums for each additional age of the wine, each additional Parker point awarded to the wine, wines ranked highly, and wines from the region of Pomerol