Relationships Among Wine Prices, Ratings, Advertising, and Production: Examining a Giffen Good

It has become increasingly popular for statistics to be used in the prediction of wine prices. In fact, the prices of mature wines produced in the Bordeaux region of France have been accurately predicted by vintage growing-season characteristics. This paper analyzes the relationships among wine prices, ratings, advertising, and production, using data obtained from a wine ratings magazine, Wine Spectator. It presents a model of wine price based on information about production quantity, vintage, country of origin, and wine type. This paper then examines the scoring method of Wine Spectator by evaluating the effects of wine price on wine rating. Finally, the effects of awards and advertising on wine ratings are studied. It is found that, ceteris paribus, doubling the number of cases produced decreases the price of wine by $2.36 and each additional dollar in price increases rating by .0942 points. In addition, wineries that advertised in Wine Spectator during the years 1999 or 2000 received reviews that were .402 points higher than wineries that did not advertise during the same time period, holding all other variables constant