We examine the value of terroir, which refers to the special characteristics of a place that impart unique qualities to the wine produced. We do this by conducting a hedonic analysis of vineyard sales in the Willamette Valley of Oregon to ascertain whether site attributes, such as slope, aspect, elevation, and soil types, or designated appellations are more important determinants of price. We find that prices are strongly determined by sub-AVA appellation designations, but not by specific site attributes. These results indicate that the concept of terroir matters economically, although the reality of terroir – as proxied for by locational attributes – is not significant. (JEL Classification: C2, Q11)

This paper examines ratings of Bordeaux wines from vintages spanning 1970 to 2005. We use ratings from three popular rating sources – Robert Parker (The Wine Advocate), Stephen Tanzer (International Wine Cellar), and Wine Spectator – to examine differences and consistencies in ratings. Our study is based on over 3, 100 ratings for château/vintage/rater combinations for the “classified growths” as identified in the 1855 Classification. We developed a regression model with rating scores as the depending variable and independent variables for raters, vintages, châteaux and rater-vintage. This model explains 64.6% of the variation in rating scores. We identify the performance of individual châteaux and use our findings to propose an update to the 1885 classification. Based on the ratings we examined, more than half of the 61 classified growths are misclassified, with some châteaux moving as many as three tiers upward or downward compared to the historical classification. While we believe it is unlikely that the classification will be changed, we believe that our proposed classification update (and our rank-ordering of the châteaux, particularly in relation to price-based orderings) can help guide wine purchase decisions of consumers and the restaurant industry. (JEL Classification: L66, C22, Q12, L10)

Domestic products have a disproportionately high market share on many goods markets. We examine the contribution of preferences to such “home bias”, using detailed data on wine sales in New Hampshire (weekly sales by brand by store for one year). In counterfactual simulations, where we use the same set of products as currently available, the U.S. market share falls from 58 percent to 38 percent if all country-of-origin effects are set equal. Home bias on this market is not explained by higher marginal costs for imports or by lesser store coverage of imported brands. The evidence rather points to higher foreign fixed costs of entry, coupled with a preference for U.S. wines, as the main sources for the high domestic market share. (JEL Classification: F12, F14, L13, L66)

Empirical evidence gives support to a close association between liver cirrhosis mortality and the intake of alcohol. The present analysis draws on a panel data set for sixteen European countries from 1970–2006 where both alcohol consumption and liver cirrhosis seem best described as trend-stationary variables. Consequently, a flexible non-linear functional form with country fixed effects including linear trends is applied in the analysis. It is argued that fewer restrictions on the relationship between liver cirrhosis mortality and alcohol consumption are appropriate for empirical modeling. The conclusion is that the total level of alcohol consumption as well as the specific beverages – beer, wine and spirits – contribute to liver cirrhosis mortality, but the present study also reveals that addressing the question of panel unit roots directly and in this case subsequently applying a trend-stationary modeling methodology reduces the estimates of the impacts from alcohol consumption to liver cirrhosis. Finally, more restrictive alcohol policies seem to have influenced the country-specific development in cirrhosis mortality positively. (JEL Classification: 110)

We pose several Knapsack Problems (KPs) to select the optimal subset of wines subject to budget and quantity constraints. The first problem seeks the subset of wines, from a single cultivar (zinfandel) that maximizes the sum of ratings subject to a budget constraint. We modify this problem by adding an equality constraint on the number of bottles that must be chosen. The third problem seeks to maximize the sum of ratings from three different cultivars (cabernet sauvignon, pinot noir, and zinfandel) subject to a budget constraint and then a budget and minimum bottle constraints for each cultivar. The rating maximization problem may have multiple solutions. We also pose two expenditure minimization problems, subject to achieving the maximum sum of ratings. We extend the model by defining an integer choice problem, that allows multiple purchases of the same wine, and by accounting for possible non-linearities between wine ratings and utilities. Applications of this model include procurement decisions for tastings, special events or building a personal wine cellar. (JEL Classification: C61 D12)

We designed an experiment that examines how knowledge about the price of a good, and the time at which the information is received, affects how the good is experienced. The good in question was wine, and the price was either high or low. Our results suggest that hosts offering wine to guests can safely reveal the price: much is gained if the wine is expensive, and little is lost if it is cheap. Disclosing a high price before tasting the wine produces considerably higher ratings, although only from women. Disclosing a low price, by contrast, does not result in lower ratings. Our finding supports the notion that price not only serves to clear markets, it also influences expectations that in turn shape a consumer's experience. In addition, our results suggest that men and women respond differently to attribute information concerning wine. (JEL Classification: C91, D03, D83, M31)