AAWE, Economics Dept, New York University, 19 W 4th St, 6Fl., New York NY 10012aawe@wine-economics.org

AAWE Working Paper No. 28 – Economics

 

Unobserved heterogeneity in the wine market: an analysis on Sardinian wine via Mixed Logit 

Maria Bonaria Lai, Teresa Del Giudice and Eugenio Pomarici 

Introduction

The evolution experienced by the food sector in the last ten years has greatly changed the models which analysts employ to explore the purchase and consumption patterns of post-industrial society. New consumption patterns are based partly on undifferentiated food products and partly on high quality ones, like high quality wine, which are strongly characterised by a close link to specific geographical areas, and their local traditions in food production.

The present study attempts to offer more insights into the Italian wine, in particular the Sardinia wine market with emphasis on wines produced by local vineyards by relating wine choice to consumers’ preferences.

We assess the effects of such characteristics of the wine produced in Sardinia on consumer preferences, using a discrete choice model. Perceived quality in wine is complex and often operationalized by multi-dimensional constructs, whose measurement requires sophisticated approaches. Wine is a food category where consumers’ quality perception is particularly difficult, because, among other things, wine is a highly differentiated product.

The paper presents some results from a stated-preference study on data collected by a web-based survey of 138 Italian consumers. A series of multinomial logit models are estimated from choice experiment responses and tested for unobserved heterogeneity for some wine attributes. The consequences of such form of heterogeneity are flashed out with respect to issues of market segmentation on the basis of the pattern of correlation across preferences as estimated from mixed logit models.

The paper is organized as follows: the following section illustrates the survey and data; section 3 shows the research methods and theory behind our approach. Section 4 discusses the characteristic of the econometric model, while section 5 presents the results of the choice model. At the end, section 6 discusses some conclusions.

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