Essay Sample on Price & Quality: Complex Relationship in Wine Market

Introduction

In every market, the relationship between prices and quality is always complex not only for wine but also for other products product. For any given price of a wine, the apparent quality is the result of many different characteristics, involving the type of grape, producer, a region of production, maturation, vintage, serving temperature, bottle age and many other conditions (Bombrun & Sumner, 2003). In most cases, the prices that are often charged for wine are determined by the producer, the vendor, the government and the media, among other things. Nonetheless, the above features are all integrated when one is actually looking to purchase the bottle of wine in a specific market, either online or in the bottle shop, or even in the restaurant listing. Therefore, in general, there is always the need to investigate the relationship or the correlation that exist between the prices and quality in the general sense. There are people who can talk of the complexity of marketing the wine specifically when it comes to the pricing.

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The prices of wine usually fluctuate dramatically across the globe even though in general, the pecking order seems to be the same everywhere. However, through choosing one quality assessor with a single retail market, one can easily eliminate lots of complexities that may reduce the existence of any simple relationship between prices and qualities. In particular, the way wines are assessed usually varies between different regions or markets (Miu, 2001). For example, Burgundy Pinot noir may not necessarily be valued in the same manner as the California pinot noir. The correlation between quality and prices in neither easy nor exact do define. However, the higher the quality and the lower the prices, the greater the wine value. Even though the process may seem simple, the equation may be contorted by different variables. When it comes to the determination of the relationship between prices and the quality of the wine products, the value becomes a relative term. The great deal from one brand of wine may be vastly different from the other brands. Through analysis, it is clear that for most consumers, the utmost values are found in the range of $15 and $20 for every bottle (Goldstein et al., 2008). For the above prices, one will be able to get wines that are not only exciting but also sound. The above bottles are usually the works of traditional craftsmanship, a situation which makes the wines as an expression of cultures.

For one to determine the correlation between quality and prices, there is the need to have a specialty in the quality ratings. In most cases, identifying a single rater working over a given period often ensure that wines possess consistent ratings. And the patterns in the data set presented below seems to be comparable to other datasets that are found on other websites. In addition, the choice of one type of grape, sampled at a given time, and envisioned for a given retail market may also standardize the comparison (Oczkowski, 2016). The scatter plot presented below indicates the relationship between prices and quality of the wine products. (Miu, 2001)

From the graph, the data points are scattered, a situation that shows that there is a lot of variation in the prices of wines for a given quality score. The graph apparently reflects the innumerable influences of the quality of wine as well as their prices, the variables which may act independently from each other. The prices of wine are not determined exclusively through the perceived quality. Mathematically, from the graph, only thirty-eight percent of the variation in pricing is related to quality in the above particular example. Nonetheless, there is an increasing trend in the data, and the summarized by the line. The above graph consists of the line that represents the best-fitting exponential model. The model elaborate two things, the prices of wines are multiplied as the quality increase, and as a result, the multiplier increases the quality (Taylor & Barber, 2008). The graph indicates that high-quality wines have higher costs compared to low-quality wines. Therefore, the higher the quality, the worse the price difference becomes. From the graph, the excess of wines above the line is as a result of both the brand prestige and the marketing premium. From the graph, at 78 points, there exist two wines with clearly atrocious values.

Conclusion

The analysis clearly shows that the higher the quality of a wine, the higher the pricing; this, therefore, shows that expensive wines are the status symbols and therefore, they can be modeled as the luxury goods. On the other hands, there are some consumers who prefer the taste of cheap wines. In some other cases, the prices of wine can be determined by many other factors apart from the quality. In such cases, the consumers may pay more due to scarcity which often increases the level of demand. In situations where there is a lack of determination of quality, consumers may pay more because of the label in the bottle and not the content or quality (Oczkowski, 2016). Due to the differences in pricing, some consumers prefer the taste of cheap wines which they are sure will be cheaper. In most cases, it is worth noting that there are wines whose prices can extend much further, a scenario that indicates that it is easier to find wines with poor values for the money than very good for values of money.

References

Bombrun, H., & Sumner, D. A. (2003). What determines the price of wine. AIC Issues Brief, 18, 1-6.

Goldstein, R., Almenberg, J., Dreber, A., Emerson, J. W., Herschkowitsch, A., & Katz, J. (2008). Do more expensive wines taste better? Evidence from a large sample of blind tastings. Journal of Wine Economics, 3(1), 1-9.

Miu, C. (2001). Relationships Among Wine Prices, Ratings, Advertising, and Production: Examining a Giffen Good. University Avenue Undergraduate Journal of Economics, 5(1), 3.

Oczkowski, E. (2016). Hedonic wine price functions with different prices. Australian Journal of agricultural and resource economics, 60(2), 196-211.

Taylor, D. C., & Barber, N. A. (2008). A relationship of wine ratings and wholesale pricing, vintage, variety, and region. Hospitality Review, 26(2), 2.