Current and regular prices hedonic models for the wine industry

J. C. Ortuzar-Gana, O. Alfranca-Burriel

Abstract


The purpose of the current research is to address the use of regular price to assess the long term attributes of products in the hedonic model within the Chilean wine industry. Regular price is widely used in marketing, but has not been used to assess the stable characteristics of a product across time. Using regular price when permanent attributes are being assessed allows for the avoidance of potential bias in hedonic functions due to margin changes in the product, and it allows the control of endogenous movements within prices. To show its best performance, we used a store panel that includes a two-year period. Two hedonic functions are constructed. One of them uses transaction price and the other one uses regular price. Regular price function performs better because it displays a better adjustment of the data and its results show that the product’s permanent key characteristics are its most significant attributes.


Keywords


Chilean wine; margin of manufacture; stable attributes; treatment of price

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DOI: 10.5424/sjar/2010084-1381