Fairtrade wine price dispersion in the United Kingdom
- This paper analyzes wine price dispersion in the United Kingdom. In particular, we are interested in examining whether Fairtrade wines are different from non-Fairtrade wines. Because Fairtrade wines serve an additional social purpose, one may think that consumers search less aggressively for the outlet with the lowest price, thus allowing for a larger price dispersion than for regular wines. We draw on data for about seven thousand wines from South Africa, Fairtrade and non-Fairtrade, sold in the United Kingdom between 2007 and 2012. In a first step, we run a hedonic regression model explaining the wine prices using Ordinary Least Squares (OLS) and Two-Stage Least Squares (2SLS) Instrumental Variable (IV) approaches. In the next step, we regress the squared residuals from the first step on a Fairtrade 0-1 dummy-variable. When using the squared residuals from the OLS model, we find that Fairtrade is a negative determinant of price dispersion. Therefore, Fairtrade wines exhibit a significant lower price dispersion than the comparison group. When using the squared residuals from the IV model, we find mixed results and suspect the presence of a substantial bias due to weak instruments. Finally, in order to avoid IV pitfalls, we ran Fairtrade and Non-Fairtrade wines in separate equations. We find support for the OLS results, i.e., Fairtrade wines appear to exhibit lower price dispersion than their non-Fairtrade counterparts. Whether this is due to consumer search is a priori unclear. (JEL Classifications: L31, L81, Q11)
Author: | Britta NiklasGND, Karl-Heinz StorchmanGND, Nick VinkGND |
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URN: | urn:nbn:de:hbz:294-65915 |
DOI: | https://doi.org/10.1017/jwe.2017.48 |
Parent Title (English): | Journal of wine economics |
Publisher: | Cambridge University Press |
Place of publication: | Cambridge |
Document Type: | Article |
Language: | English |
Date of Publication (online): | 2019/09/18 |
Date of first Publication: | 2018/01/11 |
Publishing Institution: | Ruhr-Universität Bochum, Universitätsbibliothek |
Tag: | Fairtrade; price dispersion; wine |
Volume: | 12 |
Issue: | 4 |
First Page: | 446 |
Last Page: | 456 |
Note: | © Copyright Cambridge University Press. Permission for reuse must be granted by Cambridge University Press in the first instance. |
Institutes/Facilities: | Institut für Entwicklungsforschung und Entwicklungspolitik (IEE) |
open_access (DINI-Set): | open_access |
Licence (German): | Nationale Lizenz |