Wine Quality and Regional Reputation: Hedonic Analysis of the Bulgarian Wine Market

Abstract

This paper develops a hedonic pricing model to estimate the effects of wine quality and regional and varietal reputation on prices in the Bulgarian wine market. We show, most importantly, that wine quality has a significant and positive impact. Red wines of local varieties have diminishing reputations, while white wines from local varieties have improved their standing in consumers' preferences. Our results reveal that there is significant regional reputation effect as well--at least for now--with wines sold with significant price discounts compared to Svishtov cabernet sauvignon wines. Over time, price discounts are rapidly diminishing for white wines and increasing for red wines, and regional reputations are losing significance, with an increase in the coefficients. We also show that product differentiation is important when transition markets are discussed. Regional specialization in production of a certain type of wine is displayed, and regional reputation depends strongly on it. Finally, the age of the wine has a strong positive and significant impact on market prices for red wines but is insignificant for white wines.