Behavioural economics and wine
Thomas Shotton
Introduction
In August 2014, Indonesian national Rudy Kurniawan was sentenced to 10 years in a California prison for the world’s first documented case of wine fraud . He had made over $35 million selling bottles of what appeared to be rare and expensive wine, but was in fact cheaper wine. For years, he fooled countless experts into believing they were tasting different wines, all through the bottle in which it was presented. Wine-tasting is often thought to be a prestigious field, accessible to very few, where quality can only be assessed by experienced individuals with nuanced flavour perception. But as this story exposes, even the experts can be fooled: all it takes is for people to expect a certain thing. Experts and consumers alike are prone to a number of biases and psychological factors that affect their perception of wines. While true experts, such as master sommeliers, a title achieved by fewer than 300 people since 1969 when testing began, are able to distinguish between wines in a blind taste test, when other factors are introduced, human brains are very susceptible to outside influence. Behavioural economics is an area of economics that proposes consumers are not entirely rational – as the classical economic model suggests – but can be influenced by psychological factors. A key concept in behavioural economics, which is used in wine marketing, is the idea of expectancy theory. This is the idea that people taste and experience what they believe they are going to taste. This essay explores research and studies into factors that affect the experience of purchasing and consuming wine from retailers, wineries, and restaurants, and how these establishments can adapt their retail and serving methods to create the most enjoyment for consumers, thus maximizing the likelihood of their return to this brand or establishment, increasing profits. It also focuses on methods that can be used to encourage consumers to spend more on wine.
Pricing
A number of luxury wines are regarded by economists as Veblen goods, goods where, as the price increases, so does the demand – contrary to the traditional economic model. This is because such wines have become associated with luxury and used as a display of wealth. Brands such as Moët & Chandon, Veuve Clicquot, and Dom Pérignon are well known for this reason. This is an example of brand building that winemakers can strive towards. It is also an example of the impact that price can have on perceived quality, and how influential it is in sales. Price and quality In a 2008 study Hilke Plassmann et al. tested the impact of price on enjoyment of a wine. The researchers gave participants samples of wine that they were told cost different prices, when in fact different sets of the same wines were being used. In one set, participants were told they were a tasting
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