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Pricing Models for German Wine: Hedonic Regression vs. Machine Learning

Published online by Cambridge University Press:  06 August 2020

Britta Niklas  and
Wolfram Rinke
Britta Niklas*
Affiliation:
Institute of Development Research and Development Policy, Ruhr-University Bochum, Universitätsstr.105, 44789Bochum, Germany
Wolfram Rinke
Affiliation:
Department of Information-Technology and Information-Management, Fachhochschule Burgenland GmbH, Campus 1, A-7000Eisenstadt, Austria; e-mail: wolfram.rinke@fh-burgenland.at.
*
e-mail: britta.niklas@rub.de, corresponding author.
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Abstract

This article examines whether there are different hedonic price models for different German wines by grape variety, and identifies influential factors that focus on weather variables and direct and indirect quality measures for wine prices. A log linear regression model is first applied only for Riesling, and then machine learning is used to find hedonic price models for Riesling, Silvaner, Pinot Blanc, and Pinot Noir. Machine learning exhibits slightly greater explanatory power, suggests adding additional variables, and allows for a more detailed interpretation of results. Gault&Millau points are shown to have a significant positive impact on German wine prices. The log linear approach suggests a huge effect of different quality categories on the wine prices for Riesling with the highest price premiums for Auslese and “Beerenauslese/Trockenbeerenauslese/Eiswein (Batbaice),” while the machine learning model shows, that additionally the alcohol level has a positive effect on wines in the quality categories “QbA,” “Kabinett,” and “Spätlese,” and a mostly negative one in the categories “Auslese” and “Batbaice.” Weather variables exert different affects per grape variety, but all grape varieties have problems coping with rising maximum temperatures in the winter and with rising minimum and maximum temperatures in the harvest season. (JEL Classifications: C45, L11, Q11)

Keywords

German wine priceshedonic pricingmachine learningweather changes
Type
Articles
Information
Journal of Wine Economics , Volume 15 , Issue 3 , August 2020 , pp. 284 - 311
Copyright
Copyright © American Association of Wine Economists, 2020

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Footnotes

We are indebted to an anonymous referee and the participants at the 11th Annual AAWE Conference in Padua for many helpful comments.

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