With ‘Dry January’ over, you may find yourself buying some wine this week. With apologies to those of you who prefer beer, spirits or something non-alcoholic, only wine has its own economics-related periodical. From the Journal of Wine Economics, there are a number of interesting conclusions on how to deal with everything from which bottle to bring to a dinner party to how to deal with a wine snob.
First, suppose you are footing the bill in a restaurant and are picking the wine for the table. Having looked at the wine list, note that people who are unaware of the price do not derive more enjoyment from more expensive wine. In fact, unless they are experts, they enjoy more expensive wines slightly less as evidenced by the Goldstein et al 2008 Journal of Wine Economics paper. However, if people are informed about the high cost of a wine before tasting, they score it higher. Therefore, if you are blowing the budget, you should certainly tell your fellow guests if you have chosen an expensive wine – they will perceive it to be better tasting than if they had not been informed of the high price. On the other hand, if you want to keep costs down, say nothing about picking the cheapest wine on the list and the likelihood is that nearly all your guests won’t care.
Second, suppose you are going to a series of dinner parties among a group of friends or work colleagues and are expected to bring a bottle of wine on each occasion. Should you bring a ‘good’ (i.e. fairly expensive) wine or settle for a special-offer supermarket bottle? We can use a bit of game theory to work this out. If this is a repeated interaction with people who know their wine, it’s best to produce a good bottle. Your fellow guests will reciprocate. The catch is that you will need to find out if your dining partners do indeed understand wine. That is easy: at the start, bring something decent and see if they remark on it. Then observe what they bring the next time you dine together. If they bring an equally good bottle, then the equilibrium is set – and everybody continues to bring nice wine. If they settle for cheap wine, you should revert to the same low price level from then on.
Third, suppose you are picking a special bottle to impress your other half. Recall that when goods with similar characteristics differ in price, people have been shown to expect a positive correlation between price and quality. Moreover, in a study of French Bordeaux (red) and Burgundy (white) wines, Lecocq and Visser (2006) found that characteristics that are directly revealed to the consumer upon inspection of the bottle and its label - essentially, its brand name, vintage and ‘appellation’ (or region) - explained the major part of price differences. Differences in taste did not really matter. Putting these facts together suggests playing it safe and opting for a well-known French classic wine or ‘grand cru’.
Finally, how to deal with a neighbourly wine snob that drops by uninvited for a glass or two? Well, remember to keep an empty bottle of a good wine that you’ve already enjoyed. Then choose an average wine of the same style for the snob, but decant it first. Then, show the neighbour the impressive-looking label on the empty bottle while serving the mediocre one. All told, he or she probably won’t be able to tell the difference as the research indicates that it’s the perception of quality that counts.
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