When is a wine a bargain? A comparison of popular and regression-based approaches

Abstract

Discussions of wine bargains appear frequently in the popular wine press, where bargains are usually defined by quality rating and price thresholds. In this research, we introduce another wine bargain definition, a wine with an actual price less than its predicted price. To predict a wine's price, we regress price on a number of quality signals. Our sample consists of 2450 cabernet sauvignon wines from the states of California and Washington that were reviewed by Wine Spectator magazine. We show that if a wine is a bargain by the traditional threshold definition, it will also be identified as a bargain by our definition. However, our approach finds other wine bargains in categories beyond the traditional one. In particular, we find ‘Connoisseur Bargains’, ‘Third Bottle Bargains’ and ‘Other Reason Bargains’. In each of these categories, the actual price of the wine is less than its predicted price, but it violates the price or quality rating threshold(s).