A recent study by the American Association of Wine Economics shows how Wine Ratings hurt consumers. In the study, they analyzed 44,808 wines from the Wine Spectator review database and found that wine ratings cause market price variation and consumer confusion. Not cool.
Traditional economics has shown that an increased ratio of educated consumers leads to market stabilization. However, in the wine market, an increase of reviews (education?) causes price fluctuation across the entire line of wines from a producer. For example, a wine which receives a favorable review is often overvalued by as much as 12%. Reviews create uneven pricing markets which leads to confusion and inflated prices. Similarly, a winery with an acclaimed wine will see higher demand for all of their wines, regardless of quality.
How to Win at Wine
Start a winery, make a super expensive high-end wine and get it reviewed. Then, coast on the success of that review and jack up the prices on introductory wines. A winning formula?
Since reviews are not standardized nor revealed publicly (you have to have a Wine Spectator membership to view), wine reviews are a way of controlling information about wine. Ever wonder why you never see point ratings on wines below a score of 88? Chances are you’re looking for wine ratings on a wine merchants website, so why would they display a wine rating in the 70’s or below.What’s the solution? Learn why you like the wines you like. The region, producer, style, varietals; all of these factors can help you develop your own taste profile so that you can find similar wines you’ll enjoy. It’s your money, just know buying wine based on ratings is going to cost you!
Read the full study “The Detrimental Effect of Expert Opinion on Price-Quality Dispersion Evidence from the Wine Market” by Karl Storchmann, Alexander Mitterling & Aaron Lee.