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The preferences and prejudices of Australian wine critics
Abstract
The paper demonstrates a method for identifying and measuring the preferences and prejudices of wine critics. Employing expert rating scores from four wine critics assessing Australian premium wines, the analysis further illustrates the significant variability which exists among expert quality scores. A mean pairwise correlation of 0.435, an intraclass correlation of 0.426 and an alpha reliability of 0.748 are identified for 258 commonly assessed wines. These measures of rater consensus are lower than those identified from other wine studies and in other disciplines. Regression models are developed to explain the difference between each specific expert score and the average score of the other experts. The models explain the specific preferences of wine critics employing information which is readily available to consumers. For different experts, the cellaring potential of a wine, its vintage, the source region of the grapes and the variety/style of the wine are found to explain wine preferences to different degrees. The presented information may usefully be employed by consumers when confronted with conflicting wine scores. To aid with purchasing wine products consumers may wish to align their preferences with the identified preferences of specific wine critics.
... Effectively, the show scores are transformed to have the same quantiles as Halliday (2017). Even though a number of shows employ the same 100 point scale as Halliday (2017), there is evidence to suggest that on average, Halliday (2017) rates wines higher than other experts (Oczkowski 2017). As a consequence, all show scores whether they employ the 20 or 100 point system are scaled to Halliday (2017) ratings. ...
... This is evidenced 5 To evaluate possible systematic assessment biases of show judges, variables are added to Equation (7) and recognised as making up part of the opinion regressor in Equation (8). Oczkowski (2017) identifies some systematic differences among four Australian wine-guide experts in terms of varietal and regional preferences. Adding the regional and variety variables to Equation (7) adds only, on average, an additional 7% explanatory power. ...
... Recognising these additional variables as part of the opinion variable in Equation (8) makes no demonstrable difference to the presented estimates. It appears the systematic expert wineguide variation identified in Oczkowski (2017) is captured by the weather, vintage and producer effects already specified in Equation (8) and/or may not apply to wine show judges. Note: †Statistically significant at the 5 per cent level. ...
This paper assesses wine show results and their relation with wine prices across seven Australian shows. Consistent with previous studies, only a moderate degree of agreement for medals exists among shows. The correlation of wine show points across shows is also only moderate. Hedonic wine price functions, which employ show medal/points as direct measures of quality, indicate that for some shows estimated premiums are statistically significant and may possibly be practically important. The relation of show opinion with prices, however, is reduced for models which recognise the separate impact of objective quality and show opinion on prices. The results imply that producers should seek to improve the objective quality of their wines to achieve price premiums. Producers could also selectively target some wine show opinions to gain additional higher prices.
... Frick (2020) demonstrated how expert opinions affect the reputation of wineries and how changes in the editorship of renowned wine guides could alter the ratings of wineries. Besides this market-influencing potential and the possible impact on wine prices and market performance of the wineries, current studies have also shed light on the composition of expert knowledge (e.g., Ashton, 2017) and the consistency of (star) expert ratings across various wine products and rating platforms (e.g., Marks, 2015;Ashton, 2012Ashton, , 2013Oczkowski, 2017). In this context, several studies have investigated the consistency of raters in different settings (e.g., Hodgson, 2008Hodgson, , 2009; Cao and Stokes, 2012; Gergaud, Ginsburgh, and Moreno-Ternero, 2021). ...
The impact of product ratings is significant in the experience goods market, whose intangible products are difficult to evaluate before consumption. Product ratings can reduce information asymmetries because they represent a credible signal of quality and thus positively affect product sales. In this study, we shed light on how professional critics behave by focusing on the influence of product characteristics and former reviews on rating behavior and market prices as additional quality signals in wine markets. Using 13,911 observations from professional wine tastings, we analyze 8,444 worldwide-produced wines and their ratings over 20 years. We find clear evidence to suggest that prices and product ratings are significantly related. Finally, the results suggest that review consistency evolves and determines current ratings.
... Then, defining the overall quality (OQJ) as an objective parameter and statistically defining the attributes most influencing it using regression models, when run in combination with consumers' surveys, might also give a different perspective on the outcomes of these latter tests. The presence of preferences and prejudices in wine evaluations is a well-known argument, also among experts [61]. Applying regression methods against chemical profiles might provide a sounder background against which evaluations are presented and provide insight into the chemical factors related to viti-enological variables that underpin the given preference scores. ...
Monovarietal wines produced in different wine-growing areas may have completely different sensory profiles. As a result, they may be suitable for sale in different regions, depending on local preferences. Better insight into the sensory and chemical profiles of these wines can be helpful in further optimizing commercial strategies and matching supply and demand, which is the main challenge for global wine traders. The training of dedicated sensory panels, together with the correlation of the evaluated attributes with chemical parameters, followed by validation of the obtained models, may yield an improved picture of the overall features associated with products from a specific region. Eighteen samples of international Chardonnay and eighteen samples of international Sauvignon Blanc wines were collected from nine world origins (Northern Italy, Southern Italy, Chile, Argentina, New Zealand, Australia, and South Africa). The overall quality judgement (OQJ) and the sensory attributes were evaluated by a panel trained with a MRATA (Modified Rate-All-That-Apply) method. Moreover, volatile compounds were analysed by HS-SPME-GC × GC-ToF/MS and the phenolic composition, including proanthocyanidins, was determined using HPLC-QqQ/MS. The processing of the data using different multivariate analysis methods, such as multiple factor analysis (MFA), was essential to gain insight into the quality of the samples. The profile of cyclic and non-cyclic oligomeric proanthocyanidins was found to be substantially dependent on the grape variety used in the wines (varietal markers), despite the country of origin of the wine influencing it to a limited extent. The results from the same samples analysed by a sensory panel from Germany and ours were qualitatively compared, highlighting the presence of potential factors inherent to the panels themselves that could influence the different judgments and quality classification of the wines. Consequently, the combination of sensory and chemical analysis, by means of the application of multivariate statistical methods presented in this study proves to be a powerful tool for a deeper and more comprehensive understanding of the quality of the wines under investigation. Overall quality was described as a combination of the sensory attributes, according to the perception process. The attributes were in turn described based on the chemical profiles, which were determined independently by analytical techniques. Eventually, this approach can be very useful not only for basic research on wine quality but also as a tool to aid business-related decision-making activities of wineries and wine traders and to create models that can aid the refinement of marketing strategies.
... Preferences and prejudices among wine critics are an example of the contradictory stimuli consumers often face when making wine choices. Oczkowski (2017) found, for example, that consumers could potentially choose a wine from a taster whose preferences more closely aligned with their own. ...
Wine producers have built their businesses on the concept of sharing, typically explored in the context of the communal consumption of wine among consumers. In this paper, we offer an often-overlooked area of the supply chain that can play an important role in the communal consumption of wine, that of direct selling companies utilizing the party plan sales strategy. By breaking down the production-consumption network through the Systems of Provision (SoP) and Actor-Network Theory (ANT), this research explores the supply chain in influencing consumption. The direct selling party plan allows for active engagement in the production-consumption network and is explored in this research as a material artifact of the communal wine consumption experience. An analysis of the 10Cs categorization of the SoP is conducted within two direct selling wine companies, Traveling Vineyard and WineShop at Home. The analysis expands an often fragmented view of communal sharing (usually viewed through the lens of end users) to include more actors and how these direct selling actor’s roles can impact the future of the production-consumption social network in the wine marketplace.
... A large body of wine economic literature highlights the lack of wine experts' consistency (see Storchmann, 2012, for a survey). Indeed, this literature underlines the absence of consensus among experts (Cliff and King, 1996;1997;Ashenfelter, 2006;Hodgson, 2008Hodgson, , 2009Ashton, 2011;Cardebat and Paroissien, 2015), their lack of reliability over time (Hodgson, 2008, Cao et al. 2010, the systematic bias of their judgements due to their preferences (Masset et al., 2015;Cardebat and Livat, 2016;Oczkowski, 2017) or due to systematic measurement errors (Cardebat et al., 2014;Oczkowski, 2016). ...
This paper shows that the Wine Spectator Top 100 list mixes objective and subjective information while resembling a bargain wines list, in which the ranking is better when the price (score) is lower (higher). Indeed, there is a weak but positive and significant correlation between the WS ranking and the hedonic bargain wines rank calculated in this analysis. However, significant geographic bias, wineries bias, and the large part of unexplained variance of the WS ranking reveal that some subjective information also determines the WS Top 100 ranking. This blend of objective and subjective determinants, added to the formal aspect of the list, hierarchized from 1 to 100, might mislead the consumer into considering this ranking as a "best (top 100) bargain wine list". Therefore, this impossibility to disentangle objective from subjective information could be seen as a source of inefficiency on the wine market. Splitting the WS Top 100 list into a hedonic bargain wine list (based on subjective components) and a non-hierarchized "crush" wine list could be a solution for reinforcing the quality of the information on the wine market.
Studies suggest the inter-rater reliability of judges at wine competitions is higher than what would be expected by random chance, but lower than what is observed when experts in other fields make judgments specific to their expertise. To further contextualize the (un-) reliability of wine judging while also extending the study of fine water, we examine the inter-rater reliability of judges at an annual international competition for bottled waters. We find that the inter-rater reliability of water judging is generally better than chance and, at best, about the same as the inter-rater reliability of wine judging at some wine competitions. These results suggest that perceptible differences between fine waters exist but are less pronounced than those between fine wines and, also, that aesthetic standards with respect to fine waters exist but are currently less established than those for fine wines.
This paper examines whether online reviews by wine experts use different language to describe wines from different countries, and whether this reveals a certain bias. This is important because the language used in wine reviews can make a wine seem more or less appealing, and therefore may have a significant impact on consumers’ perceptions and purchase intentions. An automated content analysis was conducted of 28,858 reviews for top-rated wines that were published on the Wine Enthusiast magazine website. While the initial objective was to focus on the Old World versus New World dichotomy, the findings are more nuanced. Most of the differences that were found between reviews for wines from particular countries can be explained based on for example climate and whether or not the wine is purchased for immediate consumption. However, it was also found that reviews for wines from France, Italy and the United States use much more figurative language, and refer more often to the vineyard and the winemaking process, while this is much less the case for wines from Spain, Australia, New Zealand, Argentina and Chile. This could indicate that reviewers have a bias based on their level of knowledge of, and/or interest in, particular countries.
This paper assesses the relative impact community consumer ratings and expert ratings have on Australian wine prices. Results suggest community ratings may better explain price variations than expert scores; however, the performance difference is not definitive. Expert scores are found to have some additional unique power beyond community ratings in explaining prices. These results hold for both models based on current quality and reputation ratings and a number of robustness checks. The results suggest that producers may need to monitor both expert and community assessments of wines based on numerous vintages to accurately assess wine prices.
Purpose
– Given the lack of consensus among wine experts, this paper aims to examine whether this implies they make systematic mistakes or is an expression of their idiosyncratic preferences.
Design/methodology/approach
– Grade equations are estimated for five famous wine-experts and a panel of 62 Bordeaux fine wines over the period 2003-2011. The appellation of origin is considered a measure of the typical taste of the wines. The authors control for objective factors, thanks to weather variables and the ranking of each wine.
Findings
– Ratings vary among experts, such that some statistically significantly favour wines produced in specific areas, indicating their taste preferences. Thus, preferences matter in expert ratings and would seem to suggest a continental variance. The finding explains the lack of consensus in this opinion market.
Social implications
– The lack of consensus among wine experts should not necessarily be viewed as market inefficiency. If consumers find the “right expert” reflecting their own tastes, as in the case of cultural goods, they may not necessarily experience a welfare loss due to expert opinion heterogeneity.
Originality/value
– This paper contributes to renewing the debate on expert accuracy, considering wine as a cultural good and introducing preferences into the analysis. The authors develop the concept according to which existing differences in the personal tastes of the experts can facilitate consumer search.
In this paper we provide a simple and transparent non parametric methodology to express the scores of each wine expert on the same rating scale. We discuss the advantage of this methodology over a linear transformation. The non-paramatric method ensures the comparability of scores among experts and allows for a relevant average calculation of available wine scores. (JEL Classifications: Q13, L15, C14).
The purpose of this paper is to provide a tutorial of data analysis methods for answering questions that arise in analyzing data from wine-tasting events: (i) measuring agreement of two judges and its extension to
m
judges; (ii) making comparisons of judges across years; (iii) comparing two wines; (iv) designing tasting procedures to reduce burden of multiple tastings; (v) ranking of judges; and (vi) assessing causes of disagreement. In each case we describe one or more analyses and make recommendations on the conditions of use for each. (JEL Classifications: C10, C12, C13, C59, C90)
Cronbach's coefficient alpha is the most widely used estimator of the reliability of tests and scales. However, it has been criticized as being a lower bound and hence underestimating true reliability. A popular alternative to coefficient alpha is composite reliability, which is usually calculated in conjunction with structural equation modeling. A quantitative analysis of 2,524 pairs of coefficient alpha and composite reliability values derived from empirical investigations revealed that although the average composite reliability value (.86) exceeded the average corresponding coefficient alpha value (.84), the difference was relatively inconsequential for practical applications such as meta-analysis. (PsycINFO Database Record (c) 2012 APA, all rights reserved).
AIthough intraclass correlation coefficients (lCCs) are commonIy used in behavioral measurement, pychometrics, and behavioral genetics, procodures available for forming inferences about ICC are not widely known. Following a review of the distinction between various forms of the ICC, this article presents procedures available for calculating confidence intervals and conducting tests on ICCs developed using data from one-way and two-way random and mixed-efFect analysis of variance models. (PsycINFO Database Record (c) 2012 APA, all rights reserved)
In the context of the development of prototypic assessment instruments in the areas of cognition, personality, and adaptive functioning, the issues of standardization, norming procedures, and the important psychometrics of test reliability and validity are evaluated critically. Criteria, guidelines, and simple rules of thumb are provided to assist the clinician faced with the challenge of choosing an appropriate test instrument for a given psychological assessment. (PsycINFO Database Record (c) 2012 APA, all rights reserved)
Popular computer programs print 2 versions of Cronbach's alpha: unstandardized alpha, α(Σ), based on the covariance matrix, and standardized alpha, α(R), based on the correlation matrix. Sources that accurately describe the theoretical distinction between the 2 coefficients are lacking, which can lead to the misconception that the differences between α(R) and α(Σ) are unimportant and to the temptation to report the larger coefficient. We explore the relationship between α(R) and α(Σ) and the reliability of the standardized and unstandardized composite under 3 popular measurement models; we clarify the theoretical meaning of each coefficient and conclude that researchers should choose an appropriate reliability coefficient based on theoretical considerations. We also illustrate that α(R) and α(Σ) estimate the reliability of different composite scores, and in most cases cannot be substituted for one another.
Domenic V Cicchetti1, Arnold F Cicchetti21Yale Home Office, North Branford, CT, USA; 2Consulting Specialist of Wine, Director of National Accounts, Wine Warehouse, San Anselmo, CA, USAAbstract: The authors studied seven wine rating scales judged to be useful for the wine producer, consumer, or oenologic researcher: (1) My Wine Rating scale; (2) the Amerine and Roessler (1983) wine rating system; (3) the redwinebuzz.com rating system; (4) Robert Parker’s wine rating scale; (5) the Wine Spectator scale; (6) the Stephen Tanzer scale; and (7) the Chebnikowski Winespider evaluation system. Statistics were applied to answer three hypothetical oenologic questions: (1) Does a particular wine meet criterion for everyday consumption? (2) How well do tasters agree on both the level of wine aroma and bouquet? And (3) How well do tasters agree on the overall quality of a wine, both currently, and after it has been appropriately cellared for 10 years? The implications of this study were discussed in terms of their heuristic value for further oenologic research. One fundamental issue that has received little or no attention in oenologic research is a determination of measurable taster variability that can be expected to occur when the same wine is blind tasted again, either by the same taster or by other tasters blindly evaluating the same wine.Keywords: wine, rating scales, taster consistency
Reliability coefficients often take the form of intraclass correlation coefficients. In this article, guidelines are given for choosing among 6 different forms of the intraclass correlation for reliability studies in which n targets are rated by k judges. Relevant to the choice of the coefficient are the appropriate statistical model for the reliability study and the applications to be made of the reliability results. Confidence intervals for each of the forms are reviewed. (23 ref) (PsycINFO Database Record (c) 2006 APA, all rights reserved).
We examine the degree of consensus in quality ratings of prominent U.S. wine publications. For the purposes of wine consumption and research, are ratings on the ubiquitous 100-point scale reliable measures of quality? The value of expert judgment has been called into question by a number of studies, especially in the context of wine competitions and tasting events. Using data on 853 wines, we find a moderately high level of consensus, measured by the correlation coefficient, between most pairs of publications, similar to the level found by Ashton (2013). Rank and intraclass correlations are similar. Consensus is not found to be related to the blinding policies (or lack thereof) of the critical publications. (JEL Classifications: C93, D46)
This paper examines the ratings of 12 influential wine critics on the Bordeaux en primeur market over the vintages 2003–2012. We hypothesize that wine experts differ significantly in their rating approach and influence on prices. We find that European critics are less transparent and in general more severe in their scoring than their American counterparts. Experts also appear to reach a relatively strong consensus on overall wine quality but have more diverse opinions on wines that achieve a surprising level of quality given the vintage, the ranking, or the appellation from which they originate. Our evidence also suggests that Robert Parker and Jean-Marc Quarin are the most influential critics, as a 10% surprise in their scores leads to a price increase of around 7%. We further find that their impact is higher for appellations and estates that are not covered by the official 1855 classification and for the best vintages.
This study examines the impact that recommended retail prices, actual market prices and the release of a prominent wine guide have on Australian wine hedonic price estimates, for attributes such as sensory quality, winery reputation and grape region. In general, hedonic price estimates appear to be independent of prices employed. The main identified differences in estimates relate to the size of the producer and some regional impacts. For market prices only, increases in producer size are estimated to reduce prices. This implies the existence of supply chain quantity discounting price practices. The impact of an authoritative wine guide appears to have a negligible influence on prices in Australia. In the absence of market transaction prices, the common practice of employing recommended prices for hedonic wine price estimation is defendable.
This paper examines the level of consensus, or agreement, among the wine quality ratings of six prominent wine critics for seven consecutive vintages of red Bordeaux. Consensus, a critical component of expertise in wine evaluation, has important implications for consumers' reliance on critics' ratings in deciding which wines to purchase or consume. The principal analyses focus on a core set of wines in each year that were rated by all six critics. Additional analyses concern differences in agreement for classified growths vs. nonclassified growths and for critics of different nationalities (American, British, and French). The level of consensus among these prominent critics is contrasted with that among both wine professionals who are not prominent critics and professionals from several other fields. (JEL Classification: C93)
The paper has three basic objectives: (1) to discuss and analyze the subtleties of ranking wines in blind tastings, (2) to analyze the degree of agreement or disagreement among the tasters (judges) and (3) to shed some light on the problem of identifying the wines and to determine when the identifications of the judges might be called statistically significant. The first issue utilizes the rank sums or the related measure, “votes against,” and discusses the appropriateness of a statistical test introduced by Kramer. The second introduces Kendall's W coefficient of concordance and discusses some other, related measures. The third derives the finite sample distribution of the number of correct identifications under the null hypothesis of random identifications, from which critical values can be obtained, both for the case in which each wine has to be identified exactly and the case in which there is a small number of different types of wine that have to be identified. (JEL Classification numbers: C12, C15, C49, C59)
This paper considers the levels of reliability and consensus of wine quality judgments found in studies of experienced wine judges. Both reliability, which concerns the similarity of repeat judgments of a particular wine by the same judge, and consensus, which concerns the similarity of judgments of a particular wine across judges, are necessary requirements for expertise in wine judging. Reliability and consensus levels found in wine judging are compared to those documented by a large body of research in six other fields: medicine, clinical psychology, business, auditing, personnel management, and meteorology. In all fields, including wine judging, reliability is greater than consensus. Both reliability and consensus are, on average, substantially lower in wine judging than in other fields, although tremendous variability exists across judges in every field. Overall, little support is found for the idea that experienced wine judges should be regarded as experts. (JEL Classification: C91)
Reports 3 errors in the original article by K. O. McGraw and S. P. Wong (Psychological Methods, 1996, 1[1], 30–46). On page 39, the intraclass correlation coefficient (ICC) and r values given in Table 6 should be changed to r = .714 for each data set, ICC(C,1) = .714 for each data set, and ICC(A,1) = .720, .620, and .485 for the data in Columns 1, 2, and 3 of the table, respectively. In Table 7 (p. 41), which is used to determine confidence intervals on population values of the ICC, the procedures for obtaining the confidence intervals on ICC(A,k) need to be amended slightly. Corrected formulas are given. On pages 44–46, references to Equations A3, A,4, and so forth in the Appendix should be to Sections A3, A4, and so forth. (The following abstract of this article originally appeared in record 1996-03170-003.). Although intraclass correlation coefficients (ICCs) are commonly used in behavioral measurement, psychometrics, and behavioral genetics, procedures available for forming inferences about ICC are not widely known. Following a review of the distinction between various forms of the ICC, this article presents procedures available for calculating confidence intervals and conducting tests on ICCs developed using data from one-way and two-way random and mixed-effect analysis of variance models. (PsycINFO Database Record (c) 2012 APA, all rights reserved)
The author revisits the heralded 1976 Paris blind tasting of US Cabernets and French Bordeaux. The conclusion reported in 1976, 1999, 2001 and 2003 was that the Americans won the competition outright. This conclusion derives from a non-parametric analysis of the data that converts wine rating scores to ranks, thereby producing invalid results. The author discusses: the biostatistical importance of the reanalysis; the practical impact of the earlier conclusions upon the economics of the California wine industry; and the heuristic importance of the burgeoning body of data analytic strategies for further elucidating the scientific understanding of judges' evaluations of wines.
The author discusses reliability research designs and data analytic strategies that are required in future wine competitions. The sources of variations that are identified and need to be controlled in order to increase both the reliability and, to the extent possible, accuracy of wine tasting evaluations derive from two literature sources, wine research and biostatistical research. These sources of variation include: the manner in which the sample of wine tasters is selected; the type of a priori screen required to eliminate inconsistent wine tasters before the competition begins; a careful selection of the specific wine characteristics that the tasters are required to utilise, with specific criteria provided to the tasters; the selection of well defined wine measurement scales; the selection of appropriate wine glasses for the tastings; and the application of appropriate state-of-the-art statistics to analyse the data deriving from the wine competitions.
The hedonic technique is applied to wines. In the price equation we include objective characteristics appearing on the label, as well as sensory characteristics and a grade assigned by expert tasters. We have three almost identically structured data sets (two on Bordeaux wines, and one on Burgundy wines). The results are used to make comparisons between two of the most important wine regions in France, and comparisons over time (the two Bordeaux data sets are sampled at different points in time). (JEL Classification: D49.)
Another puzzle is the lack of correlation between price and pleasure. Perhaps it is not so surprising that a first-rate example of a little known wine can seem much more memorable than something more famous selling at ten times the price; part of the thrill is the excitement of discovery and the feeling of having beaten the system. What is more extraordinary is the wild price variation at the very top end. Demand bubbles up mysteriously, apparently fuelled by fashion and rumour as much as by intrinsic quality .—Jancis Robinson, Confessions of a Wine Lover , Penguin Books, 1997.
A general formula (α) of which a special case is the Kuder-Richardson coefficient of equivalence is shown to be the mean of
all split-half coefficients resulting from different splittings of a test. α is therefore an estimate of the correlation between
two random samples of items from a universe of items like those in the test. α is found to be an appropriate index of equivalence
and, except for very short tests, of the first-factor concentration in the test. Tests divisible into distinct subtests should
be so divided before using the formula. The index
[`(r)]ij\bar r_{ij}
, derived from α, is shown to be an index of inter-item homogeneity. Comparison is made to the Guttman and Loevinger approaches.
Parallel split coefficients are shown to be unnecessary for tests of common types. In designing tests, maximum interpretability
of scores is obtained by increasing the first-factor concentration in any separately-scored subtest and avoiding substantial
group-factor clusters within a subtest. Scalability is not a requisite.
The epidemiological literature has been ambiguous concerning reliability estimates for continuous variables. Reproducibility and internal consistency have been presented as different aspects of reliability, the former being estimated with some form of intraclass correlation coefficient, the latter with Cronbach's alpha. Based on demonstrations available in the literature this paper recalls that both estimates are based on the same measurement model and on the same definition of reliability. It also highlights the conditions under which they are equivalent and provides practical suggestions concerning the estimation of reliability, based on design considerations.
The author studied the conditions under which coefficient alpha and 10 related internal consistency reliability coefficients underestimate the reliability of a measure. Simulated data showed that alpha, though reasonably robust when computed on n components in moderately heterogeneous data, can under certain conditions seriously underestimate the reliability of a measure. Consequently, alpha, when used in corrections for attenuation, can result in nontrivial overestimation of the corrected correlation. Most of the coefficients studied, including lambda 2, did not improve the estimate to any great extent when the data were heterogeneous. The exceptions were stratified alpha and maximal reliability, which performed well when the components were grouped into two subsets, each measuring a different factor, and maximized lambda 4, which provided the most consistently accurate estimate of the reliability in all simulations studied.
Accumulated theoretical and empirical evidence suggests that wine prices depend on quality, reputation and objective characteristics. Unlike previous studies, we recognize that quality and reputation are latent constructs and therefore employ factor analysis and 2SLS techniques to consistently estimate hedonic prices in the presence of attributes measured with error. The application to Australian premium wines points to significant reputation effects but insignificant quality effects. It is also illustrated that inappropriately using standard OLS procedures can seriously distort the statistical significance of attributes, the implicit marginal attribute prices, and the predictions of "average" prices for a given set of characteristics. Copyright 2001 by The Economic Society of Australia.
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