Using an Online Wine Community to Investigate the Roles of Quality and Hype in the Market for Wine

Wine has a powerful connection to the world of the sophisticated and even godly far surpassing that of any other food or drink. In this vein, the wine community is often seen as out of reach to the average individual. However, the evolution of social networking technologies over the past decade has given rise to an accessible online wine community. This community, called CellarTracker, attaches not just big, fancy words but also numerical ratings to a vast array of wines. The existence of such a digital community, rich in numbers that represent what many deem to be a product beyond quantification, allows for a fresh approach to questions about quality perception, reputation effects, and prices—all fundamental issues in microeconomics.

Specifically, the questions I investigate, by delving into this digital community, are: how much does hype influence prices? What about quality? Do expert reviews (those by well-known critics) affect prices due to their true evaluation of quality or due to the hype that surrounds them? While there already exist many econometric studies that seek to address these questions, all have made one of two problematic assumptions. They either assume an expert reviewer’s ratings are a perfect proxy for quality or they claim the reviewer’s influence over price is attributable solely to the renowned nature of the reviewer, both of which are overly simplistic. To move beyond the previous literature, I take advantage of data that can be pulled from the CellarTracker wine community. Paired with sophisticated macroeconomic techniques, the information from this unique source allows for a novel approach in investigating economic principles.

CellarTracker is used as a tool to keep track of one’s wine cellar in the digital world. Each user possesses a virtual “cellar” that she then fills with bottles that are presumably in her actual physical cellar. With the site, users can search a given wine and read tasting notes (reviews) written by other users about the wine, or they can write their own reviews. These notes can consist of only a written review, a point value, or, as is the usual case, a written review and a corresponding point value out of 100 determined by the reviewer. CellarTracker consists of a few hundred thousand users, who are predominantly highly informed wine consumers, as well as about 3.8 million tasting notes. The network’s popularity within the wine community makes it a natural choice for empirically tracking the opinions of informed consumers. By taking advantage of this fresh and accessible source of data, my research provides insight into how online communities complement our understanding of existing market and consumer dynamics.

In the end, my results support a skeptical view of quality’s role in high-end wines and high-end experience goods on the whole. My results also suggest that expert reviews influence price primarily due to reputational hype that accompanies such reviews rather than due to an accurate depiction of superior quality. This work provokes further discussion of the dynamics of consumer ratings within online communities and what these dynamics reflect about behavioral economics. Specifically, research in this area should look more in depth at the online consumer rating mechanism conditional on price in other markets. Future work could study the claim that hype surrounding a product can cause a decline in the product’s consumer ratings since the product is then measured against higher expectations. In this sense, continued research would examine if digital communities contain reviews that mirror personal human experiences with products, rather than reviews that hold all else equal. If such communities do, in fact, contain reviews that are conditional on expectations, then, digital communities could play a key role in illustrating that the consumer rating mechanism is more human than economists often admit.

 

Image credits: barony by-nc-nd/2.0/

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