Wednesday, February 17, 2010

Wine Case

The extent to which people enjoy wines that are more expensive regardless of intrinsic qualities is brought to bear in dramatic circumstances in court today. Essentially a group of people were fined/imprisoned having been convicted of a massive scam involving selling less prestigious wine for higher prices through falsely labelling them as a more expensive brand. Amazingly, given the scale of the scam, there were no consumer complaints at all, according to one of the lawyers interviewed by the BBC - bbc link

There are a number of behavioural and neuroeconomic studies on one reason why they got away with this for so long, namely that our brain tags more expensive wines as being tastier. See, for example, Drazen Prelec's MIT video , which references some famous studies.

1 comment:

Kevin Denny said...

This is related to "place value" where the value people put on something depends on its ranking by others. If other people rank it highly then it will be more expensive.
It seems to me that there might be two reasons why you want to buy the most popular car in Ireland or go to the most fashionable bar in town. One is an information one: its too difficult to figure out what the best car is so place/ranking is a cheap & probably reliable signal. The second is that people like to be "in", to be part of the crowd (unless they are non-conformists or misanthropes like some economists I know).
Distinguishing between these two explanations would be interesting.