Free DP Download 11 January 2022 - Price Dispersion in Wines

Tuesday, January 11, 2022

Jean-Marie Cardebat, Olivier Gergaud, Pierre Regibeau, Katharine Rockett CEPR Discussion Paper No. 16784 | December 2021

 

We investigate price dispersion in restaurant sales of wine. We measure empirically the change in price dispersion as competition varies, finding that price dispersion increases with competition. We then propose a spatial model capturing the unique features of restaurant dining to explain this empirical regularity. The model reveals an indirect effect flowing through the price of food, which is announced and known by customers, to the price of wine, which is only revealed once the customer enters the restaurant and receives the wine list. The results add to the literature on "add ons" and price dispersion in bundled good markets.

You can watch a video where Pierre Regibeau and Katharine Rockett tell Tim Phillips about this research.