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Demand under product differentiation: an empirical analysis of the US wine market *
Author(s) -
Davis Timothy R.,
AhmadiEsfahani Fredoun Z.,
Iranzo Susana
Publication year - 2008
Publication title -
australian journal of agricultural and resource economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.683
H-Index - 49
eISSN - 1467-8489
pISSN - 1364-985X
DOI - 10.1111/j.1467-8489.2008.00419.x
Subject(s) - wine , product differentiation , demand side , economics , supply and demand , product (mathematics) , discrete choice , thinning , consumer demand , supply side , industrial organization , microeconomics , agricultural economics , econometrics , mathematics , ecology , physics , geometry , cournot competition , optics , biology
Oversupply has led to a number of perplexities for the Australian wine industry in recent times. When disaggregated from the industry level, however, the problem can be better described as a range of attribute‐specific disequilibria. To date, the solutions to this problem have predominantly revolved around supply‐side policies of reducing output through crop thinning or vine pulling. By contrast, this paper focuses on the demand side and argues that the disequilibria may be reduced by gaining a better understanding of the demand for Australian wine. A discrete choice model of product differentiation is used to estimate the demand for wine in Australia's second largest export market, the United States. Implications of the analysis are explored.