Do Italian Consumers Exhibit

Abstract

Consumers in Italy have historically shunned imported wines, showing “home bias” in wine consumption. This study employs ACNeilsen panel data of Italian household wine purchases over the period: January 2002- December 2004. In order to facilitate products comparisons, data are aggregated over time and households. Finally, specific wines are aggregated into several categories: table; IGT; DOC; DOCG; and foreign. Only premium red wines are included in this analysis, € 3-7. Each type of wine is considered as a separate “good” in a quadratic almost-ideal demand system, which is estimated using generalized method of moments. The econometric specification controls for seasonality, Christmas holidays, introduction of the Euro, paycheck effects as promotions. Preliminary results show that as high-quality foreign wines become more widely available at competitive prices, the home bias of Italian wine consumers may diminish, implying domestic producers will need to compete more keenly on pricing and quality.