Segmenting wine markets with diverse price functions : evidence from California red and white wines sold in British Columbia

Previous hedonic price studies on wine market segments, exploring diverse price functions, are constrained by pre-determined price breakpoints, the total number of segments, or both. Using British Columbia Liquor Distribution Branch (BCLDB) retail price data of California red and white wines, this study adopts an endogenous approach to explore the total number of market segments and identify breakpoints in price dispersion simultaneously. Results show that red and white California wines are grouped into two (breaking at Can$ 14 per bottle) and three (breaking at Can$ 16 and $ 30 per bottle) price segments, respectively. Also, implicit prices of wine attributes such as grape variety and geographic origin differ for red and white wines across market segments.