Determining wine relevant markets

What is it about?

Wine is a differentiated product and, as such, offers different qualities (categories) for consumers. Our aim is to apply a mechanism to determine the levels of substitution among wine categories (identifying each relevant market). The analysis provides an alternative to exogenously defining where each product category begins and ends. In our empirical work, we analyze whether each segment constitutes a relevant, independent market. The consequences are important to determining whether to authorize or reject winery mergers. We perform an econometric analysis applying the Nested Logit methodology that will enable us to estimate cross elasticities in wine segments. If they are positive and significantly different to zero, the products belong to the same relevant market, and conversely. In the methodological section we discuss the pros and cons of this approach and its alternatives, while in the empirical analysis we perform several robustness controls. We conclude that there are various relevant markets for different wine qualities.

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