Am I Drinking Because of the Price or the Ambiance?

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My wife and I drink wine with almost every dinner at home. We prefer Australian wines, because we have found European wines — especially Italian and French — to be high-priced in Texas.

We even drink an occasional good Texas wine (yes, there are some).

The high prices in Texas have meant that we go through one bottle in three dinners; hardly major drinkers! In Germany, we’ve been going through a bottle in only two dinners; a 50 percent increase in the quantity of wine consumed per night.

I like to think this is due to substitution, to a move along the demand curve, as good European wines are incredibly inexpensive in Germany. For example, I bought a 2004 Barolo, one of the fanciest Italian wines I know, for €11 (only $15 these days), and I think it would have been twice as much at home.

But is our increased consumption due to the drop in price; or are we consuming more because our taste for wine has increased due to the European ambiance?

I like to think it’s the former; I don’t believe tastes change much. But my dilemma illustrates a common problem in empirical economics (and life generally): separating changes in amounts demanded from changes in demand.

And sadly, most non-economists will argue that behavior like mine results from taste changes; too few people think prices really affect behavior.


hej

Or perhaps you drank more because it tasted better.

Finishing the bottle in two instead of three dinners sounds like your increased consumption was about one small glass for each of you per dinner. That sounds like about how much I would take after finishing the food just because I noticed that it tasted good.

If that's the explanation, then your demand for cheap wine went down to 0 l because good wine became attractively priced.

erik de koster, brussels

you could start by observing your wine consumption at home in europe versus in a restaurant - I have some difficulty believing that when you're dining with your wife at home, the 'european ambiance' would incite you to drink more wine than what you do in the states. I'm likewise not convinced of the quality of your 11€ barolo - I guess this is wine that never gets shipped overseas in the first place.

Matt Stadler

My wife and I just finished a case of the Becker Reserve Cab (well not all at once). It is GREAT!

paulwesterberg

My wife & I recently went on a trip of eastern Europe and we definitely drank more wine than normal because:

1. There are many excellent quality, low priced wines available. We drank one very good bottle that only cost 2.50 euros($4) that would have cost $12-15 here. Discount wine in the US comes in boxes and it is generally horrible.

2. European cheese, chocolate and pesto pizza go great with wine.

3. You can openly drink wine in many places including parks and trains. And efficient public transportation makes it easy to get around without driving.

French wine in France is very good.

I usually don't drink french wine in the US because I haven't found anything I thought was any good, I think they only export the worst wines and keep the good stuff for themselves.

fm

This may be 'ambience,' but perhaps it is just acceptable to drink more in Europe. I have never heard anyone make an argument to the contrary.

Marc Brodeur

I drink beer when I am out at a bar and it is expensive; I don't when I am at home alone and it is cheap. Ambiance does mean something...

Danny

You know, I read a bunch of food blogs. And basically foodies will never say that price affects their preferences as much as their tastes. It's really odd and strange.

Jake

Good wines at low prices are plenty to be had in the states in the $10-$20 range. Rosenthal wine importers is a great start: http://www.madrose.com/producers.html.

Imad Qureshi

I think quantity demanded has increased due to a price drop.

Frans

Have you tried South African wines? With the ZAR/dollar exchange rate as is, it should be an excellent buy.

Plus of course my opinion is that it is far better than European wines, of course!

Joe D

Not only has the price dropped, but the perceived price (now that you're thinking in euros)--even when you consciously convert to dollars--is even lower.

I know my household's wine consumption has gone up (not per dinner, but the number of dinners at which we have wine) as the quality of these sub-$10 US and Australian wines has improved.

Kory

Maybe its both. Maybe you're now drinking your "normal" amount but the cost was prohibiting it before -- kind of like a genetic trait starts to express itself due to environmental conditions.

Michael F. Martin

Where are the best books or papers that show how aggregate supply and demand are built up from underlying individual consumption and production?

Pat

I'm not an economist, but my two penneth:-

Your net income appears to have increased at least by the difference in wine prices. Presumably you didn't move to Germany in order to receive lower remuneration, so at a guess its the price combined with exra income.

Unless you usually dine in company, in which case you're just following the herd.

Or maybe you're on the road to Alcoholism and will move on to spirits soon.

dthys

If you can get something that tastes better at a price that is equal to or lower than the inferior good that you normally consume...it makes sense that you would be liable to consume more.

mkagan

If you are drinking more German wine per night than Australian wine, perhaps it is because the alcohol % is much lower (say 12% for a typical German Riesling vs 15%+ for a typical Australian)...

JG

I think price has a factor, but less so in the narrative you described. I think it's more because in most situations, it's difficult to assess the value of the deal you are getting. In this case you now have a clear reference point and less doubt that the market transaction is favorable (really not much about the transaction has changed other than its favorability versus a reference point).

Conor

I have longer dinners when I am in Europe. If you are having longer dinners, you may drink more.

Dr. Vino

It may be a function of prices, which can vary quite a bit in the US thanks to the three-tier system.

But #2 above hits the nail on the head: alcohol levels. It's much easier to polish off an 8.5% Riesling than a 16% shiraz (for several reasons).

But I always say three cheers to ambiance!

Cheers,

Tyler

DrVino.com

Tyler

There are several thoughts I have on this:

1) The QPR (Quality-price ratio) is probably better with the local German wines than what you're used to with Australian wines in Texas, so the quality is higher.

2) Additionally, the absolute cost is probably lower.

3) 2004 Barolo should cost $40+ for a 750 ml bottle, or at least it would here in Florida. €11 is a steal; $15 *might* buy a Nebbiolo from Alba (same grape, different growing location and winemaking techniques).

My opinion? Drink up! You're getting more, and better, for less.