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Restaurant Wines: Bottle Margins and the By-the-Glass Option

Published online by Cambridge University Press:  14 December 2021

James A. Dearden Open the ORCID record for James A. Dearden [Opens in a new window] ,
Xiaohui Guo  and
Chad D. Meyerhoefer
James A. Dearden*
Affiliation:
Department of Economics, Lehigh University, 621 Taylor Street, Bethlehem, PA18015
Xiaohui Guo
Affiliation:
International School of Economics and Management, Capital University of Economics and Business, 121 Shoujingmao S Rd, Beijing, China 100026; e-mail: guo.xiaohui007@hotmail.com; School of Insurance and Economics, University of International Business and Economics, 10 Huixin East Street, Beijing, China100029.
Chad D. Meyerhoefer
Affiliation:
Department of Economics, Lehigh University, 621 Taylor Street, Bethlehem, PA18015; e-mail: chm308@lehigh.edu.
*
e-mail: jad8@lehigh.edu (corresponding author).
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Abstract

Using a sample of New York City restaurants, we examine the relationship between a wine's bottle margin and whether the restaurant offers that same wine by the glass. We find that restaurants offer less expensive wines by the glass but set higher margins on these bottles than for similar wines offered only in bottles. Overall, offering wine by the glass is associated with a 5.0% increase in the bottle price and a 12.2% increase in the bottle margin. We find similar results for retail and wholesale markups of wine bottles. Our results offer evidence that settles a theoretical ambiguity in the menu-pricing literature (Anderson and Dana, 2009) about whether to raise or lower the price of a high-quantity package when introducing a low-quantity package of a good, as it applies to restaurant wine pricing. (JEL Classifications: L11, L83)

Keywords

product-line pricingrestaurant wines
Type
Articles
Information
Journal of Wine Economics , Volume 16 , Issue 3 , August 2021 , pp. 305 - 320
Copyright
Copyright © The Author(s), 2021. Published by Cambridge University Press on behalf of American Association of Wine Economists

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Footnotes

We thank the editor, Karl Storchmann, and two anonymous reviewers for their helpful comments. These authors contributed equally to this paper. This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors. The authors have no conflicts of interest.

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