How Wine Critics’ Quality Ratings Impact the Market
It is well known that in markets such as restaurants, films and books, critics directly shape outcomes by guiding consumers’ attention and purchase decisions through their assessments of product quality. Less understood is how critics influence the decision making and behavior of producers.
Associate Professor Greta Hsu and her colleagues Associate Professor Peter Roberts and Professor Anand Swaminathan at Emory University have shed light on an integral way in which critics shape producers’ behavior: by establishing the standards for quality that allow producers to effectively differentiate themselves and their product offerings from one another. Their paper, “Evaluative Schemas and the Mediating Role of Critics,” was published in Organization Science (January/February 2012).
Studying more than 20,000 wine reviews in the influential Wine Spectator, Hsu and colleagues find that for wine varietals in which critics’ standards for quality are clearly conveyed through the language in their reviews, producers have a tangible basis for anticipating reactions to their offerings.
As a result, wine producers more effectively price their wines in ways that match the quality ratings assigned to future products within that varietal.
The result is a more orderly market in which list prices, which are often set prior to reviews, correspond more closely to critics’ quality ratings. The study adds to the understanding of how market order is produced in mediated markets, and the multifaceted role that intermediaries such as critics play in structuring the interface between producers and consumers.