Demand Under Product Differentiation: An Empirical Analysis of the US Wine Market
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Oversupply has posed a number of problems for the Australian wine industry in recent times.
When disaggregated from the industry level, however, the problem can be better described as
a range of attribute-specific disequilibria. To date, solutions to this problem have
predominantly revolved around reducing output through crop thinning or vine pulling. This
paper proposes a different approach by suggesting that disequilibria may be reduced by
gaining a better understanding of the demand for Australian wine. A discrete choice model of
product differentiation is used to estimate the demand for wine in the United States,
Australia's second largest export market. Implications of the analysis are explored.