Impacts of Differences Between Secondary Market and Release Prices for Cult and Non-Cult Wines

For U.S. cult wines, provide evidence that secondary market prices are higher than corresponding release prices. They also present a theory in which a firm may choose to price its product below the market equilibrium level in order to create a perception of scarcity, which increases demand in subsequent periods. In this article, we extend this work by examining whether the price gap, that is, the difference between the secondary market price and release price, impacts subsequent secondary market prices differently across cult and non-cult wines. For cult wines, as reported in the previous study, we corroborate the finding that lagged price gaps have a positive and statistically significant relationship with the average secondary market prices. In contrast, for non-cult wines, we find that for the large majority of observed lagged price gaps, there are no statistically significant subsequent relationships with market prices. However, a statistically significant emergence of a price gap phenomenon similar to that for cult wines appears for the largest price gap values in the upper tail of the value distribution, suggestive of endogenous underpricing behavior in the absence of distribution list rationing and cult wine status.