A recent study shows that most people rate wine as tastier if it has a fancy label. Jonah Lehrer, from his forthcoming book How We Decide, writes:
Twenty people sampled five Cabernet Sauvignons that were distinguished solely by their retail price, with bottles ranging from $5 to $90. Although the people were told that all five wines were different, the scientists weren’t telling the truth: there were only three different wines. This meant that the same wines would often reappear, but with different price labels. For example, the first wine offered during the tasting – it was a cheap bottle of Californian Cabernet – was labeled both as a $5 wine (it’s actual retail price) and as a $45 dollar wine, a 900 percent markup…. Not surprisingly, the subjects consistently reported that the more expensive wines tasted better. They preferred the $90 bottle to the $10 bottle, and thought the $45 Cabernet was far superior to the $5 plonk.
Of course, the wine preferences of the subjects were clearly nonsensical. Instead of acting like rational agents – getting the most utility for the lowest possible price – they were choosing to spend more money for an identical product.
I think the wine preferences of the subjects were clearly not nonsensical. Maybe an unlabelled $40 bottle of wine tastes no better than a $5 unlabelled bottle of wine. But that’s why people don’t buy unlabelled bottles of wine! The utility of the wine you drink isn’t contained in the molecules striking your tongue and your nose; you’re enjoying the possession of something people have agreed to value. When you travel three hours to eat the best barbecue in Texas, the long drive and the long wait are part of what you’re paying for. If you think that’s nonsensical, you’ve got problems with people’s behavior that go way past their selections from the wine list.
Note also: subjects with an expertise in wine did recognize, and prefer, the pricier wines. So consider the following experiment: give a heterogeneous group of readers a selection of novels by Tom Clancy and F. Scott Fitzgerald, with the covers torn off. You might find that the 14-year-olds in the group rated the two groups of novels equally, while those with an expertise in literature preferred the Fitzgerald, even without the identification. Now suppose one of the 14-year-olds, with knowledge of these results, was offered the choice of a book by TC or a book by FSF for twice the price. And let’s say this 14-year-old reasons, “The experiment suggests I’ll like these books equally; but my teachers and my parents say that Fitzgerald is great literature and Tom Clancy is trash, so maybe I’d better take their word for it and try the Fitzgerald.” Is the teenager’s behavior clearly nonsensical?
Or maybe the example of JT Leroy is a little less scale-thumby. People are less interested in his books now that we know the author isn’t who he claimed to be — isn’t even, in fact, a he. Same books, same sentences. Is that nonsensical?
By the way, I’m not really imputing to Lehrer the view he asserts in his book: in an earlier blog post on a similar study, he writes
What these experiments neatly demonstrate is that the taste of a wine, like the taste of everything, is not merely the sum of our inputs, and cannot be solved in a bottom-up fashion. It cannot be deduced by beginning with our simplest sensations and extrapolating upwards. When we taste a wine, we aren’t simply tasting the wine. This is because what we experience is not what we sense.
which seems to me much more correct.
The wine experiment reminded me of GMU economist Robin Hanson‘s blog, Overcoming Bias. I think I’ll write a bit more about this in a later post, but I’ll close with this question: do Robin Hanson and like-thinking economists think it’s rational to believe wine tastes better if you know it’s expensive?
Quomodocumque 
It can be rational, if you really do want your wine to be expensive. It might also be rational as a way to signal various things about yourself, to yourself and others. Such as your wealth and discrimination.
My expensive MBA from a well-known Chicago university would tell me that a wine is expensive BECAUSE those with knowledge have judged it to be some combination of desirable and scarce. The self-correcting market has spoken, and I may to an extent rely on its judgment. If I know little or nothing about wine myself, I may be completely rational in relying on the market’s verdict on what constitutes a good wine.
I often rely on the market’s judgment when I myself lack specialized knowledge. I may choose the more expensive car, believing that it contains superior engineering and durability. I can’t be an automotive engineer myself, so I rely in part on price to indicate “quality”. Or I may accept, on the word of those who have spent their lives studying such things, that a certain medical treatment is superior in its outcome, in part because it is the more costly alternative.
My MBA was expensive because it was a combination of desirable and scarce.
I don’t personally feel that waiting in line for great barbeque is part of the appeal, but then I actually have some specialized knowledge of food. In subjects where I lack personal expertise, I am reasonable in letting price, in part, guide my choices.
Thanks for a fun and thought-provoking post! M. Lukens
Funny, I went to Snow’s BBQ yesterday. It was only 45min each way (I guess you didn’t specify where from it takes 3hrs). It was a nice drive and an enjoyable way of spending a morning. The brisket was a bit dry, unfortunately and not worthy of the hype. Maybe that batch was not the best or they are overwhelmed by the number of costumers. The chicken was good, though.
Most people don’t know much about wine or BBQ, so they end up relying on “expert” opinion, price or whatever. Plus, sometimes (unless is bad stuff) the difference is too subtle to be noticed unless you are really focused on the product.
Well, as for “acting like rational agents”, it seems to me that drinking any wine already means forgetting about doint anything of the sort, at least where cheaper water can be found… (Not to mention beer).
I’d love to know what percentage of people have the palate to tell the difference between cheap wine and the pricey stuff. I know that I do not.
Wonder how this applies to musical taste.
People assign a price to a glass or a bottle of wine — for whatever the reason.
When I buy a glass or a bottle of wine, I decide if it is within my pocketbook range.
When I drink the wine, its either bad, poor, fair, good, excellant, or memorable.
Then I decide if it was worth the cost.
Regarding the comments made by New Leaf News, comparing buying a car: I understand where you are coming from, but disagree with you point for a number of reasons:
a) When I buy something as expensive as a car that I expect to have for 5 years or so, I am going to do a good deal more research than if I was going to spend $50 on a bottle of wine that will last one evening.
b) Leading on from that, the research that I would carry out when researching car specifications would be recognizable industry standards, e.g. engine size, miles to the gallon, emission levels, top speed etc. Compare this with wine variations: yes different grapes have different qualities, and older wine has a different taste to younger wine, and French wine is different from Spanish wine, and the list could go on, but the point is all of the differences are entirely subjective.
I agree that if I pay more for a bottle of wine then I expect more. But how would I quantify this. I agree with New Leaf News that I would then have to rely on expert opinion (taking into account scarcity etc). Not sure how would I make something desirable? Good marketing? How would that affect the quality of wine?
I know that in France there is a cooperative between vineyards, whereby in the event of a bad crop, any vineyard can simply borrow a mixture of wines from other local vineyards and bottle it and price it as if it was “pure”.
Personally, I like red wines that are fruity and dry. Whilst I like to shop around, I know the ones that I like; when I try them, and generally don’t bother about what is written on the label, or how much they cost (within limits obviously).