Tonight I had my second class in Managerial Economics. My professor likes to travel off the beaten path with side stories and tonight he told me a story about a marketing lecture he attended with respect to selling wine.
Being an Economics Professor he felt compelled to ask about how to price wine. With that, that Marketing Professor from Napa Valley responded that the more expensive you price the more people will buy it. Of course, anyone who knows anything about Econ knows that this is exactly the opposite of the classic Price vs. Quantity Demand Curve that is taught in, I dare say, ALL Econ classes.
This got me thinking, however, about the customers that typically buy wine in Napa Valley and those who drink it with a certain disturbing passion. What if these people are not rational like the classic model suggests, but are irrational?
If the answer is Yes, then the Marketing Professor's answer is probably correct to a degree. A certain level of quality is implied by charging a higher price for a bottle of wine. And if what matters most to wine consumers is quality, then why would they bother with a $10 special? Especially the tourists looking to burn cash and the local wine crazies...
This story amused me because I have family very close to Napa Valley and while I don't believe that their brains have been molested by the aroma of the Pinot Noir or the blandness of the Merlot, they have friends that fit into the Marketing Professor's answer very well.
So, Peace out to all the Winos hangin' out in Napa!! Keep screwing up the demand curve and livin' large!
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