大象传媒

Ha! Love the 'second-cheapest bottle' policy, that's what I do as well. I wonder if restaurants sell more of the second-cheapest bottle than anything else...

very english

Come to Western Australia. We currently have a "wine glut", so you can get very good quality local wine very cheaply.

However, the French stuff is still expensive here.

I think a 拢7.95 bottle of wine is more likely due to a better exchange rate with the currency of the country of origin, supply, shipping/fuel costs and demand, rather than having anything to do with quality.

So in my view wine is not an "efficient market" at all.

Football players is a very efficient market, if you will accept that "quality" includes marketability as well as performance.

Company shares is an even more efficient market - although it would be even more efficient if we could eliminate insider trading.

so how come at our wine group tasting last month - the most expensive of the year as we had saved for it every month since the previous January - the cheapest wine at 拢23.00 got much higher marks and praise than the most expensive at 拢80 - and we didn't know the prices at time of tasting!

I have always been led to believe that the second cheapest bottle should be avoided at all costs. Restaurants know very well that people will buy it because they don't want to spend, and they think buying the cheapest looks mean. So they can sell any old rubbish on that slot.

Buy the house wine in a restaurant. If you want to enjoy good wine, drink it at home for half the price.

I'd suggest there's one small modifier to your theory:

If you recognise the brand name of the wine you're buying then it's over-priced for its' quality.

The producers have either made you aware of their brand through advertising, which must be paid for (and you'll be paying at least part of it)

... or ...

The wine has gained a degree of success which means they have a steady market, a degree of brand-loyalty that they can abuse to some degree by inflating the price.

So generally I pick from the labels I've not heard of, in the hope of getting better value.

Would you be surprised to learn then that every now and then the 2nd least expensive bottle of wine on the list is actually cheaper / lower quality than the least expensive? See, restaurateurs have heard this advice many times too.

I found this rather rambling. If you have a point to make Evan, make it and move on.

Evan,

An interesting theory and one I apply to wine buying myself. For me, the really interesting question is whether you look only at the selling price or whether you can also consider the RRP.

Is a bottle reduced from 拢7.95 to 拢5.95 better than a bottle which costs 拢5.95 and hasn't been reduced?

In practice if it says it's reduced I'll probably buy it but is that just a cunning selling ploy?

One feature which I think for me reinforces the price to quality link for wine is that wine often seems to be bought, in a large part, because of its price.

First, if a lot of people use a tactic like yours (and I think a lot do), then your strategy will be seen to work, in a self-reinforcing way. It's very difficult to find wine commentary which doesn't prominently mention price, and I think that tastes which tend to be expensive (perhaps because they are rare) are as a result of this seen as positive attributes in the wine.

Secondly, wine seems to be used as something which is used as a gift where value is determined by price, people are more impressed the more expensive a wine they are given, it makes you look more generous. Again, the link to price is not really a quality issue.

With factors like this, the price/quality thing could apply even if the richest wines tasted of boot-polish.

Generally, I agree, though. I don't actually like wine except for really heavy "rubbish" Chianti's, but I would use a strategy like yours if I had to impress someone.

I am pretty sure that I have heard from Restauranteur friends that they are on to this second cheapest bottle system, but still that does not deter me from using it.
Since I have a fixed price for wine (cheap!) I often look for wines that have previously been sold at a higher price - someone must have once thought they were better quality.

New World wines are probably efficently priced for quality, but I suspect European wines are generally priced above their actual quality. As most of us are now drinking New World wines, the market should correct - at least for wines less than 拢20 a bottle. Really expensive wine is governed by different forces - the supply is fixed and the demand high. Eventually you are paying for exclusivity and not additional quality (although the wine is hopefully very good!).

From someone who worked in the catering industry - the story about most people choosing the second-cheapest bottle was well-known and so sometimes the cheapest two bottles were usually the same wholesale price wine, just that there was an extra 50p mark-up/profit on the second-cheapest. Unless I'm pushing the boat out I go for the house wine.

In theory I would agree that the price of a bottle of wine can be compared with its quality. However the UK prices for wine possibly distort and mislead the buyer. I would say that the UK market has definately got a taste for wine but have the prices reflected this? I am no conisseur (or good speller!) and many has been the time when I have been unable to discern by taste some wines bought at the lower end price-wise and those I have bought for a special occasion thinking the taste would blow my mind as well as my purse.

I'm always reluctant to look beyond the cheapest wines in a restaurant, because the markup seems to increase dramatically for no very good reason. A 拢5 bottle of wine typically seems to retail at 拢12 in a restaurant; a 拢10 bottle typically seems to go for 拢24. That is, the percentage markup is similar, even though the costs incurred by the restaurant on each bottle are comparable.

Best advice for me... Never buy house wine on a restaurant's wine list. Firstly, it is dependent on the owners palate and he may be less of an aficionado than you. Secondly, it has the highest mark up, so the advice about the second one on the list is probably sound.
Another one was about labels. If they are flash then so is the wine.
The last one was not to buy wine under a fiver as the producer gets next to nothing from it and therefore cannot invest more to make better wines.

Hmm, I'd read that you should avoid the 2nd-cheapest bottle of wine as it was the one with the biggest mark-up. Restaurants are obviously exploiting this tactic!

I guess it comes down to what represents value for money. If it is purely down to the taste of the wine, then the wine market is not efficient. Some people will instinctively choose a French Merlot over a Chilean one, due more to snobbery and tradition than taste, and accordingly French wine is more expensive. Likewise I have American friends who are prepared to pay a premium for American wine simply because they have visited the region in which the wine was produced. The same is true of the market for football players, which is inefficient (if measured only in ability) due to bias to home regions, loyalty to one's home country and the perceived desirability among supporters for a player that they know and have seen play, over one they have never heard of. Of course, none of this applies to a club like Arsenal, who have no interest in tradition or their supporters' greater affinity to the home market.

I once read that the price of a bottle of wine is made up of tax, bottling costs, shipping costs, and wine. And that (a couple of years ago) you spent 拢3 on the overheads before you actually paid for any wine.

The argument was that below 拢3-拢4 a bottle the wine was essentially free - ie rubbish. And that the best value for money was around 拢5 - because that was the biggest improvment in quality you would get for the money.

So that's what I do in the supermarket - 拢5 is about right for drinking in front of the TV, 拢7 to go with a decent meal. Anything over that - I probably won't appreciate the difference.

I think it is quite likely that the wine market is not an efficient one. Stories like this:

crop up from time-to-time and the key feature they seem to have in common is that, during blind tests, there is often a low correlation between price and quality.

Mind you, this seems to apply mainly to French wines - my suspicion is that the French have (deliberately?) pursued a policy that minimises the amount of information available to the consumer, which makes the market less efficient. If I were a betting man, I would guess that the non-French wine market is roughly efficient, whereas the French is not.

Must always buy wine with a proper cork.
Someone has to save the Iberian Linx after all...
/nature/wildfacts/factfiles/29.shtml
Cork trees (farms) get destroyed to make way for more lucrative crops = loss of habitat.

I think the wine market is inefficient at the lower end. We hear of wine lakes in France/Europe and yet supermarket wines remain expensive given the quality. We hear of subsidies for French wine growers and others to destroy their vines through over production. So where is the economic model?

You don't mention tax as a distorting factor. Most of the price of a cheap bottle is tax - so if you increase your price point a bit, you get a much better wine (is this related to the gradient of the utility curve, duh ?)

I look for wines that pompously say they will improve with moderate cellaring. I also like a deep dimple in the base, as that indicates the possibility of sediment. The price is pretty insensitive to these factors in the sub-10 pounds range, so I don't find the market efficient either.

I like your article, and think that it is on the whole a fair way of assessing the situation.
I would like to add a couple of points though. The first concerns wine taxes- VAT and duty, along with other fixed costs like the bottle and transport, make up a certain proportion of the cost of a bottle of wine, so the remainder is what we are actually paying for the liquid. The cheaper the retail price, the higher the proportion going to the government is. I forget the exact numbers, but roughly speaking for a 拢4 bottle of wine, 20p is spent on the liquid, for a 拢5, this rises to about 60p, and by the time you are spending 拢6, a whopping 拢1.50 is going on the liquid. For a 50% increase in cost of the bottle, you are actually gettiing wine that costs 7.5 times as much!

Also, having worked in the wine trade, I'm afriad to say that there are a reasonable number of bargains and rip-offs. 拢5 can buy you a great wine, but if you're unlucky, you might end up with nothing more than glorified paint-stripper.

When selecting a red wine, look for the alcoholic content. Never select one below 12% or above 14%. Then look for a nice label. In an off licence pay between 拢5 and 拢8. those are my tips.

Selecting white. Slightly cheaper but with a 12% alcoholic content

Right, up to a point. I think people also pay more for recognition. People prefer to buy a wine if they are familiar with the maker, grape or region. Generic Bordeaux, for example, commands a premium even though it is often mediocre. I think this is (appropriately) analogous to 'Market Liquidity'. Go with price, but pick something obscure...

I think you are about 99% right with your wine buying technique, but a couple of other pointers. In a restaurant the second cheapest is often the best seller, because customers think this makes them look less stingy than buying the cheapest, but restaurants know this and buy their wine accodingly, so its not always great value. Also, anything in a supermarket that is marked "half price" or similar, has often been made especially for that promotion and was never worth the full price, you are in effect being ripped off. But for all other wines, you are right, buyers always try to match the quality and price, so in general more money equals better wine. Finally, with the duty on a bottle at about 拢1.40, paying 拢3 for a bottle gives you about 20p worth of actual wine, once you take duty and all other costs out, whereas paying 拢4 gives you about 80p worth of wine because many of the costs are constant.

I always thought that the second cheapest bottle trick was because most of us are, at heart, tight-fisted but, being British we don't want to seem it to the waiter.

If you always buy cheap wine don't you also get relatively less good wine as so much of the price of the bottle goes into Gordon's pocket. If you assume that 拢2.50 of the price of a bottle of wine goes in tax then a 拢5 bottle should be very much better than a 拢3 bottle.

I like your article, and think that it is on the whole a fair way of assessing the situation.
I would like to add a couple of points though. The first concerns wine taxes- VAT and duty, along with other fixed costs like the bottle and transport, make up a certain proportion of the cost of a bottle of wine, so the remainder is what we are actually paying for the liquid. The cheaper the retail price, the higher the proportion going to the government is. I forget the exact numbers, but roughly speaking for a 拢4 bottle of wine, 20p is spent on the liquid, for a 拢5, this rises to about 60p, and by the time you are spending 拢6, a whopping 拢1.50 is going on the liquid. For a 50% increase in cost of the bottle, you are actually gettiing wine that costs 7.5 times as much!

Also, having worked in the wine trade, I'm afriad to say that there are a reasonable number of bargains and rip-offs. 拢5 can buy you a great wine, but if you're unlucky, you might end up with nothing more than glorified paint-stripper.

It's self-contradictory to claim that price is a good guide to quality, then that issues of quality will cause adjustments of price. Evan's method only works if there are a lot of people who buy their wine on the basis of quality (so that they cause the adjustments in the market) and few who base their assessment of quality on its price.

If everybody chose as Evan does, there would be no correcting impetus for overpriced bottles.

As an irrelevant side issue, there are in fact massive variations in quality between equally priced bottles of wine. You need to pay about fifteen quid before you have any real guarantees of quality - though plenty of good bottles are available for a fiver too.

When selecting red wine, go for alcohol content of 12-13.5%. Price between 拢5 and 拢8. Oh the label should appeal to you as well.

White wine 12% and about a quid cheaper.

I use the simple economic premise that the more expensive the wine was before the supermarket reduced the price the better it must be!
No one has complained yet, and a number of my friends have noted that I buy good wine. Or was that you can have a good whine a Bill's!

Never buy the second cheapest bottle on the wine list! Restaurants know that people do not want to pay a lot for wine but, neither do they want to appear to be a cheapskate. So no one ever chooses the cheapest wine. Consequently the second cheapest wine on a restaurant's list is by far the most popular. So the restaurant gives it the biggest mark-up. Psychology not economics.

I once read that the price of a bottle of wine is made up of tax, bottling costs, shipping costs, and wine. And that (a couple of years ago) you spent 拢3 on the overheads before you actually paid for any wine.

The argument was that below 拢3-拢4 a bottle the wine was essentially free - ie rubbish. And that the best value for money was around 拢5 - because that was the biggest improvment in quality you would get for the money.

So that's what I do in the supermarket - 拢5 is about right for drinking in front of the TV, 拢7 to go with a decent meal. Anything over that - I probably won't appreciate the difference.

Football players? Not very efficient at all. Prices in the 'top' divisions of Europe have reached astronomical levels and have only been sustained in recent years by increasing numbers of rich playboys who view the game as a hobby to lavish their pocket money on. We are heading for a situation where Russian oil fields, not gate receipts and replica shirts, is propping up the whole house of cards. Either fashions will change, or we will run out of playboys, and the money supply will run out. Just like a stock market bubble, the crash will come, it's just a matter of when.

Right up to a point. I think people also pay more for recognition. People prefer to buy a wine if they are familiar with the maker, grape or region. Generic Bordeaux, for example, commands a premium even though it is often mediocre. I think this is (appropriately) analogous to 'Market Liquidity'. Go with price, but pick something obscure...

Isn't it often the case that a restraunteur will make the lowest wholesale-price bottle of wine the second lowest priced bottle on his wine list? Knowing that most people will steer clear of the cheapest bottle on the list and often buy the second cheapest, he will increase his profits by encouraging people to buy the wine which cost him least but has a higher retail margin?

But how do we judge a bottle of wine when the supermarket present two prices - the "previous price" and the discounted special offer?

A perfectly interesting bottle of Aussie Cab Sauv from a certain supermarket yesterday was selling for a fiver, reduced from a tenner. It was perfectly awful at 拢5 and would have been a national scandal at a tenner.

The only certain way to buy wine is by the case - and selectively - where you get the economic advantage of bulk purchasing but the assurance of knowing how much it is worth per bottle, if each were bought separately.

Thanks for this Evan - I use a similar system for selecting wine to you. The problem is that I think most other people do too - I would imagine a lot more people choose wine by its rough price than because they are wine experts.

Which surely has implications for your second assumption. It makes it potentially quite easy for the bold con-tricker to price their average wine very expensively - and therefore people buy it, because it's expensive so "it must be good". Since (I would guess) most people choose their wine largely by price (and also because there isn't much "loyalty" - people don't buy the same wine consistently anyway, so the producer hasn't lost anything as a result), they are surely quite likely to get away with it.

I also often use the "second-cheapest bottle" policy, which is a polite way of saying that you're too embarrassed to go for the cheapest option but too tight to pay more than necessary!

As for footballers, the market price depends as much on the buyer as the seller. If a club is extremely wealthy, or desperate to bolster their squad (to avoid relegation for example) then the price will rocket.

Hi,

I believe in the adage : If you buy the most expensive thing in the market place you can't be sure you're getting the best but if you buy the cheapest it's vitually certain you won't!

Regards,

John Quigley

If everybody used this system, then surely the market would cease to be efficient.

The model of efficiency is based on consumers having sufficient knowledge to realise when they're being ripped off, and to stop buying a product which they believe to be over-priced for its quality. Or conversely, to realise when a bargain is available, and snap it up.

If price is taken as an indication of quality, rather than taste, then this feedback part of the system is missing. Unscrupulous sellers could market any old tat and as long as they put a nice high price on it, we'd continue to buy it.

I'm not sure about the market for shares behaving the same way with regards to a natural price being intrinsic to the way its bought and sold.

Wine is a consumable and its pricing reflects that it has to be got rid of at some point, it will eventually get reduced or perish on the shelf.

Shares sometimes also display this perishable quality. Bought on the anticipation of a rise tomorrow and quick buck to be made. Hedge funds, shorting, carry trades and other such devices all skew the behaviour of shares to be far more based around intent and opinion than intrinsic value.

However holding on to them long term seems to require a different set of assumptions and intentions from the owner. Under these circumstances shares may well have a natural price point to which they gravitate.

This always confuses me about shares as I don't understand how the long term growth/stability aspect marries neatly with the poker hand aspect of what seems to be a glorified form of gambling.

Maybe you could try and square this circle in a future blog.

Great blog. More please.

you appear to buy wine on the same principle as myself, however I have perfected this, in that once I find wine at the price I am prepared to pay I then pick the bottle with the nicest label.

Market for company shares efficient?

There has always been a dichotomy between economic theory and reality. Advocates of the Efficient Markets Hypothesis claim, assuming perfect information, that company share prices reflect the true value of the prospects of a business. In reality, many competent fund managers have been able to beat the market for sustained periods. Hot speculation that Sainsburys is going to be taken private demonstrates a prevalent perception amongst investors that the business is undervalued by the market. Perhaps all this news (and the role of private equity firms) driving up the share price is just an instrument of the EMH - in the long run, markets are efficient. The real question is how long this takes and to what extent, one understands the different factors that are of influence.

The market for football players cannot be totally efficient, because the price for any player, regardless of quality, can drop to zero if they fall out of contract. On top of this, wage caps exist in some coutries and leagues, and there are barriers to free trade ( work permits ). Addtionally, since the player will generally have to live in the country/city in whcih they play, money is not the only factor which a player considers when moving clubs. All these factors make the market inefficient.

Debating the efficiency of the securities market is rather harder, and volumes have been written on the subject. As I understand it, the present general consensus is that most markets are weak form efficient in the semi-strong and strong case, less so. Having said that, as far as I know, no-one has ever really tested for strong form efficency, and probably never will.

Thanks for this Evan - I use a similar system for selecting wine to you. The problem is that I think most other people do too - I would imagine a lot more people choose wine by its rough price than because they are wine experts.

Which surely has implications for your second assumption. It makes it potentially quite easy for the bold con-tricker to price their average wine very expensively - and therefore people buy it, because it's expensive so "it must be good". Since (I would guess) most people choose their wine largely by price (and also because there isn't much "loyalty" - people don't buy the same wine consistently anyway, so the producer hasn't lost anything as a result), they are surely quite likely to get away with it.

Hi,

I believe in the adage : If you buy the most expensive thing in the market place you can't be sure you're getting the best but if you buy the cheapest it's vitually certain you won't!

Regards,

John Quigley

It's a good rule-of-thumb.

My only reservation is that you're always following, not leading, the market, so you're more likely to get a bad deal than a good deal.

And imagine if everyone used this policy - there would be no predefined link between price and quality and we'd all be lost!

There is a major problem with your system which is that some countries/regions/types of wine are much better than value than others. This may sometimes be to do with supply and demand i.e. there are a lot of wine drinkers with a lot of money in the US and a limited area and supply of quality wine growing areas so Californian wine used to be expensive for what you get, though there are a lot more bargains around since the recent sequence of glut years.

But repution/hype is crucial too. So, for example, it is much easier to find a decent quality Chilean wine for about 拢6.00 than a french one and you have to really know your stuff to have much chance of finding a drinkable 拢6.00 Bordeaux.

It works the opposite way for Germany. They have a terrible reputation because of nasty things like Blue Nun which people erroneously suppose is something to do with riesling. In fact reisling from the classic areas on the Rhine, Saar and Moselle can be fantastic value - I suppose because of this association and the resultant terrible reputation of German wines in the general UK market.

On average of course, wine quality inceases with price to a point. What would be really interesting to find out is at what point the quality improvement curve flattens out. The way to test this would be to get a whole lot of super expensive wines, classic vintage grande cru burgundies and the great Bordeaux etc and then some slightly less stratospheric wines and then some reasonable quality wines and blind taste them. I am volunteering here, by the way!

My own observation with limited access to really top wines is that there is a definate reverse exponetial curve (if that is the correct term) in the amount quality goes up for price - thus a 拢4.00 wine is likely to be a lot better than a 拢3.00 wine, a 拢5.00 a similar amount better than the 拢4.00 but maybe slightly less etc. By the time you get to the difference between a 拢9.00 wine and a 拢10.00 wine there is very little difference indeed.

Where my knowledge is lacking is in the difference between say, 拢150 wines and 拢200 wines. Again I would be happy to volunteer to test some!

The one problem here is that the efficiency of the market is somewhat ruined by Evan's buying strategy.
The assumption in an efficient market is that the price is set by the buyer. An analogy is the property market. If I tried to sell my house for a million people would come and look and not buy - because the assessed the quality of the house.
Evan's strategy is to go for a million pound house (if he is feeling flush!) and would buy my house without looking at it.

So Evan's strategy is predicated on most people not using his strategy. And now he has blogged it...

What you suggest is a truism - if the mkt is efficient and tastes of consumers are homogeneous, then by definition the price mechanism will be the ordering factor determining prices.

Of course, in practice people's tastes aren't homogeneous - using the car market as an example, some will prefer a two seater sports car to a seven seater MPV, though the MPV may well cost more than the sports car: it depends on the relative tastes of the buyers.

Interesting approach. Faced with the same dilema (like wine but have no knowledge; want resonable wine for my money), I decided to add a random element. I started selecting wines based on whether or not they have an amphibian on the label (frog, lizard etc). Remarkably effective at chosing wines which are reasonably priced but enjoyable.

I don't think the very cheap winemakers have either the money to build a brand, or the nerve to associate their wine with lizards, whereas the very expensive wine makers rely heavily on buyers' wine knowledge. Hence you end up with something that is of moderate price, but made by someone with a hint of passion.

Thank goodness somebody else is as entirely hopeless at choosing wine as I am! I do like the occasional glass, but can I ever remember which I particularly liked or thought were good value? Of course not! I confess the appeal of the label, as much as anything else, affects my buying decisions.

In fact, I reckon most people are similarly useless at selecting wine. Millions of bottles must be bought every year, the overwhelming majority by those of us who have little clue as to what we're buying.

So I disagee with you, Evan. Sorry. I think availability is the key factor for mass-market wine price points. If a wine supplier can get their bottle on every shelf in most of the big supermarkets, they shift tons of the stuff. And surely, getting the deals with the supermarkets depends on expected supermarket margin.

To extend my argument to it's logical conclusion, my taste in wine is shaped by supermarket procurement policy, and how the bottle is presented on the shelf. I haven't got a clue what I've bought until it's too late, and if this is typical of wine buying habits, supermarkets will simply mop up our cash, selling plonk at whatever price they think they can get away with. After all, Sir Terry Leahy isn't operating a charity!

I am wary at wines at the botom end of the price scale in a restaurant as I assume that the owners of the restaurant have a minimum amount of profit they want to make on a bottle of wine, e.g. 拢5. Therefore if they think they have to have a bottle on the menu at 拢7.95 you are getting a bottle that cost them 拢2.95. I hope that when it comes to more expensive wines they will not seek as high a proportion of the price as profit. maybe I travel in hope.

I think your theory is flawed for the simple reason that it doesn't take into account a wine's "good to drink" time. Two bottles of equally priced wine may be considered equally impressive by the experts in terms of eventual quality/enjoyability, but one bottle may be good to drink now and the other in 3 years time. If you open the latter now, you will be confronted with a not very nice, tannic wine that you would have much rather left on the shop shelf. So judging by price alone is a bit of a dangerous game in my view.....

I think price as an indicator of quality is pretty reliable, but bear in mind that fixed costs (bottling, marketing, transport and most duties) are the same per bottle, so the increase in quality as price increases is better than linear, especially at the cheap end of the market.

The fact is that it is very difficult to find bad wine nowadays. Apparently, this is because of the knowledge and techniques used by wine makers. My opinion is that price has really little to do with quality
Also, you surely want to know at least what the grapes are and/or the origin of the wine: I don鈥檛 go to a pub and assume that the most expensive beer is the best one (although the cheapest can easily be the worst one!). A good book on wine and a few experiments is all you need to make some good choice.

Your system will work, given your assumptions, until everyone uses your system.

Price will no longer be a guide to quality but will only be the price people pay because that is what everyone else pays and the market will no longer be dynamic.

Hi Evan

If you buy wine in restaurants my experience is that the House wine is just as goods as the stuff they sell in bottles, that may be due to purchasing economies. In the supermarket there is no discernable relationship between price and quality between 拢5 and 拢20 per bottle in my experience. I think there may be an economic theory to explain this. There are so many labels that it is hard to remember what you bought and liked or disliked, and so much choice means people select wine at random. So it is worth putting the same rubbish in a variety of bottles, varying the price and letting people buy based on ignorance and snobbery. Best advice is to find a common label you like and look for special offers.

Not true, I'm afraid. European wines tend to be more pricey and not such good value as New World and are linked more to 'good' and 'bad' vintages -so a basic knowledge of the subject is definiteky required and is more fun anyway.

I've been following this 'system' for a few of years, but I never thought of the pure economic implications! What I do is buy, via the wife, the red wine discounted by half in our local supermarkets usually Sainsburys but sometimes Asda. The limiting critrea is that the original price of the wine must have been around 拢8
I have & others have almost always been satisfied with the quality of the wine.

Regarding the efficiency of the market for company shares... Could the dot-com boom on the late nineties suggest that the answer is 'no'? At the time many companies were hugely overvalued due to sheer exhuberance on the part of investors and the positive feedback effect on prices. The stock market was not efficiently valuing the companies being traded which ultimately lead to great losses and almost caused a global recession.

As for football players - their transfer values reflect how much money a football club has to spend. In the case of a club like Chelsea their spending power is more closely related to their chairman's wealth (and therefore the price of Russian oil) than to the actual revenues the club makes from football itself. I would therefore argue that it is an artificial market - though I don't know whether that means it is inefficient.

I like to think I've reached the stage in my life where I can now afford....the third-cheapest bottle on most restaurant wine lists.

For supermarket wine-buying one other factor my wife is extremely keen on is the attractiveness of the label. This can sometimes be the clincher between a 拢4.99 Australian Shiraz and a 拢5.19 Spanish Rioja.

My eyes are always inevitably drawn to wines in the supermarket that are apparently half -price - was 拢8.99, now 拢4.99. That sort of promotion is successful precisely because we believe we're getting a better quality of wine for our money. Do they sell more of this stuff than if it had been sitting on the shelf at 拢4.99 from the start? My guess is yes.

As an aside, you only have to go to the most modest restaurant in France to find a wine list composed mainly of very reasonable wines from the local region. They don't seem to need wines from South America or Australia, so it makes you wonder whether we in the UK actually need all this choice.

I've been following this 'system' for a few of years, but I never thought of the pure economic implications! What I do is buy, via the wife, the red wine discounted by half in our local supermarkets usually Sainsburys but sometimes Asda. The limiting critrea is that the original price of the wine must have been around 拢8
I & others have almost always been satisfied with the quality of the wine.

Interesting article - you roughly follow my way of selecting wine, although I often buy mine through mail order on the assumption that I get slightly better quality at slightly reduced prices - due to their efficiencies.

Interesting additional thoughts as well. Of course the market for football players is not efficient, for many reasons. Firstly, as the size of the market is much smaller, the pressures will be much more uneven, and bent towards certain characteristics - such as which sort of players the really rich clubs are in the market for. There is also a problem in setting the sale price of a player as it depends on a number of other factors, such as how much of the players contract is remaining. There are too numerous anomalies in the market for it to be efficient (for example the very cheap price of Michael Owen when he went to Madrid).

Having said that, I think that the footballer market does share one interesting aspect in common with wine. As another commentor noted, at the more expensive end, there is a much more difficult definition of value. Just as a lot of people may find a 拢20 wine better than an 拢80 one, a lot of people may also find a 拢10 million player better than a 拢30 million one - especially if that player is Rio Ferdinhand!

As a couple of people have already pointed out, Evan's theory is pretty inadequate in accounting for the emotional element of wine-buying and the effect of this on restaurant pricing. Restauranteurs know that the second-cheapest is a guaranteed sell for a large proportion of diners who don't want to look too cheap.....and so they can put a bad-value bottle in this slot. What's more, a familiar grape or anything from a familiar region is guaranteed to sell more easily than an unrecognisable or hard-to-pronounce wine - so these obscurer wines are almost always better value.

You are right in saying that there is an economical savoir-faire to wine buying, and it is probably the most empowering piece of information the wine buying punter can possess.

The Chancellor takes a flat duty rate of 拢1.32 on each bottle of still wine, whether it is cheap plonk or fine wine (a little more on non-EU wine and a few shillings more on fizz).

Therefore if you see a bottle of 拢3.99 wine on the shelf you can work out the following:

VAT 拢0.59p
Duty 拢1.32p
Profit* 拢1.32p
Etc** 拢0.25p
Oh, the wine 拢0.51p
TOTAL 拢3.99p

*Profit for retailer assumed to be 33% (POR), not unreasonable.
**Approximate cost of the dry goods, bottle, labels, capsule, box, shipping etc etc.

So for 拢3.99 you're buying 51p worth of wine and there's not an awful lot a winemaker can do with just 51p.

Contrast this with a wine at twice the price, 拢7.99:

VAT 拢1.19p
Duty 拢1.32p
Profit* 拢2.64p
Etc** 拢0.25p
The wine 拢2.59p!!!
TOTAL 拢7.99p

So for twice the outlay you get 5 times the wine.

Easy to put these figures into a spreadsheet and see how cost and value rise in very different arcs.

At about 拢12.99 the curve starts to flatten off so Evan's rule comes more into play.

If only ordinary punters understood this it would stop them rushing to the cheap bottles.

Cheap wine ain't good value - unless your name is Brown and you live at Number 11.

As a wine merchant I am always banging on about this and I'm disappointed that even many in the wine trade haven't "Done the Maths"!

Matthew

Footballers, like wine, are worth the amount of joy they bring. Who would question the rather bitter after-taste in Jose's mouth after Shevchenko's early performances? On the other hand Man Utd supporters, including Sir Alex himself, must savour each skillful libation from Madeiran Christiano Ronaldo.

Share certificates don't bring you much joy in ownership, but as the Good Book says, there is much joy in their redemption at a great price!

A couple of thoughts.

The "you get what you pay for" theory works especially well at the lower end of the market, due to fixed costs of bottling, labelling, distributing etc. So if overheads equal 拢2 per bottle, then a 拢6 bottle contains 拢4 worth of wine, and should be twice as good as a 拢4 bottle. Of course, there's no way to precisely quantify this, but the point is that the 拢6 bottle should be noticably better than the 拢4 bottle, more so than the difference between an 拢8 bottle and one for 拢6.

Second, Evan's theory assumes there is a single market for wine. A good red burgundy is not the same thing as a good claret or a good rioja. If you don't like red burgundy, it doesn't matter how much you spend on the bottle, it probably won't be worth it (for you). A little knowledge is definitely worth investing in before reaching for the chequebook.

I was looking forward to reading this article when I saw the link.. It's a pretty weak effort to show economics at work though isn't it?

The point seems to be "More expensive wine is probably better; except for sometimes, when you get ripped off. The opposite is also true." How are these ideas new exactly?

I understand you're not a wine buff, but perhaps the best tip for people is to go to major supermarkets and find high-end wines that are vastly discounted. The shelves are almost always empty as people who know their stuff have already been there to pick up a few cases!

I think your theory is flawed for the simple reason that it doesn't take into account a wine's "good to drink" time. Two bottles of equally priced wine may be considered equally impressive by the experts in terms of eventual quality/enjoyability, but one bottle may be good to drink now and the other in 3 years time. If you open the latter now, you will be confronted with a not very nice, tannic wine that you would have much rather left on the shop shelf. So judging by price alone is a bit of a dangerous game in my view.....

Wine buying in a restaurant is probably exactly as you describe it, with a bit of skewing for obvious premium products like Champagne. I like the 2nd cheapest premium approach and it cheers me up to think it exists. I think that if you are in a mega-restaurant that clears as much wine as a branch of Sainsburys then there may be some price-fixing, but this will most likely be in the consumer's favour. E.g. if a bottle of wine is about to become less drinkable and they're holding crates of the stuff, then they'll discount it. In contrast, buying wine from a supermarket chain is fraught with danger. There are always wines on offer at dramatic discounts and these are the ones you'll not have seen 1 row of, on a dusty top shelf, at the original price for a week 3 months ago. In general, the best wine to get for the price you want is the one they've just sold out of and, in that, you see that market forces are at work!

I apply a similar method when buying wine in a supermarket, but I actually use the fact I know little about wine in the selection process.
If a shelf is running out of a certain bottle that is in your price range then BUY IT! The assumption is that other wine buyers know what they're doing, and if they have bought up more of a certain type of wine that fits in your general category (eg colour, price, origin) then it cannot be bad. I do not recall getting a bad tasting bottle of wine using this method. However, if everyone follows my method, then the theory falls to pieces because everyone will buy what the first person in the shop bought that day! Keep it to yourselves!

"Loosely speaking, a market is efficient if the buyers are so effective at boycotting over-priced products they don't sell until their price falls into line. And the sellers find they quickly run out of stock if they under-price an item, until they raise the price into line."

I do not believe that buyers are efficient at boy-cotting over-priced products, if the term product is intended to cover only the quality of the wine. For example, there are many Bordeaux classed growths that have been underperforming (making wines that are not as good as their terroir could produce)for years. A purchaser who buys one of these may, in fact, be purchasing the bottle for the wine or, more likely, for the fact that it is a third-classed growth and will appear as such on the dinner table (or wine list) and be drunk by/sold to people who are not informed about the quality of the wine in the bottle. The flaw in your argument is that you make it about the wine inside the bottle, and not about the whole product, which includes prestige and reputation. If those are included, then your argument is sound. Personally, my pleasure is to focus on the wine in the bottle - eventually the market will give it its reputation but I will have had many years of great drinking till then

As a rule of thumb when buying a really special bottle of wine, never spend more than 0.01% of what you earn ie: salary 拢30K max wine price 拢30. If you enjoy it you can afford to buy more of it, if you hate it you haven't lost too much money.

Nice theory but it fails to take into account another factor that influences the price of wine, scarcity. Admittedly this only applies to more expensive wines but if two are of the same quality and once comes from a much smaller producer the rarer one will be more expensive. Again a basic rule of economics.

Do you also choose food this way? If fish and chips are the same price as pizza, do you assume you won't be able to tell the difference?

It also helps to have a clue as to what kind of wine you like. If you have even the simplest palate, you know that a Pinot Noir really tasts very little like a Syrah or Zinfandel. Most of us can at least remember we don't like Merlot, or do like Chianti. Going by price alone is assuming that the style and make upof the wine won't matter.

I agree entirely with Evan on his wine-choosing methods. I have an extra (and equally unsphisticated) method. I always choose new-world wines, as I read somewhere that they are nicer than French wines of a similar price due to the fact that France previously dominated the wine production of the world. It keeps me happy, and I'm always too sloshed at the end of the evening to know if I have made a wise choice...........

The market for footballers cannot be compared to the market for wine as the bottle of wine does not have any input into it's sale whereas a footballer does. The market in footballers is also skewed over time as the nearer a footballer is to the end of his contract the cheaper he becomes until he becomes completely free, regardless of his quality.

This all seems pretty logical. Except that the secret is not to buy the second most expensive bottle on a winelist. It is to buy the second cheapest.

As the manager of a high-street wine merchant for several years I agree with the 'you get what you pay for' addage, though only upto a point. Not all wines are equal, however.

A buyer will put a generic Bordeaux on the shelf at a higher price than an equivalent Chilean, for example, because he or she will understand that many wine snobs will more likely put their money into the 'reputable' brand rather than the young upstart.

A better policy, is to choose the most obscure wine at a given price point. The buyer will have chosen this wine purely on the basis of its quality and value, and not on the recognisability of its label.

A buyer will know that any wine with Bordeaux or Burgundy on its label, good wine or not, will sell. It might very well be fantastic wine, but the chances are it will be overpriced.

The football transfer market is not always an efficient market for the following two factors:

A players value does not always reflect his value - Clubs like chelsea are often forced to pay over the odds for a player because the selling club knows that they can afford to. Similarly english players will often cost more than foreign ones.

Secondly, different managers have different preferences in players. Some may like an english spirit in their team so will play over the odds for players. Others know foreign markets better so can pick up the right quality player for cheaper and also might fit into their team better than an expensive englishmen.

Are you also assuming that all the information about a bottle of wine can be represented by its price? However, your pleasure from drinking a certain bottle might increase if enjoyed it alongside a buttery sauce, whereas another may be better with something sharper. In this case, a single variable to determine a bottle's utility to you at that time is not sufficient

and I thought the 'second cheapest' theory was all my own original thinking (I've been giving that advice for years).
I've been exercising wine Evanomics for some time. 拢3.99 for a week night, 拢5.99 for a weekend.If you mix around your choices then you slowly begin to develop a winey palate.

As a rule of thumb when buying a really special bottle of wine, never spend more than 0.01% of what you earn ie: salary 拢30K max wine price 拢30. If you enjoy it you can afford to buy more of it, if you hate it you haven't lost too much money.

I can't really say whether wine quality does directly link to price, as I'm not really a wine drinker. My wine choosing technique can be considered the foodie equivalent of pinning the tail on the donkey. Strangely, it seems to work.

What I can speak about with some authority is Single Malt Scotch Whisky. Here price bears little relation to quality, but in two different ways depending on the type of bottling.

Most Single Malt sold is standard distillery bottlings at 10 or 12 years old, the stuff you generally see on supermarket shelves. These bottlings are made up from lots and lots of barrels of different ages (the age statement on the label is the youngest malt used), mixed together for "consistancy" of taste. Here the quality is much of a muchness, it's largely down to personal taste as to which you prefer; a sweet one, a spicy one, a dry one, a fruity one, a peaty one, a smokey one, etc.

Individual bottlings of single barrels (often by independent bottlers) vary in quality trendously. They are more expensive than distillery standard bottlings to begin with, as caring and bottling a single barrel's contents has a much worse economy of scale than mass bottling of a vat's worth. Then the price pretty much equates to how many bottles are available. This is how some very old, very rare bottles can go for thousands of pounds. From personal experience I can say that I have drunk from bottles that cost 拢250 that were worse quality than ones I bought for 拢35. The cost purely related to the fact that there were several hundred bottles of the latter available, as opposed to a dozen or so of the former.

I don't know if the same principles apply to wine as Single Malt, but I suspect they do.

I've been following this 'system' for a few of years, but I never thought of the pure economic implications! What I do is buy, via the wife, the red wine discounted by half in our local supermarkets usually Sainsburys but sometimes Asda. The limiting critrea is that the original price of the wine must have been around 拢8
I & others have almost always been satisfied with the quality of the wine.

Doesn't the tax element on a bottle of wine depend on the alcoholic strength of the contents - i.e. doesn't the price of a bottle of wine that is 14% abv include a higher tax element than a bottle of wine that is 11% abv

As a couple of people have already pointed out, Evan's theory is pretty inadequate in accounting for the emotional element of wine-buying and the effect of this on restaurant pricing. Restauranteurs know that the second-cheapest is a guaranteed sell for a large proportion of diners who don't want to look too cheap.....and so they can put a bad-value bottle in this slot. What's more, a familiar grape or anything from a familiar region is guaranteed to sell more easily than an unrecognisable or hard-to-pronounce wine - so these obscurer wines are almost always better value.

To advance your theory you should also address the the tax element - if you strip out the tax on a 75cl bottle of wine out of the equation would a bottle that is priced at 拢8.00 be much better value than a bottle priced at 拢6.00

My buying decision is a lot less scientific than that. Being a graphic designer I always base my buying decision on the label: I'll always pick one where the predominant colour is dark blue. To date I've never been disappointed.

This argument does not take account the production costs. Wines might be expensive because they come from smaller, less economic, vinyards.

While these sometimes produce great wine the quality is less predictable than the large "production" type vinyards.

Perhaps at a supermarket level, this factor is quite small. It should not however be ignored.

I find that country of origin and grape are a better guide to wine than price.

The market for supermarket wine appears to be distorted by 'special offers'. Certain brands of wine are overpriced for a period then advertised as 'half price' but often suffer in comparison to other full priced bottles at the lower price.

Actually - will work in not getting a terrible wine (unless you cannot stand "Fumes") - However, it does not work for getting a better valued wine. This is because you have not taken regional economics into consideration - For instance Californian Wines were an excellent bargain 10 years ago as supply exceeded demand - now, through adverstising and reputation, you will find most are over-priced in comparison say to an Australian, Chilean, or South African wine.

- Footballers - most fixed market there is.

- Stock Market (eg NyMex or Merc) - on open trade are very fluid in general.

Like it - but I have an observation. You seem to be assuming that the majority of people buy wine based on taste only. In fact, buying decisions are generally separate from tasting experiences, so it might be that only the most extremly good or bad tasting wines are memorable enough to be chosen or rejected again. So middling wines may be priced according to other more instantly obvious factors such as the prettiness of the label, shape of the bottle, presence of a brand name etc. Funnily enough, wines carry fancy labels, bottles vary in shape, and things like "Chateauneuf du Pape" are written in big letters on relevant bottles.

At one time generic Bordeau sold in local french supermarkets for 9F95 about 1拢 then one year the price rose to 12F95 that pallet load stayed all summer none moved.The price then dropped to 9F95 again and it started selling again. That generic bordeau is now selling for 1 euro 50 about 1拢.When selecting wine I buy a selection for under 2 Euro if I like it I return to the shop and buy a case or two easy!

To be honest, Evan, the only thing I've ever drunk out of a wine bottle is something known only as 'Perry', sold only at my local Tesco, and priced at the humblest of prices, 84p. I was seventeen, and something that cheap for 7.5% alcoholic content it was the drink of choice. Plus the cheap plastic cork was an effective missile.

Price is a rough guide to quality, except in the upper regions of quality wines. As for taste, there are enormous differences between 'old' and 'new' world wines. Old world wines have far more character than new world which tend to be like sherry, in that you can always rely on them tasting the same, bottle after bottle, for ever and ever. Old world wines are far more distinctive, even within the same wine area. Really Evan, you should educate your palate, once you have you will never regret it, then you can join the wine-bore society of which I am a lifelong member,

Happy tasting!

"Window Shopping". When choosing between French Bordeaux whose names I don't recognise, I plump for the label with the largest number of windows on the building pictured on it. The rationale is: the better the wine, the more successful it's been, the grander its chateau.

Nick Bridge - you should choose the bottle with the WORST label.

Clearly it was not bought for its looks!

It depends on which sector of the market for footballers you are talking about. Overall the market is efficient to the extent that deals get done. But you need to distinguisn between Premiership footballers (premium goods) and players in the lower Divisions (standard goods). The market for Premiership players is hopelessly compromised, manipulated by factors (or externalities) such as agents' fees, the players' preferences, get-out clauses, etc, each of which determine the outcome as much as the willingness of the clubs to pay the price of new assets. There are however many instances of "clean" and "transparent" transactions in the lower Divisions, where these externalities are minimal.

I've heard it reported a couple of times that wine producers get paid on the basis that the bottle will sell at 拢4. Oz, California and South Africa sell consistent quality across the range. My resonably-successful economic policy is to pay no more than 拢4 for wine from these sources

You should also recognise that within any country, say France, the production rate and consequently price varies considerably with the area. So since there is far more Bordeaux wine produced, because of the huge acreage under cultivation, than Loire reds, Bordeaux still remains a better buy (in my opinion.

Wine buying in a restaurant is probably exactly as you describe it, with a bit of skewing for obvious premium products like Champagne. I like the 2nd cheapest premium approach and it cheers me up to think it exists. I think that if you are in a mega-restaurant that clears as much wine as a branch of Sainsburys then there may be some price-fixing, but this will most likely be in the consumer's favour. E.g. if a bottle of wine is about to become less drinkable and they're holding crates of the stuff, then they'll discount it. In contrast, buying wine from a supermarket chain is fraught with danger. There are always wines on offer at dramatic discounts and these are the ones you'll not have seen 1 row of, on a dusty top shelf, at the original price for a week 3 months ago. In general, the best wine to get for the price you want is the one they've just sold out of and, in that, you see that market forces are at work!

The wine market isn't efficient and your first premise is pretty far off the mark. There is a world of difference between a merlot, for example, and a rioja or valpolicalla and shiraz. The least you could do is pick a variety of wine you have previously enjoyed, and if have never had a wine that was nice enough to remember what it was drink beer - or ask the waiter.

Within a type of grape price is very often not a good representation of quality. Also larger brands will need to pool millions of litres to produce massive quantities so they have much less control over the consistency. Smaller growers are almost always better.

I'm pretty unconvinced about an efficient stock market either. A large percentage of shares are bought for tracker funds - that doesn't add efficiency. Some people put in more effort into researching what they buy than others. Some people look for short term gains and others buy and never intend ot sell. It's only efficient if everyone is buying according to the same requirements.

I'm a strong believer in the Evan approach to wine-buying, and in general terms I think the wine market is pretty efficient.

To answer the question of football players and company shares, the answer has to be no and no. Why not?

With wine, you know what you are buying. It's right there in front of you, in the bottle. And it is probably about the same as the other 拢7.99 bottle, not quite so good as the 拢12 bottle, quite a lot better than ther 拢3.99 bottle.

With a footballer, you are buying a perception of what he is capable of, based on what he has done in the past. And if he breaks his leg the following week that's too bad (unless you had good lawyers negotiating your contract). You are buying in anticipation of future performance without any guarantee that he'll deliver.

Same with a company share; price is based on expectation. That is why the price earnings ratio varies wildly from stock to stock and sector to sector. We think that a company is about to do well and so buy it, even if results to date have been lacklustre. We think a company is about to do really badly and so sell it, even though past history has been great. For both stocks and footballers we are buying into the future. For wine we are buying something that is right there, dependant on nothing in the future for our enjoyment. Much less left open to chance.

Here in Spain I have found that most rural eating houses have a pride in what they serve, therefore, here it will always be the "house wine".
I have always been disappointed by going by labels eg not all Riojas are good. Smaller less known can be better eg "Vegano" from the Valencia region is my favourite at the moment for home consumption.

Good Drinking!!

Evan,

I usually find your reports on TV stimulating but I can't believe the naivity of your blog on the wine market. The market for wine in this country is brimming over with hype and snobbery 鈥� two factors guaranteed to distort prices. The reason the market can carry on like this is that very few people are confident enough to trust their own taste 鈥� like you they would rather follow price. I've even met people who sneer at and avoid any wine that comes in boxes rather than bottles 鈥� even though boxes are a much more effective packaging system for wine. At our local pan-European supermarket we can sometimes find 'on special offer' perfectly drinkable wine at below 拢2.50 a bottle. At that price 鈥� if you trust your own taste 鈥� you can afford to try one before buying in any quantity!

The 'buy by price' strategy is good but one that removes the pleasant surprise of tasting a wine, thinking "gosh this must have been expensive" and discovering it was much cheaper than you thought. We all love a bargain and by being adventurous and learning about wine, we can treat ourselves at less than 拢5.95.

There is a major problem with your system which is that some countries/regions/types of wine are much better than value than others. This may sometimes be to do with supply and demand i.e. there are a lot of wine drinkers with a lot of money in the US and a limited area and supply of quality wine growing areas so Californian wine used to be expensive for what you get, though there are a lot more bargains around since the recent sequence of glut years.

But repution/hype is crucial too. So, for example, it is much easier to find a decent quality Chilean wine for about 拢6.00 than a french one and you have to really know your stuff to have much chance of finding a drinkable 拢6.00 Bordeaux.

It works the opposite way for Germany. They have a terrible reputation because of nasty things like Blue Nun which people erroneously suppose is something to do with riesling. In fact reisling from the classic areas on the Rhine, Saar and Moselle can be fantastic value - I suppose because of this association and the resultant terrible reputation of German wines in the general UK market.

On average of course, wine quality inceases with price to a point. What would be really interesting to find out is at what point the quality improvement curve flattens out. The way to test this would be to get a whole lot of super expensive wines, classic vintage grande cru burgundies and the great Bordeaux etc and then some slightly less stratospheric wines and then some reasonable quality wines and blind taste them. I am volunteering here, by the way!

My own observation with limited access to really top wines is that there is a definate reverse exponetial curve (if that is the correct term) in the amount quality goes up for price - thus a 拢4.00 wine is likely to be a lot better than a 拢3.00 wine, a 拢5.00 a similar amount better than the 拢4.00 but maybe slightly less etc. By the time you get to the difference between a 拢9.00 wine and a 拢10.00 wine there is very little difference indeed.

Where my knowledge is lacking is in the difference between say, 拢150 wines and 拢200 wines. Again I would be happy to volunteer to test some!

Someone mentioned that you should NEVER buy the house wine, Surly the ability of a restaurateur to select a wine that represents their restaurant is a good reason to buy it as their reputation is on the line, I have experimented with the house versus 2nd cheapest many times and find the house wine to be of a better quality.

What is 'very english' supposed to mean? If he was Scots would it be 'very scots'?

Excellent blog, Evan Davies. Let's hope it does its bit to rescue economic science from the realms of "dismality".

No, the markets for company shares and for footballers are not efficient, for all sorts of reasons. One concerns predicting the future: whilst you can be pretty sure that the wine you're buying will hold its quality, good or bad, until pay-off -if you drink it within a few minutes or hours - the same is certainly not true for footballers or shares. Mr Ballack and Mr Shevchenko presumably do not display the skillsets their buyer(s)thought they did.

Another reason is marketing. If you can make your product seem unique, it will have no competitors and be able to establish its own price - like, say, a 150-year-old claret. I wonder if David Beckham is aware that he has such a good grasp of micro-economics?

Ah, but wine really isn't an efficient market, as you point out a large percentage of it's consumers don't know enough to make it one.

Firstly there is a lot of preference as to the grape, a heavier Merlot/Pinot will taste very different to a Garnacha for example, obviously this is a matter of personal taste.

The next very important thing(and again something of a matter of taste) is whether or not it has been oak aged, that is stored in an oak barrel (and indeed whether it is a new barrel,stronger taste, or an older barrel matters too). Oak aged wines taste very different, but tend to be more expensive (added cost of barrel/storage).

As others have mentioned here cheaper wine is something of a false economy, as taxes and overheads make more expensive varieties (i.e anything above a fiver) more value per ml.

My advice, find out what grape varieties you prefer, and whether you prefer them oak aged, and then try not to buy below the 拢5 mark.

When buying wine in a restaurant ask the advice of the waiter. You'll soon decide if he is more knowledgeable than you, then you can take some of the risk out of the wine list. We've had some excellent wines this way and saved a lot of money against our initial choices!

In supermarkets most of the risk is removed because the wine buyers need to make sales, so it seems that price is generally a reasonable guide to drinkability (not quality) in that we're more likely to repeat a purchase if we feel it was a good product at a good price, thus repeat sales and the wine buyer keeps his job.

The term "quality" should be put aside for the wine buffs as wine "quality" is much more related to complex issues of wine-tasting skills and we all know that even the experts can get it wrong. Oz Clark recently got a lot of his blind-tasting on tv wrong - including being unable to determine if it was red or white! This should tell us that our perception of satisfaction is, at least in part, pre-conditioned through looking at the bottle, the label the presentation, the store, our own prejudices and so on.

For about a year I've been buying 3 litre boxes of the same wine for under 拢12 from the supermarket and it's great everyday wine. At the same time I like to buy a few more expensive bottles in the range 拢7-8 and with these I like to look out for wines that are new to me, are from unfamiliar countries or regions or, just occasionally, interesting or gimmicky labels.

Enjoying yourself is a complex business !

Cheers!

My uncle was the head waiter at a very posh London hotel. He told me that it was universal practice to price the cheapest wines in hotel restaurants at second and third from the bottom. As previous commentators have noted, restauranteurs are wise to the second-lowest price ploy but also - double-bluff - to those who know about restaurants knowing this and therefore go for the third least expensive bottle. My uncle therefore always advised that if one was short of funds, to go for either the cheapest or the house wine. In a local restaurant, rather than a destination restaurant, the house wine should be drinkable because the owners want to encourage repeat business from locals.

And when visiting a restaurant on the Continent, always go for wine from the local area. Almost invariably, this will be of higher quality and better value than similarly priced wines from out of area. That's because the sommelier will proabably know a lot about his or her local area and therefore know where the bargains are and because it's likely that a lot of restaurants in the area will serve the same wines and therefore competition will force prices down. It's less likely that those same restaurants will serve the same brands of wine from out of area.

I prefer beer.

A neighbour used to work in a wine shop, and he helped me find wines I like. Basically choose the grape that gives the sort of flavour you like. For me that is Pinot Noir, at least with reds. You might like Merlot, Shiraz or whatever (and the names vary between countries). Then within that grape, price is a rough guide to quality. But avoid wines recommended by famous people such as the US wine writer Parker as they will be overpriced.

This method of wine buying is incredibly inefficient as there is absolutely no way of price relating to quality at either end of the market. Also country of origin, alcohol content, label or anything else has no bearing on quality or value for money. The only way to check is taste. Efficient wine buying would be to find someone whose opinion you trust and let them advise (either a mildly alcoholic friend or better a wine merchant). With good advice you should very easily be able to find brilliant wine at anywhere from about 拢4.50 to 拢15. Above this and other factors come in to play. This method means that you should save time and increase quality for money ratio.

The wines to beware of are the "half price" specials or "finest" wines many of these are dressed up and the price is inflated to twice what it should be to allow for the deal. Take a look at them and you should see on the back that the wine was bottled somewhere just outside of Manchester, very poor value.

Hi Evan,
Wine is in a brilliant place for wine-sellers to make profit.
Here's the theory, which I heard once from John Quelch and it seems to work brilliantly for wine.
Point 1: Sensible businesses don't make profit when consumers know nothing. Their purchases are so random, it's impossible to ensure they buy your product rather than another: in your case, why you would buy one red wine at 拢6 rather than another red wine at 拢6. With your principle, based on knowing nothing, but just going on price, they aren't going to make a profit rather than anyone else. It's pure luck from the business point of view.
Point 2: At the other extreme, wine sellers won't make profit out of connnoisseurs who know everything. These connoisseurs will know what a real bargain is and what's overpriced. You can't make much profit out of them as they know too much. They will only get good value
Point 3: A little knowledge is a dangerous thing. Or in this case, winesellers will make profits out of people like me, who THINK they know a bit, but actually don't know much. e.g. I know that chardonnay is a good thing to drink when I am eating fish. This means that I will prioritise buying chardonnay. I will be pleased with myself as I look through a wine list and choose the chardonnay. I am applying my knowledge. I may even know enough to think I don't like oaked chardonnay and Australian chardonnays are often oaked and therefore should be avoided. This means that I may choose the (possibly more expensive) Burgundy chardonnay alternative.
Yet this alternative may have been picked up from the vigneron at a bargain price because 2004 was a bad year for chardonnay in Burgundy. And I don't know enough to know what was a good year and what was a bad year. The wine seller knows more than me, but I am in the position where I think that I know enough to differentiate my purchases. I (like most of your friends) am exactly at the point where I can be mugged for prices.
Luckily for the wine industry, there are increasingly more people like me than like you, and it's going to take a long time before i become connoisseur enough to move into the new bracket whereby I always pick bargains and they cease making profit off me. Probably a life time.
And that's why Majestic and the like are all making a lot of money. Or at least they should be.

As a manager of an independant wine merchant I am horrified to read 90% of the comments above. That the general public can have so little knowledge of what they are drinking on a regular basis i find amazing. Wine is I admit a minefield and never the easiest product to understand but to judge by price of alcoholic content or the label is just foolish. The best way to understand and to learn is to go to a decent wine merchants and talk to somebody in there. Do not go to the supermarkets and there rarely have anybody who knows the wines. We try all the wines before we buy them and we would not buy a terrible wine just to have a pinot grigio on the shelves - this selection takes time but then you the consumer gets the benefit.

Not sure the price things works. It would work if you were always sure that you were paying for the wine in the bottle, but sometimes you are paying for the bottle, or at least the brand associated with it. Now that wine has become branded, there are some branded wines that rely purely on their name and less on their content, they have such a monopoly on the shelves that they can get away with charging more for inferior wine, as they have paid the supermarkets to place these bottles on the most predominant shelves. people who know little about wine will buy the brands as they are well known and actively advertised.

I generally look above the eye level shelves for some decent wines and i can be relatively certain that a 拢5.00 of branded wine (relying on the brand) will be worse than a 拢5 bottle of unbranded wine, (relying on the wine.

Oh yeah, and I like interesting labels too.....

I understood that the main point of offering a range of similar products at different prices is to profit from the purchaser's ego. The motor, cosmetics and jewellery trades are very good at this. Supermarkets ('finest' and 'value') play the game rather well too. I don't see much evidence of market resistence.

By the way - refilling the bottles of more expensive wine with similar but cheaper stuff for susequent orders used (allegedly) to be common practice. If anyone noticed, the 'corked' bottle was removed (with profuse apologies) and replaced with the real thing - but the more people had drunk the less likely it was that this would happen.

Cheers!

I think there's some truth in the premise, though I tend to steer away from the common grape varieties on the basis that supermarket buyers put cabernet, shiraz, chardonnay etc on the shelves knowing it will sell. But if they've put a facing of primitivo, carmeneres or something else unusual, it's probably justified the choice on the grounds of quality, and a slightly better bet for value.

Anyway, main reason for posting, Evan:
I thought you should perhaps have acknowledged David Mitchell for borrowing his concept - viewers of Have I Got News for You wil remember his little rant in May last year about the stupidity of people who need help understanding restaurant wine lists.
"It's quite easy to know how good a wine is from the menu because it's got a 'how nice is it?' column next to it, in money".

Ever since then that's sort of summed it up for me.

the second cheapest strategy is one that comes up frequently. It is normally referring to restaurants (the on-trade).
It is flawed, in that your basic premise of price/quality is only really valid at the trade point-of-sale, excluding times of glut or scarcity.
However, the on-trade typically applies a crude multiplier to its buy-in price, normally at least 3x, and ranging up to 6x for the cheaper wines!
So if you assume that buy-in price of X reflects a quality of Q, you would pay 6X for a value of Q.
At the upper end of the winelist, perhaps buy-in price of 2.5X with a quality of 2.5Q, you would pay 7.5X for 2.5Q, in other words you have paid an increase of 1.5X for a wine that is 1.5Q better quality.

Of course, if that gives you wine which you cannot appreciate, and many cannot, then you have still wasted your money!
In addition, basic marketing intelligence informs us that most consumers operate in predictable price bands, with rare excursions outside the band. In which case, back to the start of the argument.
However for my money, I would sooner drink less of the 2.5Q wine...............

Evan, I am also not a Wine expert, however I have got my own system.
Most places which sell wine have a scale of dryness/sweetness, 1-5 or 1-10, I usually pick a wine which is closest to the middle of the scale on the basis that the exremeity's of this scale will be too sweet/dry for my taste, and so I go for a more conservative choice.

There is an additional technique you can employ to check the likely quality of your purchase; the punt. Research has demonstrated that the punt depth is related to the price of the wine (www.itchysquirrel.com) and if we assume that the producer has selected deeper punts for their higher quality wines, then we can compare two wines of similar prices by simple thumb insertion.
Of course this all falls down if it turns out that the winesellers base their prices on the punt depth.
More research needed perhaps, off to the cellar...

I generally apply a similar system to choosing wine. However, I have modified it in that I never choose French wine. Experience has taught me that, at least as far as my tastes are concerned, French wines are inferior to similarly priced wines from other regions.

OF course, 90 percent of what is written here is utter rubbish, including the second cheapest rule. As a wine writer, in a past life, I have some insight to offer here, and first and foremost is that it - equipped with a little knowledge - is very difficult to buy bad wine these days.

The most powerful man in the UK drinks industry is the head of wine at Tesco. Supermarkets now drive the market and their buyers are astute and able. Somerfield's wine buyer had her palate insured for 拢10m - by Somerfield. They tend to deliver value and choice in a global market saturated by over production. As a result we've never had it so good. For example you can now buy three bottles of perfectly serviceable Sauvignon Blanc for a tenner from Iceland. Tesco's top of the range own label Sauvignon has been mistaken for the venerable (拢22 a bottle) Cloudy Bay at blind tastings. There are many examples of amazing value on the high street. (Although rarely in restaurants)

The trick to getting value, whether at a restaurant or on the high street is to listen to or read the experts. It is what stockbrokers and agents get paid huge commissions for, so why not wine. It's amazing that not one post here has suggested this, and yet we'd be crazy to go into the stock market without doing ANY similar research. Be they writers or sommeliers, their jobs are to inform and deliver value.

Often you'll find that big commercial brands are producing prize winning value wines of all varietals. These wines are then seriously discounted offering amazing value. To say that heavily-marketed big label wines are poor value, as some twit has ventured above, is utter drivel. It is however often the case that old world producers have been left behind, unable to match the quality we now enjoy at the typical high street price point.

As a rule of thumb, a decent claret from Bordeaux doesn't exist below 拢8, but for 拢12 there are many new world equivalents that are serious wines. Great value whites come from New Zealand and South Africa, but Chile is as reliable as any country these days for our favourite varietals.

Best bet though is to buy wine guides by those men and women who spend their days tasting literally 1000s of bottles at hundreds of tastings, and take it from there.

Whether it is wine, houses or football players, the true price of a product is not in pounds, shillings and pence, but what it's value is to the buyer and seller. A 拢10 million football player may be too expensive for one club, but may be a great buy for another.

Dear Mister Davis,

Buying wine by the price-numbers would tricky if you麓d compare prices within one shop. You麓d be subject to the quality of the buyer who does the wine-selecting for this shop. To eliminate this you should look at shops first, sort them by the numbers and then pick your wine. Once you have found a shop that reguarly produces wines that are their moneyworth then you can set your standards within their stock.

Yours,

Theo Smits

At the lower end of the UK wine market there's a blip where one or two heavily marketed brands are overpriced (partly to recoup the marketing cost, but mainly to make a mint out of cheap plentiful stuff). But the power of advertising means that people who buy little wine are duped into thinking that only the best wines appear in ads so those are the ones they should buy. While they are not necessarily poor quality (some are, some aren't), they are inevitably overpriced. So can I suggest an addition to the Evanomic rule on this? Namely, if you want to spend around 拢5, don't buy anything you've seen advertised!

There's probably a similar blip at the upper end of the market, where snobbery about "exclusive" brands takes over from any real assessment of relative quality.

In the bulk of the market, though, I reckon Evanomics probably is as good as anything in making a stab at the relative quality of similar untested wines.

2003 aussie shiraz from mclaren vale (South Aus). Cant go wrong esp. if its from Serafino :)
Try finding one though...

I'd suggest that the economics of wine are slightly more complicated - Red? White? Dry? Sweet? Smooth? Sharp? Personally, that's my primary method of choice, decide on a grape blend you like then choose something reasonably cheap in that line.

Certainly that way you get plenty of surprises, especially from 'less fashionable' locations like Chile or South Africa at a cheap price... but I can't say I've ever had a bottle of 'paint-stripper'!

Yes - if you pay more, you get more "reliability", the bottle you get will be more likely to taste the way you expected it to. But - in my opinion - why bother?!

I understood that the price theory only works if you have full information. This would include:
a) how much was the wine seller paid to stock the wine
b) who makes the choice on which wine to sell
c) The mark-up for each wine
d) how was it stored (basement or shop window on a hot summers day)
e) pretentions (people assume that spending more must mean a better bottle, quality, taste etc).

My prefernce is for wine i know in public, or by myself wine I am willing to try, due to a press release.

But there again do I know all the information.

I am interested in the clothes market as my sister (once high up some big organisation) explained that for example "all sweaters cost the same to produce" the only difference is the quality of the raw materials and this is a very small part of the process. The pattern is programmed into a computer and can therefore the same sweater could be produced using less expensive raw materials . But this is never seen in the market place.
This applies to all clothing but especially sweaters. So it seems like you can tell the price of a sweater by the pattern.

I had a theory of value - something's more valuable if it's hard to achieve. I think it's why we value things more when we haven't got them to hand than when we do, and it explains why the value of artefacts increases with rarity and age. It also applies to things like freedom - you value freedom more when you realize how difficult it is to attain. And love and respect - once you learn how transient and hard to get these are, you'll value them more. Wine is just one more example. The best wines are rare and hard to come by or produce, so there's more value to them, and this is reflected in the price - if everyone wants it, the price rises, by the laws of supply and demand. Anything you want to value or put a price on, just ask 'how easy is it for me to achieve?' If very, then you will generally pay a lot for it. Or from a more objective point of view, 'how easy is it for people in general to achieve?' It's why some experiences or objects and all people are literally priceless, and I think it's why people who have everything sometimes think life worthless. Just my two-penny's-worth!

Evan, buying bottles at 拢7.95 is a great idea. As your system is based on the market pricing approach, why not try to get the bottle (or preferably cases!) when the price is reduced to say 拢3.99-4.99.

I cannot agree with you.

For a recent birthday, my husband bought me four bottles of red wine (I only drink red!) ranging in price from 拢35 to 拢10 all basically in the class of wines I like. I drank each of them blind. I quite liked the dearest and the cheapest, found one revolting, and one ok.

Sop I have reverted to my normal 拢6-拢8 which I find on the whole satisfactory with the occasional horror and occasional excellent one.

I recently bought a 拢12 bottle which I found excellent but next time I bought the same wine, it was not better than the cheaper ones.

So I think it is a lottery!

A further rule sometimes to be applied regards the label on the bottle. If it is overly colourful then it is trying to hide its less than ordinary taste. Applied together with the pricing theory and hey presto you have a pretty fail safe method of evaluating wines. Expensive bottles with unimaginative labels should prove very palatable and conversly cheap wines with 'loud' labels will never get finished.
But then again I'm not a wine connoisseur really.

Basically, you are right, you get quality if you pay for it. Personally, I would not purchase any wine below 拢6.99 and I always read the back label to see if it can be cellared for beyond two years. Anything that states consume within two years of purchase I ignore.

I think there is a correlation but not a precise one. There are other factors that determine price such as the traditional 鈥�4 P鈥檚鈥� of marketing (Product, Place, Promotion & Price)

Your suggestion is that 鈥榩roduct鈥� rules the price. But businesses know that the other 3 P鈥檚 can help along the way.

Place:

E.g. I saw you in November 2006 on the Calais/Dover ferry. (I actually got your autograph with my dodgy pen). On that occasion it was a Sunday and I was trying to get some cheap wine but many of the French supermarkets were closed. I had to buy from the more expensive 鈥楤ritish鈥� merchants 鈥� the ones that often advertise their products in sterling.

Promotion:

Advertising can be persuasive or informative. Either way, it can push up demand and hence 鈥榩rice鈥� can rise for one product more than another. Additionally, products can have 鈥榓dded-value鈥� by the recognition of a brand name. 鈥楢dded-value鈥� in this case allowing for a higher price.

Price

As other people have remarked, restaurants can use psychology in pricing their wine. In the UK we often buy a 鈥榩rice鈥� rather than a 鈥榳ine鈥� in a restaurant. Various psychological pricing tactics can be used to make a bottle have a 鈥榩erceived鈥� value. Perhaps like a 鈥榞iffin鈥� good.

There is a correlation between the desirability of knowledge of wine and knowledge of economics versus social acceptability and enjoyment of an an individual's company. A little knowledge may be dangerous, but excessive knowledge (or apparent) has the propensity to bore. My view - never spend less than 拢5 or over 拢10 from the off license. Always buy 4th down the wine list in a restaurant. Unless its Rioja.

Never mind the wine, Evan, what about all that rubbish outside in our street - what's the efficient market operating there?

I'm sure I heard somewhere that the biggest percentage mark-up on wine in
restaurants is on the second-cheapest bottle. I suppose if there are
enough people following your dad's rule, that would create sufficient
demand to inflate the price beyond its 'true' value. As long as one's
judgement is based on price rather than tastebuds - or exchange value
rather than use value if you're a Champagne socialist - who's to be any the
wiser?

Personally, unless I found a wine I really like, remembering wine labels is too difficult - there are too many. knowing grapes or blends of grapes is much easier and is a good benchmark to work from.

Few guests are going to say your choice of wine stinks, so serve the wines you like. I've lived in Texas for nearly three years but Sainsbury's used have this plastic 1.5 litre bottle of cabernet sauvignon that was a great sipping wine and excellent value.

My all time favourite is Rioja but it has to be at least 7/8 years old. There are other wines made from the Temprinillo that can be excellent - look for Utiel Requena.

Steve
Midland, Texas

I suggest your technique is only suitable for someone with not much knowledge: in which case, it's quite a reasonable rule of thumb. And more so in a supermarket than a restaurant.

The flaw is that in the last few years many more vinyards have come into production, so that enjoyment is NOT well correlated with price, IMHO. That's because well known labels can fairly easily sell their entire output; whilst less advertised growers and those from less popular areas have a struggle, unless they cut their prices.

It's easier to buy well in a supermarket than in most restaurants

I'm afraid I've only waded through the first quarter of the comments, so apologies if someone else has made this point.

Good luck, Evan, in your quest. I only fear the subject could easily extend beyond one person's lifetime :-((

I'm afraid that Evan's wine theory doesn't work. We buy a lot of wine direct from the producers and then find ourselves doing some sort of comparative drinking once we get home. At this point we find where we have messed up! Buying 'new age' Rousillon wines picked at the right phase of the moon, for example, priced at 5 euros more than our middle range BUrgundy and not half as good. Wine sales carry a lot of hype with them as well as a crust of snobbery. Wines from a 'good' Bordeaux chateau carry a martk up with the name putting them well ahead of some pretty good cru bourgeois from the same area.
I also think that preferences are more widespread than Evan makes out. If you can't tell the difference (and perhaps have a preference) between a cabernet sauvignon and a pinot noir you should really be sticking to Theakston's Old Peculiar!

I think diminishing returns come into it for me. If I pay 拢7.00 a bottle I will probably like it twice as much as something for 拢3.50 a bottle. If I pay 拢14.00 I'm unlikely to like it twice as much as the 拢7.00 bottle but still like it more. Get up to 拢21 a bottle and I'm starting to feel I'm wasting my money. Subjective I know.

I take issue with your view on personal taste. Just because you don't mind what you drink doesn't mean that this applies to the rest of us. I think your analogy with buying a music cd is much more accurate. Just because there's gallons of new world jammy fruit get-drunk-cheap sold out there doesn't mean everyone likes it; there's probably nothing else on the shelf. Do you eat fish fingers? Nor do I. Don't knock personal taste; it sells. And you don't know what you like until you've tried it.

Notice which wines are always selling out it's usually a good one which people keep coming back for!

While I agree that your "more expensive wines are better wines" idea is generally right, I find that better wines generally come in bottles with nicer-looking labels.

Generally, I go for those that have a papyrus texture, are cream in colour and generally look qualitative (especially the text print). It's similar to gauging whether a restaurant is going to be upper-class, expensive, bad etc. by judging its name and the quality of the sign on the building.

I've been wrong a few times, but then I can say that for gauging by price as well. They both generally work, I think.

All very laudable and logical but another way is to see how far you can stick your finger up the bottles bottom!!!
Yes honestly the more expensive the actual bottle the deeper the punt of the bottle. Normally, poor wine does not get put in expensive bottles.

Of course I have had fabulous drinks from flat bottomed bottles but as a general rule of thumb for red wine this works well for me

Hmmm. if you buy frascati or pinot grigio you will pay 拢2-3 more for same quality as something called by an unknown name.
Hence - never buy these famous names but spend the same money on something else from same region - almost alway better value in end.

Erm - this is a really quite poor approach and I'm quite shocked that an economist can equate quality of consumer products with price. Is a t-shirt with a small logo on it a better quality t-shirt that a non-branded one? Nope - the difference is aspirational buying. Back to wine...

A classic example is the 2004 WHICH blind tasting of 14 English sparkling wines against a favourite champagne. Four of the English wines (3 made in Sussex) beat the bubbly hands down. Likewise, the 2005 International Wine and Spirit Competition awarded its sparkling prize to a Sussex wine.

In wine, price is to do with branding and perception. Champagne is often no better than very good Cava or Prosecco. But it is purchased as a buy in to a lifestyle of luxury and glamour. That is basic marketing and very basic economics. Bordeaux is no longer that good at the mid-range and the much cheaper chilean versions offer far greater depth and interest for the same money.

I'm so disappointed by Evan's approach I'm almost in tears...

Nice theory but it's really a strategy. I'm not a financial analyst, I'm not a businessman and I'm not even a wine connoisseur (although I do know what I like).

Anything in this world which you can buy or sell has a value of perception. If enough people believe a bottle of wine is worth 拢10 then it will sell at 拢10 even if you could find another wine at half the price which tasts twice as nice.

Marketing, presentation, exclusivity, pricing and word-of-mouth all combine to create our perception of what the wine is really worth to our pocket. The publics taste probably doesn't impact the price in the slightest. I'm fairly sure there are many wealthy wine connoisseurs who purchase on the basis that any bottle below R20 must be anti-freeze.

I'm fairly sure a large chunk of the populace stumble across a wine they really like and would gladly stick with it; but (unlike your favourite carbonated drink) wine stocks come and go and even the labels change, so that bottle you held aloft at Christmas and proclaimed as 'nectar of the gods' can no longer be found at your local supermarket/wine shop so you settle for something 'safe' but by no means exceptional.

My personal belief is that there are seriously good wines in all the price ranges. The difference between a good wine and anything less is: did you really like the taste (to the point that you drank more than you would normally have) and after a good few glasses did you have a headache the next morning.

If you drank more than usual and you didn't have a headache congradulations go buy a couple of crates.

Price is a strategy to choosing good wine as Lotto tickets are a strategy to financial wealth.

Thanks Evan, you made me think.

I think that one thing missing from the discussion (well the 40 or so I read) was liquiditity (excuse the pun)


Markets are efficient if there are lots of buyers and sellers. this example is best understood when you look at company shares, a big company like Vodafone has millions of investors watching its share price so one would of thought that any small discrepancies from its 'true' price would be aribitraged away quickly. At the opposite end of the scale are stocks like those listed on the Aim market where the liquidity is alot lower and on some days the shares may not trade at all. Because no one watches the shares distorions may arise for investors to aribitrage.


This can then be appplied back to the wine market, one would expect a 1830 Bordaux to be much harder to price than a 2003 Australian white avaialable in 90% of corner shops and supermarkets

Alas this algorithm doesn't work terribly well. Wines are often sought by region rather than quality. French wine is overpriced compared with Australian wine (for example). Yet the French still sell wine and therefore someone must be paying more money for a worse wine just because it comes from France.

Few footballers are worth what clubs pay for them. Shevchenko is clearly not worth 拢30 million, a valuation which is based on past performanace that he is no longer capable of, it would seem. Cantona, at 拢1 million, was definitely worth the price tag given the improved performance of Manchester United and the increase in revenue. Beckham is an interesting one. As a footballer, he clearly is worth nothing like the vast amounts paid for him, especially as he is over 30 with his best years behind him. On the other hand, he is a brand with huge future potential in the US which could be worth tens of millions of dollars in advertising revenue alone.

The most valuable players are those who cost nothing to buy and become great players before they sold on which offsets their wage costs - Beckham is a good example for Manchester United or Micheal Owen for Liverpool.

Company shares aren't very different. How often is it worth buying shares in a company that is already established? Obviously buying into a Microsoft or Google in their early days would, like a great footbaler, reap rich rewards, but betting on start ups like them is not much different from guessing the winning Lottery numbers.

It all works as long as you remain a price taker in the market. It all goes horribly wrong if you're not.

I'm reminded of the Japanese tycoons that turned to investing in art in the 1990s. The looked at the European and American fine art markets, saw decent returns on investments, and saw what they thought was an efficient market. The theory was that you didn't need to be an expert you could rely on other experts in the room and then just outbid them, landing your painting at the market price. Turn up a few years later, and you make a killing.

Alas, it all went wrong when Japanese investors starting bidding not against an expert, but against other investors. They knew the art they were bidding on was valuable, but not how valuable, and so kept on bidding until all bar one ran out of money. Hence, we saw the market for famous artist's work skyrocket in the 1990s.

My father in law came up with the best 'what wine do I buy' theory, which is simply, the higher the alcohol percentage (up to 14.5%) the better the red wine and as for white wine, as long as its dry and above 12.5% it'll do.
This hasn't let me down in 15 years...
try it, you'll be amazed.

Three rules of thumb;
1. Do not buy American - it is over-priced

2. Do not buy good quality Bordeaux in restaurants - it is too young and tannic. Australian, and even more so New Zealand, is better

3. In the 'good' years, buy two cases of any red Bordeaux or Burgundy costing more than 拢30 a bottle. After five years sell one case and drink the other free, free! FREE!

The first assumption seems fair, the second not so.

Firstly you don't seem to account for the prestige costs involved in wine - the sort of price hikes Veblen noted with American golf clubs. If you want to impress socially, then yes price is a good index. Near the higher end of the market though one must question whether quality and price are truely aligned or whether you are primarily paying for a label.

Secondly - you assume the market is in perfect competition. I suspect elements of it are somewhere close to this (the lower end of the market). But a great deal of the market has been differentiated by the disingenuous marketing of wine-makers, creating artificial monopolies at the top. Indeed, to inject some psychology into this - it has been proved that more expensive drinks are perceived to taste better than their less expensive counterparts. Evidence suggests that the very label itself can determine the price, as shown when labels are swapped. Therefore, it would seem eminently possible that you have been hoodwinked by the marketing techniques of the wine manifacturers!

It's debates like this that make me glad that a) I don't eat in restaurants, so my wine-drinking is done at home with dinner, and b) I live in Canada, where winemaking stores and excellent wine kits are everywhere.

I can make a decent bottle of wine for the equivalent of L1.50 (including the bottle). I can't buy a decent bottle of wine for less than the equivalent of L4.50.

Wine quality is not quantitative or linear, it is (at the risk of being obvious and redundant) qualitative. It's similar to choosing the Nth most expensive restaurant in a city as a guide to eating well - you'll end up in a jacket-and-tie instead of what you were actually in the mood for, which was casual Thai. Once there, though, you can rationalize yourself a positive experience - the food will taste better because you're paying more for it. You want to feel good about the choice you've made, so you enhance and forgive a restaurant that, if much cheaper, would be judged more harshly.

While we all may have, at heart, similar taste in wine, we do not have similar knowledge. This creates peaks and valleys of demand that correspond to popular knowledge rather than popular taste. If the Nth most expensive bottle of wine is a Riesling Spatlese or a Pinot Noir, it will be ordered much more often than if it's a Gruner Veltliner or a Rias Baixas, simply because the first two are familiar and the second two are obscure. In any market, including this one, ignorance always drives up demand, and therefore price, for the familiar.

In a nutshell, your strategy is perfect for getting an "at least this good" wine that is probably a bad to average value.

The market for wine is not efficient, nor that for footballers.

Wine prices are heavily influenced by fashion - so many people still think that all French wines warrant a premium price even when the wine is not one of a select few - the ludicrous price of much 'champagne' is bizarre, and who dares serve a fine Cava at a wedding? At least over the long term, and supposing that lots of people are drinking, this market will tend toward efficiency.

As for footballers, the market for any single player is very limited by finance, and also is heavily affected by fashion - this time due to recent outstanding performances, in say the world cup - performances which are significantly atypical compared to the player's longer term average performance. The 'products' in this market are each unique and lack any consistent basis for comparison, hence the market is always influenced by fad.

Evan,

RE Theory on choosing wine based on the price

I enjoy enormously your radio and TV commentaries, and have a lot of respect for them. However you are as wide of the mark as you can be when it comes to choosing wine. A particular wine may complement one dish but not another. Indeed a less expensive wine which complements a light dish of sea bass will taste much better than a more expensive wine which complements pheasant. The price of wine reflects its desireability and relative availability or scarcity. However the price does not give sufficient information to indiscriminatley choose the wine without regard for the food.

I recommend a course of holidays in France. Visit a wide variety of restaurants, order the meal you like, and ask the restauranter to recommend a wine to complement it. Initially limit yourself to a given area, say the Bordeau wines to avoid learning too many names and flavours. If you can perusade the 大象传媒 to fund this, I will volunteer to come along as your research assistant.

Anthony Bowen

Your second assumption - that it is reasonable to assume that if a wine is priced above comparable quality bottles it will not sell - surely doesn't work if the market judges quality as you do. That assumption suggests that if there were two wines priced at 拢7.95 you would buy the better quality one and leave the worse quality one on the shelf. And yet your whole theory is based on the premise that both bottles, being the same price, are of the same quality. So one of the assumptions backing your premise is inconsistent with that premise.

I'm not sure that Evan's theory holds across the entire price range. While a 拢100 bottle is almost certainly much better than a 拢5 one, it takes a bit of knowledge to choose between say 拢8-15 wines. A really average Pinot Noir could come in near the top, while a delicious Shiraz may be much cheaper.

As with footballers or tennis players (or maybe any sort of thing or person), there's a tiny number of outstanding individuals, lots of fair-to-middling ones, and some duffers at the bottom. Is that a Bell curve? So you need knowledge, and taste, and money, and luck when buying wine, as in life. Good luck and good drinking.

Suggest 2 modifiers:

1 - supply and demand can create a price that isn't necesarily based on your quality measure.

2 - the price inrease isn't smooth; whilst a 拢8 bottle might be twice as good as a 拢4 bottle a 拢500 bottle is unlikely to work to the same improvement ratio.

Finally you surely have to factor in the attractiveness of the label....

how to choose good wine?send a frenchman to the shops for you

All 3 markets are efficient in so far as they are controlling prices to levels that keep dealers in business and not making a loss. However that does not mean the markets are healthy. Wine dealers may be making a good profit, but in Scottish football for example, the price of footballers is making the transfer market stale, turnstile prices too high, and is keeping bums on seats to a minimum. Football clubs cannot drop prices because the resulting increase in attendance figures would be so slow to materialise that the clubs would be out of business before they reaped the benefit. So efficiency does not always equate to healthy.

Market for company shares efficient?

There has always been a dichotomy between economic theory and reality. Advocates of the Efficient Markets Hypothesis claim, assuming perfect information, that company share prices reflect the true value of the prospects of a business. In reality, many competent fund managers have been able to beat the market for sustained periods. Hot speculation that Sainsburys is going to be taken private demonstrates a prevalent perception amongst investors that the business is undervalued by the market. Perhaps all this news (and the role of private equity firms) driving up the share price is just an instrument of the EMH - in the long run, markets are efficient. The real question is how long this takes and to what extent one understands the different factors that are of influence. Similarly, a shift of consumer tastes towards Red wine near Christmas will no doubt increase the number of special offers in supermarkets but over time, prices are more or less indicative of their real quality.

interesting to note that most posters post without having read anyone else's post, hence the umpteen posters remarking that restaurants are on to the 2nd cheapest bottle theory. i suppose it's the same in a pub; we're not really interested in what anyone else is saying as long as when it's our turn we can have our say. safe in the knowledge that no-one else is either listening or gives a damn.

Has anyone mentioned the Wine Society yet? Good value wines, expertly assessed, promptly delivered, never a disappointment. Most supermarkets sell inferior quality goods in whichever aisle you are shopping. Why should the wine aisle be any different? I can't remember the last time I drank a wine purchased from a supermarket and said/thought "that's nice" - and I am no connoisseur, just someone whp enjoys a glass or two

You focus on the product value, which is most of the issue but what value would you put on the process? How much pleasure does the "are you all right with a recent Bordeaux?" bring and is it worth the cost? Assuming it takes you up from the cheaper end.

@Redson

"As a rule of thumb, a decent claret from Bordeaux doesn't exist below 拢8, but for 拢12 there are many new world equivalents that are serious wines."

What a shame!! Living in Paris we would never consider spending 8Euro on an every day bottle to plonk let alone 8 UKP! A very good bottle of 2003 Bordeaux can be acquired for around 5 Euro.

Surely I can't be the only person who enjoys drinking wine whether in company or solo. It is a fantastic beverage and has proven health benefits when taken in moderation. Is not all this 'economics' driven by those who wish to impress others with either their knowledge or wealth. Surely most of us drink enough of the stuff to be able to differentiate the godawful form the palatable without the need for instruction. Anything that costs more than four quid from the supermarket in my book is showing off. Apart from those beautiful whites Pouilly Fusse & Fumes with oysters and possibly the odd Chablis.

Re: the second bottle of wine on the list - I think you have this the wrong way around. The second cheapest is always the worst, and aimed at those who think that buying 'house' wine is somehow wrong.
Quite apart from the fact that restauranteurs are well aware of this fallacy, any establishment that has a bad house wine is by definition a 'bad house', and should be avoided.

The trouble with your theory is that it doesn't take into account what you're having the wine with i.e. if you want just basic plonk to get drunk or if you want to have it with nice food. And if you want to have it with food, what kind of food? Different wines can enhance the food you're eating or completely destroy the taste of it. Hence comparing say a white wine from Australia with same priced white wine from France or US or Germany or Italy can be either a great complement with your fish making you the great cook or make everybody pucker their mouth instead. So, no I don't agree that wine is a homogenous product where price is a good indicator of quality. That puckery Italian wine can be wonderful with pasta, and the lovely Australian oaky white completely kill your oysters!
Quality of wine is not only a quastion of the quality of the product itself, it's also a question of taste. It's the same thing with music; while Rolling Stones may have aged well and with quality, are they equally well aged and as tasty as Verdi's operas or Bach's fuga?

Never buy the second cheapest bottle in a restaurant - this will be the worst value. The house wine is nearly always the best value - start with a glass to try it and move on to a bottle if you like it.
In supermarkets beware of wines sold well above their true worth to establish a price before putting them on sale at a heavy discount.

My technique for buying wine, of which I know little, nor care much about, is (in wine departments) to select by looking only up at the top shelf or down at the lowest shelf, never at eye level. Then I choose the bottle with the most prosaic label - The wine MUST be good for such a dull label to suffice. Does it work for me? Not sure, I have rarely found many wines that taste different from the last bottle; but my friends think my choices are ok so I guess my systems works to some extent. I really am wondering if a lot of the wine marketing business is snake oil / emperors鈥� clothes though. Winespeak, and that long perusal over wine lists; save me!

Like so much in life, it depends where you draw the boundaries of the system.

Even in its recent state of "irrational exuberance", the stock market was efficient in the sense that everyone who was in it agreed that the valuations were fair. Those who expected a crash simply weren't "in" the market for the time being.

The same applies today in the narrower market in Google shares. If your model of the market includes only people who think its share price is reasonable, then the market is efficient. If it includes those who aren't buying Google shares because they think the valuation is insane, then the market is clearly inefficient.

My friend swears by the measure of the quality of the wine by the 'depth of the concave base' of the wine bottle it comes in (does this have a proper name). A flat bottom must be really poor quality, get your thumb in it and you have a winner.

The process of catering for people avoiding the cheapest (or for that matter avoiding the most expensive) is known as versioning. If you've got a product to sell, make it in 3 sizes. Most will therefore select the middle offering. You just need to price each correctly to capture the biggest (profit) margin (as per the restaurateurs pricing wine). A similar technique is used by printer manufactures; rather than have 3 expensive production lines they have just the one and change (for example) the printing speeds to 'create' different versions/models. Another example are DVD players, which are made for different regions but can be miraculously 'cracked' to play DVD from all regions with a few clicks on the remote control.

Fifteen years ago I had a dinner party with two red wines marked "A" & "B". At the end of the meal the guests voted on the two. The person who was the most discerning correctly identified "A" as a good year's St Julienne. Overall the opinion was that there was only a slight difference between the two wines. The St Julienne cost 拢27 - the other was a 拢3 Bulgarian native grape.

Looking at it from the US, what works for me in a restaurant is to pick the mid-priced French wine. It will invariably be better than the California wine at the same price. This works for the East Coast primarily. On the West coast, you don't have a choice, except pay these overpriced California wines.

Wine buying techniques... As you well considered, Evan, people buy the taste, not the bottle of wine. Also, they buy the good time they can enjoy with that drink.

As well as not only restaurants know about the 'second most expensive buyouts' but also how many customers would prefer one wine to another. So they stock what's most popular. Would advise to consider some other aspects not related to economics.

I'd agree with your method of wine buying if you can eliminate the effect of branding, which can and is used to price up wine above its quality level.. This is seen most with new world wines, which have cleverly copied the tactics of FMCG companies like Mars etc.. e.g. Stella is marketed as a premium beer in the UK and priced accordingly, yet anyone from Belgium will tell you its a common or garden "house" larger which is "cheap as chips" over there...

So for the theory to work you have to find wine merchants who are independent of the big supermarkets and price according to quality....

What role does the managerial model of the firm selling the wine play in the price it charges?

i.e. is it a neo-classical profit maximiser, a Baumol sales maximisier or is it driven by the indifference curves associated with the marris-williamson models ....

On another note we could apply fama and french's 3 factor model to the wine market to test the assumptions

Wine is a wonderfully snobish idiom. At the end of the day most people drink it to get pissed. Having sampled very expensive vintage and the delights of a 拢2.99 Sainsbury Chianti, it really comes down to what one is looking for at that moment. Likewise food. Having sampled some wonderful meals in very expensive eateries and also my local Kebab house, it again comes down to the moment.

After a night on the razz I'll take a Kebab takeaway every time over a beautifully prepared, but miniscule, Rack Of Lamb in a swanky 'name' resteraunt. A few Michelin stars mean nothing when the palette is not up to it. I have 4 Michelins but they are on my car.

chianti hic........

I think that Evan's approach can work on supermarket wine, provided that you recognise also that:
- French wine is horribly overpriced for its quality, therefore divide its ticket price by 2 at the low end and 3 at the high end. This is because there are a lot of buyers who will only buy French, like some clothes buyers only buy Hugo Boss. Market inefficiency!
- marked-down prices are the real price, not the "once was" price which is a fiction
- it's worth learning which variety of wine you like best (eg oaked Chardonnay, Merlot, Bordeaux Sauvignon, etc) so that you actually get wines that taste the way you like
- ignore all but the last point in restaurants, and accept that if you buy wine there you are being ripped off in the sense that you pay 3 - 4 times the Tesco price. Just go for what you like, pay up and enjoy the wine with your meal. Or wait till you get back home.
- get one of the small guides to which wines (broadly speaking) were good in which years and which were rubbish, and take notice of them. Don't buy bad years.

Evan, your assumptions tell us more about you than about wine. All people tend to like the same wine? You must be joking, try France, Spain, Italy, Germany or Austria - these are just the countries I am really familiar with - and people will strongly disagree. Take region: Italian people will often debate the merits of their local wines as fiercly as you and me talk about football teams. I have many Italian friends, keen wine drinkers, who have never bought a bottle of French wine. Why should they? Over to prize as predictor for wine - if that is so, simply buy the cheapest bottle in the restaurant. An economist should surely not feel embarrassed to be economical. So surely, prize is already more than a simple predictor for quality. Only because 99% of punters at Tesco buy wine like you do (whatever is on sale, average apparantly about 4 pounds a bottle), does not make it right or wrong, it's just another example of the drink-to-get-drunk principle that so many people pretend to hate when advocated by the younger bingers. A wonderfully simple helper for wine is the region it comes from: eat pasta, drink a cheaper end Italian; eat lamb and try New Zealand Pinot Noir; eat a nice rare steak, how about a bottle of Californian or Australian? Simplistic, but much better than purely choose on prize, especially if you combine the two: on a tight budget, why not try some eastern europeans or greek wines - they can be stupenduous for very little money. In other words, seek out the lesser regions of the world and spend as much as the cheaper end of the French wines.

My rule in the restaurant is to spend as much on the wine as I do on food - I eat a 20 pounds per head dinner, I spend 20 pounds per bottle of wine; if I eat a 8 pound pizza, there is no reason to spend more than a tenner on a bottle and if I win the lottery and get to eat at really good place, I am happy to spend a lot more. If I cannot afford the wine, I drink water. The way to answer your mates who brag about their wine sense is to expose it as what it is: conspicuous consumption - more to impress others than to really enjoy it themselves.

(check out Thorstein Veblen - great writer and a must-read for any economist!)

Redson no 137

I'm afraid to haul you up on your stock market analogies.. There is a massive body of empirical work on how markets work and there is no evidence that a broker can pick better stocks than a monkey throwing darts at the wall street journal.

Stockbrokers and agents get paid huge commissions because people believe their advice because of good marketing. Research has also shown that actively managed funds perform worse than passive funds...

True I've over simplified the description here but check out Eugene Fama's work if you need supporting evidence.

By this analogy as a wine writer paid by this industry you have an incentive to protect your position and support your income stream!

Another tenet of the theory is that the experts often get things wrong but the market gets things write as its the averaged opinion of everyone taking part, which eleiminates the extreme views , bias, either side leaving the true market value for said wine / stock / goat etc.

Heh, everyone knows that the second-cheapest bottle is the one with the biggest mark-up! A better guide to quality, if you can actually get your hands on the bottles, is the size of the dimple in the bottom of the bottle. The dimple is bigger in red wine than white, and the bigger the dimple, the 'better' the wine. Perhaps that's more handy at the supermarket, but it's still pretty useful.

I have to agree with one of the previous contributors that the price of a wine reflects its future drinkabilty. I was appalled to be in one of London's highly acclaimed restaurants recently where the oldest (and very pricey) Bordeaux they had on their list was from 2000. There was really nothing on their Bordeaux list that should have been touched for another 10 years! I understand the economics of cellaring for a long time, but we took the advice of the very good sommelier and ended up with some much less expensive bottles which were very enjoyable. However, I can imagine businessmen on expense accounts buying wine that is far from ready to drink, and therefore quite tannic, simply because it is expensive and they recognise the name.

The price of wine is partly governed by transport costs between source and market. Therefore the selection of wine purely by price can only work between wines from the same place surely? Apart from that caveat I think the assumptions are broadly correct, especially in these days of huge supermarkets with massive buying and selling power giving them a tight control of the market. I've been buying wine, clothes, cars, cans of baked beans etc. for years by applying those very same assumptions to price. PS: I don't think footballers are worth much at all, being more of a rugby fan myself.

If there is one magic theory that can solve your problem, all wine merchants like us would be out of business ages ago! Sadly, there is no guarantee between price and quality.

The wine world has its own peculiarity. Fame, reputation and social standing can seriously inflate/ deflate prices. Here are some examples that defies logic or any theory.

Top Bordeaux wines are not treated as a drink but often traded as some blue chips or trophies among some collectors in US and Asia. Unlike footballers who deprciate in value through the ages, some wines do appreciate a lot as they mature. While some will eventually dies off or never mature at the first place. Thus, there will always be some sad collectors who will gladly pay hundreds of pounds for a bottle of old vintage vinegar. Well, Good luck to them.

Champagne is another great example. Some well known champagne houses (I will refrain from shaming them) have made dreadful wines for years and they keep pumping up the prices. Guess what? We still keep buying them eagerly! We are buying images and lifestyle in this case. Fashion often dictates supplies and demands. Quality has little link with price in these cases. You will be far better off with an English sparkling or some new world bubbly.

On the other extreme, you can buy top quality vintage German wines at often a bargain price. Because people don't understand German wine label laws and just think all German wines are like Liefraumach. That is a real pity.

Conclusion? Well. Wine is simpler and more complex than people think. Just spend five minutes on a wine book everday, after a week, I will guarantee you will be amazed how a little bit of knowledge can carry you such a long way!

I think that unless you've got very fine taste buds, what you want is a wholesome wine,e.g. that has no after taste. But what's esecially important is that a couple of glasses will leave your head clear and your stomach NOT upset the following morning. Try Liddl's NO JOKE Navarra/Mesquiriz 拢2.99, not bad at all considering the price, and fairly wholesome with that. last tip, if a wine isn't pleasant and might make you feel rotten the day after, pour it in the sink!

I'm absolutely convinced that wine is an "Emperor's New Clothes" phenomenon. We can all distinguish between wine and vinegar, but beyond that none of us can distinguish between wines of widely varying price and 'quality'. It's all down to psychology - the label, the price, the ambience of the restaurant, the mood we're in. That's why your method works every time Evan: the quality of the wine you buy is... exactly the quality of wine you expect it to be.

My theory is this: If it's over 拢4, I care what it tastes like. If it's under 拢4, I don't care what it tastes like, so I'm seldom disappointed.

If that isn't efficient, I don't know what is.

Cheers!

25 years ago I spent a day with a French wine maker, and wine blender, with a seriously ancient set of buildings near Reims.

He told me that he put much more effort into making his very cheapest wine - the stuff sold in plastic bottles - because he sold a vast amount of it - tankers of it - and his buyers had a specific preference - a bit like we have for a particular cheap bitter beer. He used chemicals (simple reasonable ones, which he showed me) to sort out his cheap blended wine. As a consequence he said that you would have to spend more than 拢10 to get a wine that tasted as good as his 50p a bottle stuff!

Since then, when in France - I've bought the stuff in plastic bottles! Before I left at 3am he showed me his own favourite drink, stored in the 3 storey cellar under his chateau - Guiness!

Hi Evan

As a Brit living now married and living in the US, I now work in dollars and am horrified at price of wine when i come back to the UK. Notwithstanding the relative pricing of different bottles, my feeling is that the market prices what it can bear or how else can the same wines here be a cheaper price in dollars in the US comapred with sterling in the UK. ie $3 vs 4GBP (sorry no pound sign on US computer!)
It always amazes me that it is much cheaper to by Scotch here than it is in scotland. As they say in the US, Go figure!

Love the Blog - reminds me of why I tune into the Beeb every day for my news - keep it up!

I don't know about wine, but I do about beer and I doubt your system would work. The simple reason is that the best beers aren't easy to track down and this problem is compounded if you just don't know what you are looking for. I have a brother in the brewing industry. He has an encyclopedic knowledge of beers and a lot of knowledge about different breweries. Most of the things he recommends e.g. various Belgium beers made by Trappist monks, a particularly nice beer from Quebec and numerous Czech beers, I never would have found on my own. Having been introduced to them, I concur they are wonderful, but I never would have found them on my own. So find yourself a knowledgeable friend, if not a book on the subject will do

With all due respect Mr. Davis you are way off the mark. I tried something like your theory for a long time and almost lost interest in wine. I didn't realize that I was making mistake after mistake. There is only one solution to intelligent wine buying which works for me and that is to get unbiased well informed professional advice. The two leading sources of wine buying advice are both American. Robert M. Parker stands alone in the world of wine tasting. The man with the "Paragon Palate" is considered the greatest wine critic and even the greatest critic of anything by some people. He claims to be able to recognize over 100,000 wines including their vintages by taste and aroma alone. His opinions appear in his Wine Advocate newsletter and in the many books he wrote. He's considered the Ralph Nader of wine, the man who broke the incestuous relationship between self serving British wine merchants and French wine negociants who had previously monopolized wine knowledge and who would dismiss you as ignorant if you disagreed with their opinions. The other source is the Wine Spectator Magazine which is owned and published by Marvin Shanken who also owns Cigar Afficianado Magazine. These publications drive the wine market, much to the chagrin of many in the industry. When you get the mania, as soon as each new issue come out with several hundred new reviews, people who subscribe descend on local wine merchants like locusts to cherry pick the best QPR (quality price ratio) wines off the shelves. So much so that merchants actually display the reviews right next to the wines in what the industry in the US calls "shelf talkers." I believe that the New York City metro area is the largest and most competitive single wine market in America, possibly in the world. I have bought many wonderful wines I've enjoyed very much at bargain prices and avoided many costly mistakes. Unfortunately, once those vintners who produce underpriced wine are discovered and get high ratings, their prices generally tend to go up before long. You've got to "grab 'em while they're hot."

I consider buying wine serious business. You have only so much money for wine no matter how rich you are and you are faced with a seemingly infinite universe of choices. That's why I stick to professional advice. On the other hand, drinking wine is not to be taken seriously at all. Once wine is bought and paid for, assuming you are not going to resell it, there is only one thing to do with it and that is to get the most enjoyment out of it you can.

Ha Ha Ha.... uk wine culture=disaster

Pretty fatuous comment really. Perhaps Evan would like to give us advice on how to buy a sunday joint - how to tell when buying it and before cooking it whether it is tough, has a good flavour etc.
Honestly I have rarely seen such a load of tosh!
Different people are different. We all mercifully are individuals, all like different things, all have different tastes, and want different things on different days in different moods. So just how you can identify the best wine like this beats me.
I always wondered just how this guy got his job with the 大象传媒. I wonder even more now.

In my view, any restaurant / pub worth its salt will offer a good house wine. Speaking as a publican with thriving wine sales, I wouldn't stock a house wine that poorly reflected my business. Unless I'm splashing out I will always go with the house.

I would go so far as to say my house wine is better than my second best, as I discount it slightly more than the others to keep it keenly priced. We certainly sell more of the house than the second cheapest!

If you really want to splash out on a nice wine, buy it from your local knowledgeable wine merchant and pay corkage!

My favourite bottle of wine costs 2.95 from Tescos!!! A relative introduced it to me and I couldn't believe how cheap it was. I have since introduced it to many of my friends and they too absolutly love it! What a great bargain I came across!

My father's view Evan:

I think this is the first blog I've ever read.聽 If you accept聽Davis's third, unspoken, assumption, that there is a need out there for blogs - unproven -聽then you have to identify the need, which I don't think he's done.聽 In the case of paid journalism, which he normally practises, the need is to extract money from an employer, and a very聽worthy cause that is..聽In fact you & I would probably both dispute his view that we all have roughly similar tastes in wine;聽and聽choosing the 2nd least expensive from an unfamiliar wine list is not a particularly novel manoeuvre - we all tend to do it when feeling stingy.聽 But I don't have the time to reply to Evan - where do people find it?聽 His views on mainstream economics are usually worth reading though..

I have one big issue and that is the effect of brand on price. Sure, generally speaking a good brand has to be underpinned by a good quality product. However, if you look at France there are lots of 'branded' wine growing areas such as Nuites Sainte George and Chassagne Montrachet which don't always produce good quality but still charge higher prices.

Second cheapest bottle: A thorough and time saving technique if you ask me.

Having had friends round for dinner last week where two 鈥渨ine freaks darling鈥� agreed that the Bordeaux smelt (I swear to goodness this is true) like an 鈥渆ver so slightly old suitcase鈥�, I am all for a simple and logical equation to make such purchase decisions.

I didn鈥檛 have the heart to tell them the red in question was 鈧�6.99 鈥� from the local petrol station (and I鈥檓 sure its mark up is at least 100% as they only sell to Winos and disorganized culinary failures).

I think your theory works up to a point. There are some wine snob out there who will only buy wines over 拢20.

I personally buy froma wine club and buy based on previous customers ratings/what I think about the wine or price.

The other thing I do is order a mystery case where I have no idea whats in it, they simply put a minimum value on the wines contained (generally around 拢10 - 拢20 more than I'm paying) and I haven't been let down yet!

I also get confused when looking at the wine shelves and never sure what is good value or not, so now I am a member of a wine club, I buy by the crate 12 bottles at a time and pay about 拢4 a bottle. I have been a member for about 2 years and up til now I have never had two bottles the same, they come from France, South Africa, South America, Australia, the variety seems so much more evident than buying in a supermarket with the labels saying "specially selected etc" which I always find suspicious.

the comments are as interesting as the blog....if a restaurateur cares at all about their reputation, the house wine should be drinkable at a reasonable price. If the house wine is drinkable, then it is probably worth exploring the wine list. If it isn't...beware of the food as well.

Wine at a reduced price is subject to the same regulations as any other product; it must have been on sale in one branch of a chain or supermarket at a higher price for a set period of time but that doesn't mean its value was higher originally.
Go to a wine merchant regularly, and always when there are tasting sessions, educate your palate, make a friend and be prepared to pay a decent amount of money for a memorable experience. Otherwise, stop worrying, pay around a fiver a bottle and drink plonk happily.

I have to agree to AVOID the second cheapest wine - it's the slot they use to offload the rubbish.
There's a big question for me of whether the price to use as a guide is the original price or the promotion price. What I mean is, is a 拢10 bottle on a half price deal better than a 拢5 bottle? It's the big brands with big marketing budgets (and therefore potentially overpriced) that fund the supermarkets to do the half price deals. And yet they are the ones I go for all the time...

Footballers - have you been reading MY blog, Evan? I commented on this only the other day. In short, an efficient market relies on rational behaviour. hardly anyone behaves rationally when it comes to football, so NO IT's NOT!

Shares - a friend of mine went to work in the city, and compiled a theory that share price movements on a summer afternoon were directly linked to the weather.
Good weather = pretty girls not wearing much = traders in a good mood = share prices rise.
Bad weather = no girls = bad mood = share prices drop.
Rational, well maybe. Efficient. I'd say not...

Evan

Your relative value approach will work if applied to wines with large differences in price eg I think we can safely conclude that a bottle of Petrus at 拢500 is superior in quality to a 拢5 bottle of Sainsbury own label house red. Whether a 拢10 bottle of Bordeux is better than an 拢8 bottle of Shiraz is going to be a lot harder to determine given the different production costs, "heritage", buyer preferences (snob value) etc.

Same thing with footballers, Thierry Henry is on a different planet to Terry Smith at Barnet but is Thierry Henry more valuable than Cesc Fabregas ? Hard to say, they are different ages, play in different positions...also how do you value them given that Arsenal are not prepared to sell either ? There is no transparent pricing mechanism unless a sale actually takes place.

As for share prices, there is usually a daily mkt in them which provides a transparent pricing mechanism but even then the pricing is influenced by various things, technical mkt factors, mkt sentiment, imperfect information about earnings quality etc. In the long run, companies who are successful should have that success reflected in the share price but in the long run we are all dead anyway.

The second most expensive bottle always has the biggest markup. Always. It's the worst possible (valuewise) choice.

With regard to Mr Rae on reply no. 73 I think Evans' point on wine is a classical example of economics. A cheap wine - like a cheap share - highlights the gamble/risk of either being pleasantly surprised although more than likely to be given something which leaves a horrible taste in the mouth. Couple this with a expensive wine/share - doesn't mean you're getting value for money - over-hype is a sure way of increasing the price whilst not increasing the value. Wine by country/region/grape/colour, like shares in different companies and different markets suit different people at different times. Lay the wine down for wine or keep for the share for the future? - or turn around quickly for a quick drink or a quick profit? - but I think the issue is value. Future performance of shares, like a bottle of identical wine last year to this - is no guarantee it will still put the same smile on your face.

The analogue gets better the more its compared - the tax on a bottle resembles the stamp duty and dealing costs - you have got to spend a reasonable sum or you get nothing as a percentage of the capital....

Anyway - my wine buying goes like this - go to France whenever possible for a booze run for French wines (and only French wines) - the wine is much cheaper and better quality - sometimes a 拢1 bottle of wine does taste like paint stripper but better to spend 拢1 then 拢3 in this country! - if it's crap - it goes in the food - and if its terrible it goes on the '3rd bottle of the night' queue for inebriated guests... As for Spansih and new-age wines I only buy in the supermarket because of the decent price discounts and even then they rarely compare to a similarly priced French wine bought in France - but I think its because of the money I've saved from Gordon that adds a certain bouquet.....

The market for football players is inefficient, and the demand and supply of football talent does not operate freely. The market has high barriers to entry e.g. exhorbitant transfer fees which prevent any but the top handful of clubs getting the most talented players; and there is not a free movement of factors e.g.work permit restrictions on non-EU players. Added to this you have restrictive exit barriers in the form of sunk costs e.g. large signing on fees paid for poor quality players which clubs will never recoup. The market is also distorted by a lack of information i.e. are the 'best' players really the best or is it just the opinion of a few pundits which others just follow unquestioningly e.g. Real Madrid's failed galacticos policy. The market is also distorted by the expectations/motives of those who run/own clubs. The handful of mega-rich who see owning a football club as an expensive pastime do not have the same profit-driven motives as clubs owned by PLCs, and this too has a bearing on the efficiency of the market.

Surely an efficient market requires both buyers and sellers to have a reasonable amount of information about the product?

Most wine buyers don't know much about wine, and rarely buy the same bottle twice, so we're very much at a disadvantage! Which makes it all a bit of a lottery.

My only suggestion is to buy bottles in your price range at random, and if you find one you particularly like, lay in a stock of them...

My fridge magnet says:

"Life is too short to drink cheap wine"

and this has served me well so far. Although my estimate of what is cheap keeps creeping up over time. In line with RPI rises? Not sure... Nowadays I rarely buy anything that's cheaper than 拢8 or more expensive than 拢12, it's usually red, it usually comes from Australia, the US, France or Italy, usually delicious. Ten years ago it was between 拢5 and 拢8... Usually red Australian though!

I would agree with you if there wasn't a little thing called 'marketing' involved. A French 'Vin de table' could be equally as good as a lot of mid-priced fancily labelled bottles. One could easily be dismayed by a 'pretty' high-priced bottle as by an 'ugly' cheap one.

I agree with Ewan's choosing method, but with the following rider. Quality vs price is non-linear: because the duty on a bottle of wine is a fixed amount (not a % of the price), an increase in price from, say, 拢5 to 拢7 gives you a bigger boost in quality than an increase in price from 拢11 to 拢13.

I think the French have got this right: "It is only the first bottle that is expensive"!

I have seen the exact same bottle of South African wine in Tescos for 拢3.27 and for 拢6.99 - three weeks apart! In fact I have never seen it be exactly the same price, no matter which Tescos I have been into.

I aim to buy wine at prices as close to 拢3.50 as possible. 'A bit tight' I hear you say. However, when I have purchased wine at higher prices I have invariably found it to be no better.

Not sure this supports the law of economics. But it sure helps my family's economics!

This average price technique is a bit dull. For your average glug on a Friday evening this approach seems fine but if you want wine for food then knowing a bit about the stuff is crucial. Try haveing a chat to the wine merchant or the sales guy in the supermarket that might jkust change your experience of wine and in doing so you add a bit of knowledge as you go.

Try a british wine from time to time. Wine grower here have to try doubly hard to obtain any credibility and what we produce is fab. Try Three Choirs Vineyards (Gloucestershire) white it is the best white on the planet. Select a Brit wine at a restaurant and you will be the envy of all your friends..

My method is the following:
1. never choose the cheapest wine (for obvious reasons)
2. go for the second cheapest... but hold on: the seller knows that and prices all the rubbish at the second lowest spot.
3. hence I go for the third cheapest.... but what if the seller figured me out as well?
4. Safer to go for the fourth cheapest then!
5. ...

I'm amazed that wine producers are allowed to get away with the subjective nonsense written on the back of wine bottles. It's just processed grape juice. Just avoid the stuff that tastes like vinegar.

One thing I learnt from working in France in the restaurant business, is that if in doubt, go for the house wine (especially in sucessful independent restaurants). Why? At the end of the night, this is the wine that the restaurant owner will usually be drinking (i.e. he's thrift, but knows a good wine). It will also be the most commonly ordered item on the wine menu (as it's usually the cheapest) - so it's got to be half-decent! Failing that, I tend to stay away from the imported wines, favouring the local wines, as I'm assuming we have to add transports costs, import duty, the importer's cut, etc... to the price.

What a great way to kick the pomposity out of wine. Also, an interesting lesson in economics. More please.

Whoops! Late arrival on this scene. Like many others, I tend to buy on price, since the pleasure of a "poor" wine bought cheaply but which turns out to be quite acceptable far outweighs the disappointment experienced when a "better", expensive one turns out to be not as good as was expected.

Joanne,
I can just about forgive your 'conissor', or whatever, but not your 'definately', think finite !!

Regarding football players and company shares, both should come with the warning 'past performance is not an indication of future return'...

I find that the prettier the label the nicer the wine, lots of modern wines have nice modern labels and are more exciting to the pallet than the 'traditional' styles. Hasn't failed me yet but I never remember their names!

Oh and never buy French!

The comment about 'never buy house wine in a rastaurant' goes exactly against what I was advised: The house wine is almost always the cheapest, and the reputation of the house rests in part on the house wine. If it's a good restaurant, it will be a good wine.

When buying wine off the shelf, I have a set of simple guidelines which rarely lead me astray:
1. There's no need to spend more than 拢5 for a decent bottle of wine, and unless you know what you're looking for, not much point either.
2. Wine-making is an old, traditional business. Avoid anything that looks flashy & modern. Go for the boring looking labels.
3. When the 'Beaujolais Nouveau' comes out, it's safe to start drinking LAST year's wines.

how do you know that the restaurants don't make the cheapest wine to them the second least expensive to you...!Perhaps we should be bolder and buy the cheapest...

I was always mystified how the French chose wine in supermarkets.

Finally a Parisian friend told me, in all honesty, "It's simple. You look for the wine which has the largest number of bottles missing from the shelf ..."

Don't buy wine in this country if you go to holiday in France is my motto! You can buy a Cru Beaujolais such as Fleurie for 拢4 a bottle in a supermarket over there, compared to double that over here, and ditto for most wines except very expensive fine wines from Bordeaux and Burgundy which have such a high demand they are best bought through UK merchants whilst still in barrel. Most of the price difference must be shipping costs and the retailer's margin because there is no shortage of decent wine anymore.

If you can't distinguish wine by any other criteria than price, then you are wasting your money if you buy anything other than the cheapest bottle available.

I agree with this method in general, but perhaps it's best not applied across countries of origin. Different counties have different labour costs and these are passed on to the consumer. So similar "quality" wines from Chile and France won't be similarly priced.

In my experience French wines are the most overpriced with bargains very difficult to find. For my taste, to get a French wine I'll enjoy drinking I would on average expect to pay double that of a Spanish or Australian wine. Californian wines are also quite pricey by comparison.

I gave up drinking about seven years ago when I realized I had already surpassed my lifetime allocation many times over. I serve wine to guests, but have largely forgotten whatever I did know about wine, which may not have been much. Plus, I don't even taste it any more. I apply the price rule first. The range at my store is seven dollars up to seventy. I pick in the twenty to twenty five dollar category. Second, I stick to California, to avoid introducing too many unknowns. Third, I look at the name of the wine/vineyard. Something straightforward resonates more clearly than cute or excessively creative. Fourth, I examine the label. The more colorful or cartoon-ish it is, the more wary I am. Fifth, I engage a consultant, for instance, an attractive-looking middle-age woman with a twinkle in her eye who may be standing nearby. "Ever had this one?" I ask. This, simple opener, by the way, often leads to more discussion which, were I still a drinker, would lead to private tastings. But, that was not my purpose in going to the wine store, and we must stay on task. Anyhow, my rules work fine, and my guests always compliment me on my choice. PJT

I used to work for a wine retailer. They spent a lot of time and quite a bit of money in training me to tell the difference between a merlot and my elbow. Sadly, since moving on from this employ I have lost a lot of the skill.
One thing that has made me want to comment is the memory of what I thought as a scam. Champagne, a well know label, on offer at under 拢20. At the end of the promotion the price was changed to 拢25, yet only for one night! This then means that they can sell it under the slogan "was 拢25, now ONLY 拢20!"
I always thought that this was the old MFI con where the promotion never ends. So are we ever really getting a good price on anything?

I can never remember what I've had or what I've liked. Tried a wine journal but too lazy and unimaginative to use it properly (ended up with lots of 'Yeah - this isn't bad' type comments). My brother and I use the 'hardest animal' method of wine selection. Basically, the wine label with the hardest animal on it is best. So a wine with a unicorn on it would be better than a wine with a fish on it. You've sometimes got to look carefully for the beast and there's often lengthy discussion over the animal hierarchy, but you'll get there in the end. Trust me - it's a winner.

In a friend's restaurant the second cheapest wine has a higher profit margin to the cheapest, becase so many people pick it.

Over many years I have found the best way to value my Red Wine has been to test the depth of the dimple.

The larger the dimple the better the wine. Your comments would be gratefully appreciated .....