The love of wine between ritual and reason
Posted May 22, 2018
Bronze is the mirror of the form, wine of the heart. ~ Aischylos
Rational agents in the market place know what they want and they pay the equilibrium price. We could leave it at that, but humanity often does not slavishly bend to the demands of economic rationality (Thaler, 2015; reviewed in Krueger & Kutzner, 2017). I want to relate an episode to shed light on my – and other similarly constituted people’s – inefficient market behavior. We begin with the observation that the value of a good or a service is not always evident. Moreover, we sometimes do not know our own preferences well. Clear preferences may not even exist at all, and have to be made up in the moment. From time to time, we sheepishly reconstruct preferences after the moment of market activity has passed. These reconstructions elicit delight when the bargain was good, and regret when it was poor. When our minds are unsettled in this way, clever Econs may see and exploit opportunities for additional gains. They may charge us more than they otherwise might.
I have grown a small repertoire of experience in wine tasting in the Upper Rhine region. When visiting a Domaine, I look forward to being invited to sample 4 or 5 vintages before settling on a purchase, with a bottle of Sylvaner or Burgundy typically going for less than €10. The tasting is a ritual, which when done well adds value to the experience. The sampling proceeds along a dimension of interest such as the amount of residual sugar or the degree of acidity, while the host narrates vinicultural lore and technique. My favorite venues are family-run vineyards that work the whole process from grape to bottle. A good tasting is followed up with a visit to the cellar and – if it is near enough – a trip to the vineyard itself.
On my last excursion into wine country, I walked into a Vinothek, thinking I might find some local Rivaner. A “Vinothek” or “Enoteca,” is a boutiquish wine store, with more gloss than a family-run yard, and less involvement with production. Perhaps this explains what happened next. The salesperson, with a can of Red Bull by her side, did not know what a Rivaner was and cautioned that most of the wine on hand was in “zue Flaschen” (shut bottles – with the adverb ungrammatically pretending to be an adjective). There was a Chardonnay, which I don’t much care for, and a Pinot Gris, which tasted good. Not having any more options, I said 'I’ll take the Pinot.' That would be €19, in cash. No card accepted. No receipt given. I was out on the street wondering what had happened.
Here is what happened: My experience with wine tasting is limited, but enough to form a behavioral script to take me through the ritual. The script was activated when I walked into the Vinothek; its violations (the zue bottles, the can of Red Bull, the ignorance) were not enough to make me disengage. Instead, I redoubled my efforts to stay on script, by, for example, offering prompts for ritual-sustaining conversation. A central feature of the script is that I cannot walk out without buying a bottle. The norm of reciprocity demands it (Gouldner, 1960). Once activated, a script runs on its own force, and is thus exploitable (Schank & Abelson, 1975). The seller may have understood that my script-bound behavior weakened my readiness to appraise the asking price critically. I was already knee-deep in presumed compliance (Cialdini, 1984). After the announcement of the €19 tag, I should have left the tasting-buying script and enter a negotiation script (Krueger, 2017). This would have been possible but difficult because switching scripts is a kind of social violation in its own right, and should be used sparingly. As well, my ignorance of what this wine was ‘truly worth,’ and of whether I was being singled out for being overcharged, stood in the way. I had no well-defined reservation price in mind. Economists assume that we bring reservation prices to the bargaining table. The Willingness To Pay (WTP) is the maximum amount of money a rational agent is willing to surrender for a given good or service (Becker et al., 1964). The WTP is supposed to be in place as a psychological commitment before negotiation begins. Sometimes, as in my case, the WTP presents itself only after a purchase has been made. In the street, I realized that I should not have agreed to a double-digit price without sufficient reason. The regret of having done so and having violated self-interest was sharpened by a sense to hindsight shame, a feeling that I should have seen the ruse coming and should have said Nein danke. In short, the power of the otherwise beautiful wine-tasting script is that a clever Econ can subvert it to elicit mindless compliance (Langer, Blank, & Chanowitz, 1978).
Digestif. One might wonder what the big deal is. €19 may not seem like an oenomaly against the background of the highly taxed wines in the USA or the prize-winning reserve vintages of the Médoc. Context matters here, and that is the usual range of prices in this region. A trickier question is what I might have learned if the Red Bull clerk had educated my palate. Some economists have sought to understand how wine is priced, and an interesting result is that what you see on the bottle (year, vintage etc) matters more than how the wine tastes (Combris et al., 1997). Most likely, I will not know the difference between the Pinot and the humble Rivaner (see photo), I bought in Gönnheim for €6.50. Perhaps only the latter was a so-called Trink-, Zech-, or Schankwein, i.e., a recent and decent wine without any particular distinction.
Becker, G., Morris, M., DeGroot, H., & Marschak, J. (1964). Measuring utility by a single-response sequential method. Behavioral Science, 9, 226-32.
Cialdini, R. (1984). Influence: The psychology of persuasion. Boston, MA: Allyn & Bacon.
Combris, P., Lecocq, S., & Visser, M. (1997). Estimation of a Hedonic Price Equation for Bordeaux Wine: Does quality matter? The Economic Journal, 107, 390-402.
Gouldner, A. W. (1960). The norm of reciprocity: A preliminary statement. American Sociological Review, 25, 161-178.
Krueger, J. I. (2017). The hedgehog’s tales: 37 essays on elements of social interaction. Amazon.com, kindle.
Krueger, J. I., & Kutzner, F. (2017). Homo Anomalus: Richard Thaler’s Kuhnian adventure. Review of ‘Misbehaving: The making of behavioral economics’ by Richard Thaler. American Journal of Psychology, 130, 385-389.
Langer, E., Blank, A., & Chanowitz, B. (1978). The mindlessness of ostensibly thoughtful action. Journal of Personality and Social Psychology, 36, 635-642.
Thaler, R. H. (2015). Misbehaving: The making of behavioral economics. New York, NY: Norton.