Pricing uncertainty in wine markets following the Rudy Kurniawan scandal

ABSTRACT

This paper examines the impact of the Rudy Kurniawan fraudulent wine scandal on the market for wine sold at auction. Using data gathered from Wine Spectator’s Auction Highlights reports, we estimate the difference in average price per lot of wine sold at auctions before and after Mr Kurniawan’s arrest. We find a large statistically significant decrease (25–30%) in average price per lot following the arrest, with some evidence of even larger declines at Acker Merrall and Condit, the auction house most associated with the scandal.

KEYWORDS:

• Uncertainty
• quality
• fraud
• auction
• wine

JEL CLASSIFICATIONS:

• D44
• D8
• L15

Disclosure statement

No potential conflict of interest was reported by the authors.

ORCID

Erin K. Kaplan http://orcid.org/0000-0002-0524-1597

Notes

1 For more details of Rudy Kurniawan’s story, see the documentary Sour Grapes (2016).

2 We identified outliers using a cutoff of $15,000, which corresponds to a z-score of 3.68. However, our results are robust to including these auctions.

3 p = 0.56.

4 The vast majority of wines tasted in this year range (98.3% of the wines in our dataset) were produced in 2007 or later. We drop observations produced before 2007.

5 We also examined the effect on only high-priced wines by restricting the sample to wines priced $100 or more (the 75th percentile). We find similar results with this specification; there is no significant price difference for these wines after the scandal.