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Don’t fear second cheapest wine on the menu, says study

The second cheapest bottle of wine on a restaurant list isn't always the worst value option, according to newly published research that has claimed to dispel an ‘urban myth’.

It’s not true that the second cheapest wine on a restaurant list always carries a bigger price mark-up versus other bottles on the menu, suggests new research. 

Experts at the London School of Economics (LSE) and the University of Sussex business school analysed hundreds of wine lists at London restaurants and found no evidence of the ‘rip-off’ theory.

‘It has been a long-held assumption that the second-cheapest bottle on a restaurant wine list is priced with a greater mark-up to exploit naïve diners embarrassed to choose the cheapest option,’ said professor David de Meza, a study co-author from LSE’s department of management. 

‘Our study challenges the notion and finds that the percentage mark-up on the second cheapest wine is significantly below that on the third, fourth, and fifth cheapest wine and well below the peak mark-up, which tends to occur around the median wine on the menu.’

The researchers used data from 470 wine lists at 279 London restaurants gathered in 2015. Their analysis has recently been published in a working paper by the American Association of Wine Economists (AAWE)

Red wines analysed had an average price of £42-a-bottle, although the most expensive was listed for £7,630. The average white wine price was lower, at £30 per bottle.

Dr Vikram Pathania, study co-author and reader in economics at the University of Sussex business school, said it made sense that some of the biggest mark-ups would be in the mid-priced wines on the list. 

‘Having the highest percentage mark-ups on the middle wines can be logically explained,’ he said.

‘It would be reasonable to assume that at the low end of the wine [list], margins are kept down to encourage consumption. At the high end, low margins induce customers’ upgrading to the more expensive wines on the list.’

Overall mark-ups on restaurant wine lists may vary considerably between venues, as well as on individual lists. Yet the topic has long sparked debate. 

The researchers in the recently published AAWE study also found that the mean percentage mark-up for restaurant wines compared to retail prices was more than threefold. 

They also found that buying wine by the glass, instead of by the bottle, ‘does not put drinkers significantly out of pocket’. 

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