Optimal Wine Pricing for Restaurants
2015
Coqueret, Guillaume
We present a simple static way of optimizing the prices of bottles of wine for restaurants with a given cellar. In contrast to classical assortment pricing models, we posit that the cellar (i.e., inventory) is given and is not taken as a variable entering the optimization program. In our model, the optimal price is driven mainly by a rating parameter after the effect of initial cost is removed. This parameter plays the role of a dominant characteristic in hedonic models, even though the levels of stocks may also be determinant when they are very low. We provide a numerical sensitivity analysis of prices to various parameters and study a realistic large-scale example based on two wine lists with 50 bottles each. Finally, several extensions are discussed. (JEL Classifications: C61, L11, L83)
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