Aging and the Auction Price of Wine: Investigation of Korean Wine Auction Market

Abstract

In this paper, we build an illustrative model of wine auction prices to investigate the impact of aging in Korean wine auction market. Extending previous literature investigating the fundamental value of wine, our model focuses on an auction price of wine that can differ from a fundamental value due to the uncertainty. We find a positive relationship between wine’s fundamental value and aging. We also find that such positive relationship lasts in auction price only if wine auction market is well-developed and mature, while the relationship is not observed in an emerging market like Korea. Our contribution is simple and straight forward. This is the first paper that analyzes the relationship between auction price and aging using data from emerging market.