We use experimental data to disentangle signaling and budgetary effects of price on wine demand. The experimental design allow us to isolate in a simple and intuitive way the two effects. The signaling effect is present and nonlinear: it is strongly positive between EUR3 and EUR5, and...

We separate the budgetary and non-budgetary effects of price on demand using choice data from wine tasting experiments in which consumers tasted wines of different quality accompanied by fictitious price information. The non-budgetary effect is present and nonlinear: it is strongly positive...