David de Meza, professor of management at London School of Economics and Political Science.
The next time you order wine off a restaurant’s wine list, go ahead and buy the second-cheapest bottle—surprisingly, it does not have the highest price markups.
Conventional wisdom says that most restaurant- goers have little idea which wine to order, so they opt for the second-cheapest bottle of wine on the menu in order not to appear stingy. But it is a misconception that restaurateurs exploit this behavior by specifically gouging diners on the relative price of the next-to-lowest-cost bottle.
A recent study of the wine lists at 249 London restaurants by the American Association of Wine Economists showed that markups on wine actually were modest on the second- cheapest bottle and other inexpensive offerings—about 275% over the retail price—because restaurants hope to entice diners who would not otherwise order a bottle at all. Researchers believe that the results would apply to very cosmopolitan markets in the US as well.
Markups also were modest at the high end of the wine list—about 265% over retail—to encourage wine connoisseurs to stick with the more expensive wines or even trade up to fine wines that they assumed were out of their price range.
The study, which looked at restaurant wines ranging from $12 to $10,680 a bottle, found that mid-ranged wines had the highest markups—about 305% over retail—to take advantage of the fact that most diners who order wine gravitate toward mid-priced bottles. Why do diners do that? They assume that mid-priced bottles offer the best compromise between price and quality.
Another popular misperception: Wine by the glass is outrageously expensive compared to ordering an entire bottle. In fact, the study found the price of a glass of restaurant wine is just 13.1% more, on average, than you would pay to purchase an entire bottle of an equivalent wine.