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Abstract
Oversupply has led to a number of perplexities for the Australian wine industry in
recent times. When disaggregated from the industry level, however, the problem can be
better described as a range of attribute-specific disequilibria. To date, the solutions to
this problem have predominantly revolved around supply-side policies of reducing
output through crop thinning or vine pulling. By contrast, this paper focuses on the
demand side and argues that the disequilibria may be reduced by gaining a better
understanding of the demand for Australian wine. A discrete choice model of product
differentiation is used to estimate the demand for wine in Australia’s second largest
export market, the United States. Implications of the analysis are explored.