Homer Simpson, in a celebratory mood, once asked a waiter to bring over a bottle "of your second-least expensive champagne." The same buying principle is a well-known one in the world of wine—see this skewering at College Humor. The idea is simple enough. A novice poring over a wine list doesn't want to look bad by ordering the cheapest bottle and instead opts for the second cheapest. Another common perception is that restaurants know this and take advantage by marking up the second-cheapest bottle, per Food and Wine. But do they really? A working paper published by the American Association of Wine Economists calls this conventional wisdom an "urban myth," reports Quartz. Researchers looked at 470 wine menus from London restaurants and compared the menu prices to retail prices.
As it turns out, the cheapest and second-cheapest bottles were usually reasonably priced. In fact, the next four bottles up the list almost always had a higher markup. Also of note: the most expensive bottles on the list also had relatively low markups, perhaps because those buyers would be more likely to know if they were getting ripped off. The takeaway: For the best values, stick to the bottom or top of the list and avoid the middle. "It would be reasonable to assume that at the low end of the wine, margins are kept down to encourage consumption," says co-author David de Meza of the London School of Economics. That is, restaurants want to nudge people who might not normally buy a bottle to do so. "At the high end, low margins induce customers' upgrading to the more expensive wines on the list." (More wine stories.)
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