A Microeconomics-based approach to product design under uncertainty

In this paper, an existing methodology (Bagajewicz, 2007) for the development of consumer products is applied to winemaking. We use a price demand model that incorporates product quality and allows the determination of the most profitable product, which is not always the best product from the consumer’s perspectivea well known fact. The parameters of the model are however, uncertain, especially in the wine case. Thus, design under uncertainty needs to be performed. We present an analysis of profitable scenarios and their associated risk. The method allows vineyards to pick a specific wine quality, a production rate and bottle selling price based on their desired profitability and tolerable level of associated risk.