All Working Papers

Bordeaux is a region of France and red Bordeaux wines have been produced in the same place, and in much the same way, for hundreds of years. Yet, there are differences in quality and price from year to year that can sometimes be quite large. Until very recently, these quality differences have been considered a great mystery. In this paper I show that the factors that affect fluctuations in wine vintage quality can be explained in a simple quantitative way. In short, I show that a simple statistical analysis predicts the quality of a vintage, and hence its price, from the weather during its growing season. Along the way, I show how the aging of wine affects its price, and under what circumstances it pays to buy wines before they are at their best for drinking. Since this procedure for predicting wine quality has now been in use for over a decade, I also provide an appraisal of its successes (and failures), and a discussion of the role this information has played in the evolution of the wine trade. When a red Bordeaux wine is young it is astringent and most people will find it unpleasant to drink. As a wine ages it loses its astringency. Because Bordeaux wines taste better when they are older, there is an obvious incentive to store them until they have come of age. As a result, there is an active market for both younger and older wines. Traditionally, what has not been so obvious is exactly how good a wine will be when it matures. This ambiguity leaves room for speculation, and as a result, the price of the wine when it is first offered in its youth will often not match the price of the wine when it matures. The goal in this paper is to study how the price of mature wines may be predicted from data available when the grapes are picked, and then to explore the effect that this has on the initial and final prices of the wines.

This article analyses the way some 6,000 European wine consumers, both connoisseurs and non-connoisseurs, use a set of available signals (price, umbrella branding, goodwill, past consumption) to assess the quality of Bordeaux wines where price is the main source of information on quality. Connoisseurs use this signal less intensively than nonconnoisseurs. Price represents a substitute for umbrella branding where consumers are not aware of who is beneath this umbrella, and where this signal is thus of no help to them. This could explain why such wines tend nowadays to lose market share in favor of branded wines that are easier to evaluate.

We study whether quality assessments made by wine experts and by consumers (based on prices obtained at auction between 1980 and 1992), can be explained by variables describing endowments (land characteristics, exposures of vineyards) and technologies (from grape varieties and picking, to bottled wines). However, since technological choices are likely to depend on endowments, the effects can only be identified using an instrumental variables approach. We show that technological choices affect quality much more than natural endowments, the effect of which is negligible.

The purpose of this paper is to measure the impact of Robert Parker’s oenological grades on Bordeaux wine prices. We study their impact on the so-called en primeur wine prices, i.e., the prices determined by the chaˆteau owners when the wines are still extremely young. The Parker grades are usually published in the spring of each year, before the wine prices are established. However, the wine grades attributed in 2003 have been published much later, in the autumn, after the determination of the prices. This unusual reversal is exploited to estimate a Parker effect. We find that, on average, the effect is equal to 2.80 euros per bottle of wine. We also estimate grade-specific effects, and use these estimates to predict what the prices would have been had Parker attended the spring tasting in 2003.