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Working Paper No. 126

Published: 2012
Category:
Economics

Sustainability of Top Ranked Restaurants in France: Methodological Note and Analysis of Gault-Millau Data from 1974 to 2010

J. François Outreville
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Abstract
Do well-known restaurants stand the test of time? The objective of this short paper is to review the list of the top ranked restaurants from 1974 to 2010 and examine the sustainability of the grades of these restaurants over time. A new methodology to calculate migration and default rates is presented for selected years over the period under study. It is shown that these rates are relatively stable and low compared to bankruptcy rates. After 24 years, the default rate of top ranked restaurant is only about 32%.

Working Paper No. 125

Published: 2012
Category:
Economics

From Internal Taxes to National Regulation: Evidence from a French Wine Tax Reform at the turn of the Twentieth Century

Raphaёl Franck, Noel D. Johnson & John V.C. Nye
Full Text PDF
Abstract
The growth of the modern regulatory state is often explained in terms of an unambigu- ous increase in regulation driven by the actions of central governments. Contrary to this traditional narrative, we argue that governments often strove to weaken the autar- kic tendencies of regional laws, thereby promoting greater trade and a more integrated market. For this purpose, we focus on the wine industry in France at the turn of the twentieth century and take advantage of a quasi-natural experiment generated by a law implemented on 1 January 1901 which lowered and harmonized various local tax rates. We show that high internal taxes on wine, set by regional governments, discouraged trade and protected small producers. We then trace how the political response to this tax decrease led to increases in wine regulation.

Working Paper No. 124

Published: 2012
Category:
Economics

Château Migraine or Château Riche? An Empirical Study on Wine as a Financial Asset

Querijn E. Beijer
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Abstract
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Working Paper No. 123

Published: 2012
Category:
History

The Organization of Rome’s Wine Trade

Alexander Conison
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Abstract
This project has relied on the help, directly and indirectly, of my many colleagues, advisors, and friends here at the University of Michigan. But my space here is short, and it is altogether impossible to describe the suggestions, questions, and conversations held in the Classics department, Ann Arbor bars, and friends’ homes which have allowed me to bring this project to completion. First, the financial and intellectual support given me by the University of Michigan and the Interdepartmental Program in Greek and Roman History has been beyond generous. My fellow students in IPGRH, IPCAA, and Classical Philology are among the most pleasant, intelligent, and entertaining group of colleagues one could hope for. I owe, in addition, singular debts of gratitude to the following people: Ben Acosta-Hughes; Alex Angelov; Michelle Biggs; H.D. Cameron; David, Jay, & Nancy Conison; Kevin Dicus; Bruce Frier; Traianos Gagos; Charlotte Maxwell-Jones; Raji Mittal; Jason Parnell; Davorka “Seki” Radovcic; Jon Rowland; Gina Soter; Ray Van Dam. Brief words here could not possibly do justice to the many ways, great and small, you all have impacted my life over the last six years.

Working Paper No. 122

Published: 2012
Category:
Economics

Risk taking when buying wine: an experimental investigation

J. François Outreville
Full Text PDF
Abstract
The act of purchasing wines is clouded with insecurity and many wine purchases therefore involve risk-aversion. Risks include functional, such as the taste of the wine or the physical aspects of the product, social, such as being embarrassed is the quality is not adequate, financial because of the cost of the product. Different people will respond to similar risky situations in very different ways. Numerous experiments have been undertaken by psychologists and economists in attempts to understand the behavior of risk-averse persons.
The experiments reported in this paper try to shed some light on this issue by analyzing choices within the framework of a purchase decision of a wine bottle when the context assumes a possible functional risk. The experiments are conducted with graduate and undergraduate students in different countries using a questionnaire and assuming either no information or full information on the probability that the wine may have a functional risk. The demand function is negatively related to the price of a bottle as expected. When potential buyers are facing a known functional risk, the demand curve is shifting downward.

Working Paper No. 121

Published: 2012
Category:
Economics

Sustainable Certification for Future GEenerations: The Case of the Wine Industry

Magali A. Delmas & Olivier Gergaud
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Abstract
While business sustainability has been defined as the protection of the ability of future generations to meet their own needs, we still have little understanding of how to facilitate investments in practices geared at long-term sustainability. In this paper we seek to understand the conditions that facilitate a long-term business perspective. We investigate how family ties to future generations can facilitate the adoption of sustainable practices. Using data from 248 wineries in the U.S. collected through a survey questionnaire, we show that ties to future generations, measured as the intention of the owner of the winery to pass down the winery to their children, positively impacts the adoption of sustainable certification. We also found that winery owners were motivated by both positive potential market outlook for sustainable wine and increase in quality of their product associated with certification, and that the market outlook motivation was stronger for higher levels of certification.

Working Paper No. 120

Published: 2012
Category:
Economics

Restaurant Strategy and Restaurant Performance: Evidence from the Mediterranean Sea

Bernd Frick, Olivier Gergaud & Petra Matic
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Abstract
The ultimate goal of strategic decision‐making is to realize sustainable profits. To achieve this objective, managers must devise ways to create and capture value. Apart from actions to reduce production costs, to lower consumer transaction costs or to devise new products or services, the most promising strategy is to in‐ crease product demand by horizontal differentiation, i.e. by making the product sufficiently different from similar products offered by the competition. Using a large sample of restaurants from Croatia, a popular holiday destination in South‐ ern Europe, we show that adoption of either a “celebrity strategy” or a “wine strat‐ egy” is associated with significantly higher revenues. Since they require substantial investment in social capital or access to financial capital both strategies are diffi‐ cult, if not impossible to imitate.

Working Paper No. 119

Published: 2012
Category:
Economics

Reputation Tapping

Bradley J. Rickard, Jill J. McCluskey & Richard W. Patterson
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Abstract
Models of collective reputation are extended here to consider the effects from regional marketing efforts that attempt to establish links to famous production regions—a phenomenon we define as “reputation tapping”. We collect data from a laboratory experiment and estimate consumer response to information that ties U.S. wine regions to French wine regions. Results show that reputation tapping is significant for wines from emerging regions and important among subjects that are relatively knowledgeable about wine. Our findings also suggest that full protection of geographical indications would require the regulation of activities beyond those by individual firms.

Working Paper No. 118

Published: 2012
Category:
Economics

The Detrimental Effect of Expert Opinion on Price-Quality Dispersion Evidence from the Wine Market

Karl Storchmann, Alexander Mitterling & Aaron Lee
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Abstract
In this paper we analyze the effect of expert opinion on the price-quality dispersion of experience goods by referring to a large sample of wines produced in the U.S. When controlling for the number of past critical reviews and for past quality scores attained on the producer level, the following results emerge from our analysis: (1) Price-quality dispersion grows with the level of past critical exposure. (2) Price- quality dispersion grows with the level of past maximum scores obtained. This is particularly pronounced if the difference between maximum and average points is high. (3) Both effects mentioned above exert their largest spillover in the low- quality bracket resulting in significant overpricing of mediocre wines.

Working Paper No. 117

Published: 2012
Category:
Economics

Measuring Consumer Willingness to Pay for Low-Sulfite Wine: A Conjoint Analysis

Christopher Appleby, Marco Costanigro, Dawn Thilmany & Stephen Menke
Full Text PDF
Abstract
Using stated choice methods, a sample of 223 wine consumers participated in a conjoint experiment where 36 hypothetical wine labels were ranked based on organic and “no sulfites added” labeling, as well as varying price and quality levels. The results indicate that quality and price are the primary factors influencing wine choice, while “no sulfites added” labeling does not directly determine the purchasing decision. However, we find strong evidence that, at parity with price and quality, the average consumer is willing to pay $0.64 for no sulfites added in wine. Additionally, a substantial segment (34.08%) of the consumer population is willing to pay a greater premium of $1.23 for no sulfites added, indicating a potential niche market to which marketing promotions could be targeted.

Working Paper No. 116

Published: 2012
Category:
Business

Port Wine Distribution Strategies Buyer/Seller Cooperation

Luis Sequeira
Full Text PDF
Abstract
The main purpose of this study is to research buyer-seller cooperation in the distribution of Port wine. Eight research hypotheses were derived from data collected by case study, and incorporated into a quantitative questionnaire distributed to commercial directors of 52 producer companies and 49 distributors. A binary probit model was developed to analyze the Likert-scaled answers in valid questionnaires returned by 32 producer respondents and 29 of distributor respondents. The results of the study show that (1) conflict, when permanent and intense, inhibits the development of cooperative relationships; (2) trust is likely to solve conflicts; (3) a combination of trust and adaptation increases the potential for cooperation; and (4) the presence of a foreign employee at the interface between producers and distributors does not negatively affect the level of cooperation. Lastly, cooperation can be considered as an important means of developing skills and resources, which can then be applied to existing transactional relationships.

Working Paper No. 115

Published: 2012
Category:
Economics

How the liberalization of planting rights will affect the wine sector of Rheinland-Pfalz, Germany: a partial equilibrium analysis

Mariia Bogonos, Barbara Engler, Marc Dressler, Jurgen Oberhofer & Stephan Dabbert
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Abstract
This study aims at predicting the effects of planting rights liberalization on the wine industry of south-western region of Germany. Introduced by the CAP reform of 2008, abolishment of planting rights shall go into effect from 2018 the latest and is expected to cause changes in production volumes and market prices for wine throughout the EU. Rheinland-Pfalz is the most important wine producing region in Germany and thus investigated as a relevant case study here.
In order to assess the effects of planting rights liberalization a long run static partial equilibrium model is developed. The model projects equilibrium supply, demand and wholesale market price for two types of wine: barrel quality wine and wine for further processing. Since the modelling is conducted for the long term perspective, climate change effects on the land suitability for wine grapes growing are taken into consideration. With abolishment of planting rights, the model projects an increase of production of quality wine and wine for further processing and the fall of their domestic market prices.

Working Paper No. 114

Published: 2012
Category:
Economics

Quality Classifications in Competition – Price Formation in the German Wine Market

Jörg Rössel & Jens Beckert
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Abstract
How do judgment devices influence price formation? We investigate this question through a study of the German wine market. The German wine market is characterized by the simultaneous existence of two classification systems: the official classification system referring to the “quality in the glass,” and the concept of “terroir,” introduced by a private association of quality winemakers, the Verband deutscher Prädikatsweingü- ter. We used a data set comprising 1,890 wines from 248 different wineries in the German wine-growing regions of Rheingau and Rheinhessen. Our results show that the two classification systems function as mutually exclusive strategic options for wine- makers. We also show that the non-official classification of terroir is much more power- ful in explaining price formation within the market.

Working Paper No. 113

Published: 2012
Category:
Business

A Comparison of Wine Purchasing Behaviors in Ireland and California When the Celtic Tiger Roared

Marianne McGarry Wolf, David Dudley, Megan Ginny Rood, Sarah Geraghty & Ann M. Torres
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Abstract
In 2006 the Irish wine market was growing rapidly along with its Celtic Tiger economy (Euromonitor, 2008). Total wine sales in Ireland more than quadrupled in the seventeen-year span from 1990 to 2007 (Geraghty and Torres, 2009). While wine consumption in Ireland was growing at a rapid rate, US consumption was growing, but at a slower rate. (Euromonitor, 2010). According to Moran, Ireland’s increased consumption of wine was due primarily to improved accessibility, affordability, and branding of wine. Geraghty and Torres conducted research in Galway Ireland in 2006 among 307 wine consumers and identified three clusters of wine consumers in Ireland: the casual wine buyer, the value seeking wine buyer, and the wine traditionalist (Geraghty , 2009). These clusters provided insight into the consumers behind the increase in wine consumption. The recent recession however, has caused the wine sector in Ireland to plummet (Euromonitor, 2010).
The purpose of this research was to compare the California market consumers to the consumers in the Irish market that was growing at a rapid rate to identify similarities and differences in the factors that impact wine demand in the two countries.

Working Paper No. 112

Published: 2012
Category:
Business

Using Social Media for Collaboration About Industry News in Higher Education

Marianne McGarry Wolf, Mitch Wolf, Leanne Brady, Hanna Peszynski, Lindsey Higgins & Shane Wolf
Full Text PDF
Abstract
Social media use has surged in the past decade. Facebook has 900 million global users (Wall Street Journal, 2012). Recognizing that many of these 900 million users are potential customers (a search on Facebook in May 2012 revealed that there are 11.5 million US Facebook users that “like” wine, beer, or spirits), the wine industry has embraced social media (Vinography, 2012). Wineries are using social media as a tool to reach consumers and as a tool to reveal their brand quality and personality (The Tribune, 2011). In a survey of 118 of Texas’ 181 bonded wineries, nearly 80% of them were actively engaged in social media, with the majority not only using social media for customer connections, but also using social media for establishing industry connections and finding suppliers (Lau et. al, 2011). A survey by ABLE Social Media Marketing revealed that 94% of American wineries are on Facebook and 73% are on twitter (ABLE Social Media Marketing, 2012). They further found that 47% of wineries said that Facebook helps them generate sales and 72% sell wine on their websites.
Bradley and McDonald indicate that knowledge management is what company management tells employees they need to know. In higher education faculty practice knowledge management by telling the students what they need to know. Social media is a method peers use to show connections the content they think is important. Bradley and McDonald believe that organizations can gain value from social media through mass collaboration (Bradley and McDonald, 2011). Since industry, and in particular the wine industry, is using social media to enhance interactions between professionals and with consumers, how is higher education preparing their graduates to use social media in their careers? Have students pursuing wine-related higher education used social media to enhance their learning and prepare them for industry?
A 2011 survey by Pearson Learning among 1,920 professors of higher education, found that almost two-thirds of faculty are using some form of social media for their courses (Moran et. al., 2011). The purpose of this research is to examine how social media is being used to enhance learning among students at California Polytechnic State University. Further, this research aims to identify if there are differences in the attitudes and behaviors of wine and viticulture students compared to other students related to social media and industry information. The wine and viticulture students examined in this research are pursuing degrees in both enology and viticulture.

Working Paper No. 111

Published: 2012
Category:
Economics

Estimating the effect of climate change on Argentine viticulture

María Antonella Mancino
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Abstract

This paper measures the impact of annual changes in temperature and rain on wine prices and revenue per hectare, in order to determine the effect climate change will probably have on viticulture.
Using the Ricardian Methodology and the prices and volumes data from Mendoza Board of Trade, Wine National Institute and Argentina’s Ministry of Agriculture I find a non-linear relationship between temperature and revenue per hectare. In Mendoza, income per hectare would reach its maximum for an average temperature of 17.5°C during the grapevine’s growing season.

Working Paper No. 110

Published: 2012
Category:
Business

An Exploration Study of Clusters, Knowledge Exchange and the Climate Change Issue

Jeremy Galbreath, Des Klass & David Charles
Full Text PDF
Abstract
This study explores the climate change issue in the Tasmanian wine cluster. Following cluster theory, we predict knowledge exchange on climate change is widespread in the overall cluster, while component knowledge on climate change is exchanged more readily than architectural knowledge. We also predict knowledge exchange on climate change is more widespread within sub-clusters than between them. Using network analysis and a quantitative approach, all three hypotheses are rejected. A discussion of the findings and their implications is presented along with future research directions.

Working Paper No. 109

Published: 2012
Category:
Business

The Pennsylvania Wine Monopoly

Robert P. Sechrist
Full Text PDF
Abstract
Wine for home consumption in Pennsylvania is, with the exclusion of winery sales, purchased from the state owned monopoly stores. The flow of wine from its sources, through the Pennsylvania monopoly system and to the consumer is tracked in this study. Volumes and values of wine from around the world are compared in the Pennsylvania marketplace. The popularity of many types, varieties, and styles of wine are compared. Seasonality of consumer preference is discussed.

Working Paper No. 108

Published: 2012
Category:
Economics

Expert Opinion and Quality Perception of Consumers: Evidence from New York City Restaurants

Olivier Gergaud, Karl Storchmann & Vincenzo Verardi
Full Text PDF
Abstract
Exploiting a natural experiment for New York City restaurants we analyze whether consumers’ quality perception is influenced by newly appearing expert opinion. As the leading restaurant guide Zagat has rated New York City’s restaurants since 1979 by drawing on consumer surveys. In 2005, with the first release of the red Michelin Guide New York City, Zagat faced a serious competition. In contrast to Zagat, Michelin relies on experts. Employing a difference-in-differences approach we analyze whether consumer assessments (Zagat ratings) have responded to Michelin quality assessments. While we do not find any significant Michelin-induced increase in perceived food quality, we find strong Michelin effects on service and décor quality. In addition, the inclusion in the Michelin guide induced substantial price increases. While restaurants that were not Michelin-reviewed can raise their prices in response to food quality improvements, service and décor improvement do not payoff. In contrast, Michelin-reviewed restaurant enjoy substantial returns only to service and décor improvement. Our results suggest that expert opinion on the New York City restaurant market exerts a negative externality on gourmets by giving restaurants incentives to invest mainly in service and décor leading to higher prices.

Working Paper No. 107

Published: 2012
Category:
Business

On he Relevancy of Climate Change to Business: Evidence from the Margaret River Wine Region of Australia

Jeremy Galbreath
Full Text PDF
Abstract
This study explores the relevancy of climate change to business using a sample of wine firms operating in Margaret River, Western Australia, one of the premier wine regions of the world. Using a qualitative approach based on thematic analysis, the results challenge the extent to which climate change is a salient stakeholder, while demonstrating that the phenomenon may, in fact, be beneficial. Response actions towards climate change demonstrate both mitigative and adaptive actions, although differences in their level and rate of implementation appear to be attributable to a mix of normative and instrumental trade-offs. Implications of the findings are discussed, with a particular focus on location theory and economic barriers as a key driver of trade-offs between the choice of mitigative or adaptive response to climate change.

Working Paper No. 106

Published: 2012
Category:
Unkategorized

A Taste for New York: Restaurant Reviews, Food Discourse and the Field of Gastronomy in America

Mitchell Davis
Full Text PDF
Abstract
The quality of this reproduction is dependent upon the quality of the copy submitted. Broken or indistinct print, colored or poor quality illustrations and photographs, print bleed-through, substandard margins, and improper alignment can adversely affect reproduction.
In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if unauthorized copyright material had to be removed, a note will indicate the deletion.

Working Paper No. 105

Published: 2012
Category:
Economics

Climate change and the future of South Africa’s wine industry

Nick Vink, Alain Deloire, Valerie Bonnardot & Joachim Ewert
Full Text PDF
Abstract
An attempt is made to synthesise the lessons from at least four different ways of looking at the South Africa wine industry: economics, climatology, viticulture, and the sociology of work. To this end, the economic performance of South Africa’s wine industry since democratisation in the early 1990s is reviewed, as is the effect of climate change on the industry. This is followed by an assessment of possible strategies for building international competitiveness whilst simultaneously coping with the effects of climate change. Here we argue that, while industry systems should allow the marketing of speciality wines (e.g. from a single vineyard, from a single estate), this is not a viable strategy for most wine producers. Furthermore, climate change will lead to volatility in the characteristics that identify different terroirs. For this reason, industry strategies should rather focus on the benefits of diversity, but with a range of adaptations that will also result in better quality wines. These encompass quality; geographic location; viticultural practices; the style of wines and the renewal of skills. In synthesising this argument, we then consider whether such a strategy could enhance or hinder greater international competitiveness for the industry.

Working Paper No. 104

Published: 2012
Category:
Economics

War, Taxes, and Borders: How Beer Created Belgium

Koen Deconinck & Johan Swinnen
Full Text PDF
Abstract
The present-day border between Belgium and the Netherlands traces back to the separation of the Low Countries after the Dutch Revolt (1566-1648) against Spanish rule. The capacity to finance war expenditures played a central role in the outcome of this conflict. Excise taxes on beer consumption were the single largest income source in Holland, the leading province of the Dutch Republic. Beer taxes thus played a crucial role in financing the Dutch Revolt which led to the separation of the Low Countries and, eventually, the creation of Belgium.

Working Paper No. 103

Published: 2012
Category:
Economics

Agricultural landscape, vineyards and tourism flows in Tuscany, Italy: Results from an applied economic study

Paulo A.L.D. Nunes & Maria L. Loureiro
Full Text PDF
Abstract
It is widely acknowledged that landscape features can play a major role in determining tourism demand. The analysis presented in this work aims at assessing the impact of agricultural landscape and high-quality wine production on regional tourism flows. This paper focuses on Tuscany, a major touristy region in Italy renowned for its pleasant climate and enchanting countryside. Thus, agricultural landscape and high-quality wine production have been included as explanatory variables in a regression model encompassing also the socio-demographic and geographical characteristics of each municipality, accommodation availability, the presence and availability of protected areas and the main types of tourism attraction factors, such as art and proximity to the seaside. This model has been run tourist demand, which has then been disentangled into the international and domestic markets. Results allow concluding that agricultural landscape and the production of quality wines represent a positive externality for tourism flows. A monetary evaluation of the impacts of agricultural landscape and wine production has been performed. The results show that the yearly contribution of these externalities to the revenue of tourism services differs across the provinces. This can have important policy implications for tourism promotion choices and allows drawing a profile of the average tourist visiting different parts of Tuscany.

Working Paper No. 102

Published: 2012
Category:
Economics

Location illusion in the wine market: The eroding effect of word-of-mouth on the regional reputation premium

Omer Gokcekus & Dennis Nottebaum
Full Text PDF
Abstract
We develop a model to examine (1) the relationship between initial wine prices, regional reputation and bottle quality, as well as (2) the potential impact of a word-of-mouth effect, particularly via online social wine networks on price discounts. Regression estimation results based on this model provide empirical evidence to support the existence of a premium attached to bottle quality and regional reputation in setting initial prices. Moreover, we find a significant positive effect of regional reputation on discount rates, which indicates the existence of a word-of-mouth effect and its eroding effect on the regional reputation premium.

Working Paper No. 101

Published: 2012
Category:
Economics

Do Consumers Exploit Precommitment Opportunities? Evidence from Natural Experiments Involving Liquor Consumption

B. Douglas Bernheim, Jonathan Meer & Neva K. Novarro
Full Text PDF
Abstract
The object of this paper is to provide evidence concerning the extent to which consumers of liquor exhibit a demand for precommitment devices. One of the most frequently mentioned strategies for exercising self-control is to limit the availability of a problematic good by not maintaining an easily accessed supply. In a policy regime with shorter sales hours (either for on- premise or off-premise consumption), this strategy should be more effective; hence, if the strate- gy is widely used, alcohol consumption should be lower. In contrast, without time inconsistency, one would expect liquor consumption to decline with shorter on-premise sales hours (because of complementarities between liquor and other on-premise activities such as dining and socializ- ing), but not necessarily with shorter off-premise sales hours (because liquor is storable at low cost and the experience is repeated with high frequency). We examine a collection of natural ex- periments in which states expanded allowable Sunday sales hours for liquor. Our results indicate that consumers increase their liquor consumption in response to extended Sunday on-premise sales hours, but not in response to extended off-premise sales hours. Thus we find no indication that precommitment strategies affecting availability play meaningful roles in aggregate liquor consumption. Instead, the observed pattern coincides with predictions for time-consistent con- sumers who have rational expectations and low costs of carrying inventories.

Working Paper No. 100

Published: 2012
Category:
Business

The Experience of New Zealand in the Evolving Wine Markets of Japan and Singapore

Michel Rod & Tim Beal
Full Text PDF
Abstract
In this paper, we explore the developing wine markets of Japan and Singapore for New Zealand wine. Apart from several reflections from the authors regarding their experiences looking specifically at the prevalence of New Zealand wine in these two Asian markets, this paper is largely a conceptual review of the literature along with descriptive statistics illustrating the current state of affairs regarding the topic of interest.

Working Paper No. 99

Published: 2012
Category:
Economics

Quality Considerations for Coordination of the California Wine-Grape Supply Chain

Jason R.V. Franken
Full Text PDF
Abstract

This study investigates factors influencing coordination of the California grape and wine supply chain. Results corroborate prior findings that quality considerations and needs to protect investments in specialized or durable assets significantly increase usage of more formal coordination mechanisms like formal contracts and vertical integration or ownership. Consistent with findings for other industries, such investments are associated with greater contract complexity and inclusion of enforcement provisions, while trade partners’ prior experience working together decreases contract complexity. Furthermore, our results suggest that quality considerations extend to greater use of formal contracts further downstream.

Working Paper No. 98

Published: 2012
Category:
Economics

Tasters’ Bias in Wine Guides’ Quality Evaluations

Stefano Castriota, Daniele Curzi & Marco Delmastro
Full Text PDF
Abstract
Over the last years the field of wine economics has seen a surge in the amount of research carried on. Apart from the charm exerted by the item itself, the wine market is ideal to conduct economic research since it is characterized by the presence of thousands of small and medium enterprises, enormous variety of products, abundance of information and consequent huge information asymmetries among producers and buyers.
Wine is an experience good because consumers learn only after purchase about the actual quality of the product. As pointed out by Akerlof (1970), this feature can lead to market failures due to the information asymmetry between the producer, who followed each step of the production process (Dubois and Nauges, 2010), and the consumer. In extreme cases this can prevent agents from buying the good.
In order to reduce information asymmetries and avoid market failures wine guides have assumed the function of rating agencies (Hay, 2010)4. An extensive literature relying on hedonic price models has shown that the judgment of experts strongly affects the final price of wines (see, among others, Arias-Bolzmann et al., 2003; Lecocq and Visser, 2006; Dubois and Nauges, 2010) since market prices are most often determined before consumers obtain any direct and personal information about the quality of the wine of the current year (Castriota and Delmastro 2011, Landon and Smith, 1997; 1998)5. As shown by Ali et al. (2008), famous gurus like Robert Parker can affect even en-primeur wine prices. Therefore, wine guides represent a key factor that affects the market price mechanism (Oczkowski, 2001).
In spite of its prominence in shaping market equilibria, a number of studies have started pointing out that wine experts may differ in their opinion (Cliff and King, 1997; Ashenfelter, 2006; Hodgson, 2008). This paper aims at providing new evidence on wine experts’ behaviour when forming quality ratings. Using a unique database on Italian wines we show that tasters’ quality evaluations are affected by personal bias, which leads judges to be systematically more or less generous than their colleagues, and by personal preferences towards certain wine characteristics. Our results are even more interesting if we think that the tasters under scrutiny here work for the same wine guide and share a set of common and agreed tasting and rating rules.

Working Paper No. 97

Published: 2012
Category:
Economics

A Mathematician Meddles with Medals

Neal D. Hulkower
Full Text PDF
Abstract

Scores of wine competitions are held annually to bestow gold, silver or bronze medals upon a select number of bottles. Only within the past few years has the reliability of the awards come under rigorous scrutiny and been found wanting. The focus of these studies has been on the decision makers. For major competitions, these are typically expert judges who may or may not have been trained and who may or may not have been screened for consistency. Since ultimately the credibility of the decisions stems from the credibility of the judges, how they are selected is critical. But once reliable judges have been empanelled, how their opinions are recorded and aggregated becomes of paramount importance. It is well-known that an outcome of any vote depends as much on the choice of method used to combine the votes as on any other factor (Saari 2001b). After examining a number of procedures for comparing wines, Amerine and Roessler (1983) concluded that “[r]anking procedures are then usually preferred” (p. 168). Ashenfelter and Quandt (1999) used rank values, which they called “Points Against,” introduced in Amerine and Roessler (1983) to reassess the famous Judgment of Paris red wine competition. This method is equivalent to the Borda Count which Hulkower (2009, 2011) emphasized is the most mathematically defensible for combining individual rankings of wines to arrive at an aggregate ranking. In addition to the unique properties summarized in the third section of this paper, the Borda Count avoids distortions introduced by summing or averaging points assigned by individual judges which can diminish the influence of tougher graders thereby violating “one judge, one vote.” The purpose of this paper is to offer a ranking procedure based on the Borda Count that can be used to award medals in a manner that most reliably and completely reflects each judge’s opinion while preserving “one judge, one vote.”
A summary of recent studies exposing problems with wine competitions is presented in the next section. The case for the Borda Count is made in the third section and a method for awarding medals based on it comprises the fourth section. The fifth section is a discussion that compares the method proposed in this paper to an alternative in the literature. Conclusions are contained in the sixth section.
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