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Home
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Working Papers
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The Signaling Values of Nested Wine Names

Working Paper No. 265

Published: 2021
Category:
Economics

The Signaling Values of Nested Wine Names

Jean-Sauveur Ay & Julie Le Gallo
Full Text PDF
Abstract
Unobserved quality challenges the empirical content of signaling theory, and often precludes the valuation of quality signals such as wine names. This paper uses the location of vineyard plots to control for unobserved wine quality when estimating the causal value of wine names on vineyard prices. The identification tackles unobserved spatial heterogeneity by newly combining a multi-cutoff spatial regression discontinuity design with plausibly exogenous name variations. We deal with standard requirements of causal inference – unconfoundedness and overlap – with instrumental variables and high-dimensional propensity models in a double robust framework. For the Burgundy region of France, we then recover the full causal signaling scheme of nested wine names with both a horizontal and a vertical dimension. This typical structure of names is monotone and complementary, as the names are consistently ordered within each dimension (rank preservation) and they present spillovers between them (umbrella effect). We find a high importance for unobserved wine quality, which produces heterogeneous signaling values.

Submission

Please send your papers as PDF files to the editor, Victor Ginsburgh, at vginsbur@ulb.ac.be
Papers will be quickly reviewed, prior to potential posting on the website. Decision will be to post or not, possibly with short comments, but without referee reports. The decision will be based primarily on the suitability of the paper’s topic to the aims of the Association.
Such decisions are independent of publication decisions for the Journal of Wine Economics.

Working Paper publication requires that at least one author
is a regular member of AAWE.

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