Journal of Wine Economics
Volume 1 | 2006 | No. 2
Growers vs. Merchants Bargaining on the Price of Champagne Grapes and the Role of Contracts when Bargaining is Unbalanced
Claire Chambolle and Olivier Saulpic
ABSTRACT | Pages 95-113
The contract between growers and merchants for the exchange of grapes on the Champagne market is a long-term agreement based on quantities. Commitments on quantities are made for several years and negotiated individually between growers and merchants. Each year, prices are negotiated at the interprofessional level, the interprofessional committee including members of the growers union, members of the merchants union and a government commissioner. It turns out that industrial organization theory, and more precise mechanisms outlined by incomplete contract theory are relevant to the analysis of such contracts in which prices and quantities are negotiated sequentially and by different groups of actors. We show that imposed pricing by the interprofessional organization can, in some cases, balance the bargaining power between growers and merchants and thus increase social welfare. At a time when the European Common Organization of Wine Markets casts doubt on interprofessional organizations, this result tends to justify their positive role.
Spatial Variations in Weather Conditions and Wine Prices in Bordeaux
Sébastien Lecocq and Michael Visser
ABSTRACT | Pages 114-124
The purpose of this paper is to study the impact of weather conditions on prices of Bordeaux wines. Unlike previous studies (based on data from the main weather station in Mérignac), we use climatological variables from many local stations. Two models are compared: one where prices are related to Mérignac weather conditions, and one where prices are related to local conditions (weather variables measured in the station the nearest to the château). Although a (non-nested) test suggests that the model based on local data is better, the two specifications lead to very similar results. This is reassuring news for researchers interested in the relationship between weather and prices, but who do not have access to spatial variations in climate.
The Paris 1976 Wine Tastings Revisited Once More: Comparing Ratings of Consistent and Inconsistent Tasters
Domenic V. Cicchetti
ABSTRACT | Pages 125-140
In the author’s earlier research, five quite reliable and six quite unreliable subsets of tasters were identified, from among the full sample of eleven wine tasters, at the heralded 1976 Paris blind Chardonnay and Bordeaux/Cabernets wine competitions. This study shows quite conclusively that the consistent tasters and the inconsistent ones provided quite different results when compared both to each other and to the results based upon the full sample of eleven tasters. Results demonstrate the following: one should be wary of findings based solely upon an omnibus approach (i.e., results based only on the full sample of 11 tasters); that a next logical step is not only to continue to identify consistent tasters, but to design future studies in which these reliable judges are used to teach neophyte imbibers to also achieve high levels of wine tasting consistency; and that in continuing to investigate other important empirically derived oenological information, we should not, in the process, lose sight of the sheer hedonic pleasure of the next glass of wine.
What Determines the Future Value of an Icon Wine?
New Evidence from Australia
Danielle Wood and Kym Anderson
ABSTRACT | Pages 141-161
To what extent can the future price of icon wines be anticipated from information available at the time of their initial sale by wineries? Using a seemingly unrelated regression model we show that weather variables and changes in production techniques, along with the age of the wine, have significant power in explaining the secondary market price variation across different vintages of each of three icon Australian red wines. The results have implications for winemakers in determining the prices they pay for grapes and charge for their wines, and for consumers/wine investors as a guide to the prospective quality of immature icon wines.
Price Formation in the California Winegrape Economy (FULL TEXT PDF)
ABSTRACT | Pages 162-172
This paper presents a theory of price determination for winegrapes in California. As the California wine economy developed, winegrape contracts took on a role as one of the centerpieces of this transformation. The theory is presented and it is shown how two important factors, weather and financial uncertainty, served to shape the contracts. Hence, long term planting contracts for new vineyards, specifying the price, helped ameliorate the uncertainty to growers. Similarly, shorter contracts played a similar role for established vintners. The model deals with two types of growers: those with contracts made well before the year in question and those who will sign a contract in the Spring of the year of harvest. This paper hopes to illuminate these elements and their interaction. The model is then empirically estimated and tested.
Tales from the Crypt: Auctioneer Bruce Kaiser Tells Us about the
Trials and Tribulations of a Wine Judge (FULL TEXT PDF)
Interviewed by Orley Ashenfelter
ABSTRACT | Pages 173-175
I’ve often wondered how a wine like the Renaissance 1985 cabernet sauvignon could be sold to investors (like the Wine Exchange of California, which was finally shut down by the Federal Trade Commission) who ought to know better. The answer may be: “wine judges” and “wine competitors.” The Renaissance 1985, which was barely drinkable (and unsaleable) according to former Bonham and Butterfield’s auctioneer Bruce Kaiser, actually won a “gold medal” at a fair in California. How could this happen? To find out we interviewed Kaiser not long after he had been a wine judge at the San Francisco Fair.
Price and Quality in the California Wine Industry: An Empirical Investigation
ABSTRACT | Pages 176-190
This paper examines price and quality in the California wine industry using medals won in nine tasting events in 1995 as indexes of quality. For each tasting event, there were four possible medals: double gold, gold, silver, and bronze. Using stepwise least squares regression analysis, we estimate hedonic price functions for the 1884 wines in our sample treating quality as exogenous to price. We also look at results for some wine types, including chardonnay and cabernet sauvignon. The results are largely as expected. The San Francisco Wine Competition appears to be the best predictor of quality with the Orange County and Sacramento (California State Fair) competitions the second best predictors of quality.
Book & Film Reviews
A History of Wine in America: From Prohibition to the Present
Reviewed by Daniel A. Sumner
JOHN W. HAEGER
North American Pinot Noir
Reviewed by Domenic V. Cicchetti
A Life Uncorked
Reviewed by Peter J. Dougherty