Do denominations of origin provide useful quality signals? The case of Bordeaux wines |
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| Institution: | 1. KEDGE Business School, 680cours de la Libération, 33405, Talence Cedex, France;2. Department of Agricultural and Resource Economics, 2101 Social Science and Humanities Building, University of California Davis, Davis, CA, USA;3. Larefi, Bordeaux University & INSEEC, Avenue Léon Duguit, 33608, Pessac Cedex, France;1. Department of Radiation Oncology, Upstate Cancer Center, SUNY Upstate Medical University, Syracuse, NY;2. Department of Urology, SUNY Upstate Medical University, Syracuse, NY;1. Department of Economics, Korea University, Seongbuk-Gu, Seoul, 02841, South Korea;2. Department of Economics, University of Washington, Seattle, WA 98195-3330, United States;1. University of Rome, Sapienza, Department of Economics and Law, Via del Castro Laurenziano, 9, I-00161 Rome, Italy;2. University of Macerata, Department of Law, Piaggia dell’Università, 2, I-62100 Macerata, Italy;1. Ecole hôtelière de Lausanne, HES-SO//Haute école spécialisée de Suisse occidentale, Route de Cojonnex 18, 1000, Lausanne, Switzerland;2. Université de Bordeaux, Avenue Léon Duguit, 33608, Pessac, France;3. INSEEC Grande Ecole, Hangar 19, Quai de Bacalan, 33070, Bordeaux, France |
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| Abstract: | This paper investigates whether the existing Denominations of Origin (DOs) provide useful quality signals for wine consumers. To test our conjecture that the large number of existing DOs is too many for the typical consumer, we investigate the patterns of co-movement among average monthly wholesale prices for red wines from the 11 main DOs in Bordeaux over 16 years, 1999–2014. Our results indicate that consumers substitute among these wines according to the similarity of semantic elements in the names of DOs on the labels, and not according to prices or terroir that could reflect intrinsic quality where the names as such cannot. This finding suggests that the current DOs are too numerous and complex to provide helpful quality signals to consumers. A substantial reduction of the number of DOs might be warranted to better address the broader informational issue in wine markets. |
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| Keywords: | Quality signal Wine Denomination of origin Cointegration Substitution Price C32 D83 Q11 Q18 |
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