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The Dynamics of Advertising and Contract Choice on the Champagne Wine Market

Author

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  • Lanette, Hervé
  • Steichen, Daniel

Abstract

There are two main players in the Champagne wine industry; grape growers and Champagne houses. The former grow grapes and either produce their own Champagne wine or sell their fruit to Champagne houses. The latter only produce Champagne wine and do not grow grapes. However, Champagne houses invest heavily in advertisements to establish and maintain their brand's reputation. The grape market is characterized by the dominance of long-term supply contracts over spot contracts. Drawing on various theoretical models we suggest that the Champagne houses' advertising strategy and its associated positive externalities (spillover effects) on grape growers is a way of stabilizing vertical relations, i.e., keeping grape growers from producing Champagne wine themselves and thus maintaining a certain degree of monopoly power. (JEL Classification: C78, M37, D86, L14, Q18)

Suggested Citation

  • Lanette, Hervé & Steichen, Daniel, 2010. "The Dynamics of Advertising and Contract Choice on the Champagne Wine Market," Journal of Wine Economics, Cambridge University Press, vol. 5(2), pages 310-326, April.
    • Handle: RePEc:cup:jwecon:v:5:y:2010:i:02:p:310-326_00
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    Cited by:

    1. Hervé Lanotte & Aurélie Ringeval-Deluze & Erick Pruchnicki, 2022. "The stabilising effects on GVCs of multi-annual supply contracts between leading and subordinate firms: The example of champagne [Les effets stabilisateurs sur la CGV des contrats pluriannuels d’ap," Post-Print hal-04021392, HAL.

    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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