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Eco-Labeling Strategies: The Eco-Premium Puzzle In The Wine Industry

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  • Delmas, Magali A.
  • Grant, Laura E.

Abstract

Eco-labeling signals that a product has been eco-certified. While there is increasing use of eco-labeling practices, there is still little understanding of the conditions under which eco-labels can command price premiums. In this paper, we argue that the certification of environmental practices by a third party should be analyzed as a strategy distinct from although related to the advertisement of the eco-certification through a label posted on the product. By assessing eco-labeling and eco-certification strategies separately, we are able to identify benefits associated with the certification process independently from those associated with the actual label. More specifically, we argue in the context of the wine industry that eco-certification can provide benefits, such as improved reputation in the industry or increased product quality, which can lead to a price premium without the need to use the eco-label. We estimate this price premium of wine due to the eco-certification of grapes using 13,400 observations of wine price, quality rating, varietals, vintage, and number of bottles produced, for the period 1998-2005. Overall, certifying wine increases the price by 13%, yet including an eco-label reduces the price by 20%. This result confirms the negative connotation associated by consumers with organic wine. The price premium of this luxury good due to certification acts independently from its label, a confounding result not previously demonstrated by related literature.

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Bibliographic Info

Paper provided by American Association of Wine Economists in its series Working Papers with number 37325.

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Date of creation: Mar 2008
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Handle: RePEc:ags:aawewp:37325

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Web page: http://www.wine-economics.org
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Related research

Keywords: organic wine; wine market; price premium; eco-wine; Demand and Price Analysis; Environmental Economics and Policy;

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References

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Citations

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Cited by:
  1. Mann, Stefan & Ferjani, Ali & Reissig, Linda & Ayala, Tatiana, 2010. "What Matters For Consumers Of Organic Wine In Switzerland?," 50st Annual Conference, Braunschweig, Germany, September 29-October 1, 2010 93932, German Association of Agricultural Economists (GEWISOLA).
  2. Bazoche, P. & Deola, C. & Soler, Louis-Georges, 2008. "An experimental study of wine consumers’ willingness to pay for environmental characteristics," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 43651, European Association of Agricultural Economists.
  3. Maumbe, Blessing M. & Brown, Cheryl, 2013. "Entrepreneurial and Buyer-Driven Local Wine Supply Chains: Case Study of Acres of Land Winery in Kentucky," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 16(1).
  4. Marco Salvi & Juerg Syz, 2011. "What drives “green housing” construction? Evidence from Switzerland," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 3(1), pages 86-102, February.

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