Red Wines of Medoc. What is Wine Tasting Worth?
AbstractWinemaking is a highly complex technology. It needs inputs over which there is no control (good weather conditions), initial endowments which can hardly be modified (soil, exposure of the slopes), inputs which take 20 to 30 years before producing good quality outputs (vines), manual operations (picking), mechanical operations (rushing, racking) and chemical processes (during fermentation). In the paper, we disentangle the production technology, and try to quantify the impact on prices (qualities) of each of the many inputs (including weather conditions) and steps used in producing wine in MÃ©doc. We show that technology and weather conditions are able to explain two thirds of the variance of prices; when reputation effects (based on the wine classification made in 1855) are included, this proportion rises to almost 85%. This suggests either that "classified" producers are able to charge higher prices, or that the classification is a measure of quality reflected by prices. We also show that two of the more recent attempts at classifying wines are not as good in explaining prices than the official (and old) 1855 grading.
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Bibliographic InfoPaper provided by Universite Libre de Bruxelles - C.E.M.E. in its series Papers with number 9207.
Length: 32 pages
Date of creation: 1992
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Other versions of this item:
- GINSBURGH, Victor & MONZAK, M., 1992. "Red wines of Médoc: What is wine testing worth ?," CORE Discussion Papers 1992027, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Victor Ginsburgh & A. Monzak & M. Monzak, 2013. "Red wines of Medoc: What is wine tasting worth?," ULB Institutional Repository 2013/152435, ULB -- Universite Libre de Bruxelles.
- G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
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- Héla Hadj Ali & Sébastien Lecocq & Michael Visser, 2005.
"The impact of gurus : Parker grades and en primeur wine prices,"
Research Unit Working Papers
0507, Laboratoire d'Economie Appliquee, INRA.
- HélaHadj Ali & Sébastien Lecocq & Michael Visser, 2008. "The Impact of Gurus: Parker Grades and "En Primeur" Wine Prices," Economic Journal, Royal Economic Society, vol. 118(529), pages F158-F173, 06.
- Hadj Ali H. & Lecocq S. & Visser M., 2007. "The impact of gurus: Parker grades and en primeur wine prices¤," Working Papers ERMES 0718, ERMES, University Paris 2.
- Ali, Hela Hadj & Lecocq, Sebastien & Visser, Michael, 2007. "The Impact of Gurus: Parker Grades and EN PRIMEUR Wine Prices," Working Papers 37292, American Association of Wine Economists.
- Gergaud, Olivier & Ginsburgh, Victor, 2007. "Natural endowments, production technologies, and the quality of wines in Bordeaux. Is it possible to produce wine on paved roads?," Working Papers 37294, American Association of Wine Economists.
- Landon, Stuart & Smith, Constance, 1998. "Quality expectations, reputation, and price," MPRA Paper 9774, University Library of Munich, Germany.
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