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Microeconometric analysis of wine grape supply contracts in Australia

  • Iain Fraser

This paper examines wine grape supply contracts used in the main grape growing regions of Australia. An empirical analysis provides insight into specific aspects of contract design and implementation. Statistical analyses of sample data reveal differences between regions in contract specifications. Lower quality grape growing regions place a greater reliance on grape quality assessment to determine bonus/penalty payments compared to higher quality regions. Contracts in higher quality regions place greater emphasis on explicit winery involvement and direction in vineyard management. Results indicate that longer duration contracts are more inclusive in terms of the number of clauses included. Evidence of risk shifting (i.e., winery to grower) for high quality grapes is reported, where the price received by growers is determined by the bottle price of the wine produced. Copyright 2005 Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Asia Pty Ltd..

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Article provided by Australian Agricultural and Resource Economics Society in its journal The Australian Journal of Agricultural and Resource Economics.

Volume (Year): 49 (2005)
Issue (Month): 1 (03)
Pages: 23-46

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Handle: RePEc:bla:ajarec:v:49:y:2005:i:1:p:23-46
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  1. Alston, Julian M. & Smith, Vincent H., 1983. "Some Economic Implications of Minimum Pricing: The Case of Wine Grapes in Australia: Comment," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 51(02), August.
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  8. Fraser, Iain, 2003. "The Role of Contracts in Wine Grape Supply Coordination: An Overview," Australasian Agribusiness Review, University of Melbourne, Melbourne School of Land and Environment, vol. 11.
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  12. Hueth, Brent & Ligon, Ethan, 1999. "Producer Price Risk and Quality Measurement," Staff General Research Papers 5037, Iowa State University, Department of Economics.
  13. Chalfant, James A. & James, Jennifer S. & Lavoie, Nathalie & Sexton, Richard J., 1999. "Asymmetric Grading Error And Adverse Selection: Lemons In The California Prune Industry," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 24(01), July.
  14. Rachael E. Goodhue, 1999. "Input Control in Agricultural Production Contracts," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 616-620.
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