Wine market prices and investment under uncertainty: an econometric model for Bordeaux Crus Classes
This paper describes an econometric assessment of wine market prices for 21 of the Crus Classes chateaux in the Bordeaux region of France. The model developed in the analysis attempts to define the relationship between factors that influence wine quality and those that influence wine prices. Characteristics of the models are: (1) climate influences on grape composition (acid and sugar levels), (2) grape composition influences on market prices, (3) subjective quality evaluations (Parker-points) on market prices, and ( 4) the effects of age of the wine on market prices. The results indicate that composition levels ofMerlot-dominated wines are more climate sensitive than those from Cabernet Sauvignon-dominated wines. Overall, warm, dry summers result in high sugar and low acid levels at harvest which in turn lead to higher quality wines. Wine market price sensitivity to Parker-point ratings indicates that properties with high Cabernet Sauvignon-dominated wines are highly dependent on the external ratings while Merlot-dominated wines have a decreased rating sensitivity. Smaller properties tend to gain over proportionally from high ratings indicating great jumps in price from year to year. Additionally, chateaux that have experienced high ratings for past vintages exhibit great sensitivity to point steps in ratings for current vintages. Aging has a positive effect on Bordeaux wine pricing. This is due to the increasing maturity as well as the increasing absolute scarcity. Absolute scarcity of product is expressed by the size of the property, with small properties producing less per vintage and therefore having less in the market. Additionally, Merlot-dorninated wines exhibit more maturing potential and profit more from aging than Cabernet Sauvignon-dominated wines. Average per chateau real annual profit ranges from 1 to 10%. High levels of grape ripeness, absolute scarcity, and smaller properties that are dominated by Merlot in their blend lead to the highest profits. F
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nerlove, Marc, 1995. "Hedonic price functions and the measurement of preferences: The case of Swedish wine consumers," European Economic Review, Elsevier, vol. 39(9), pages 1697-1716, December.
- Combris, Pierre & Lecocq, Sebastien & Visser, Michael, 1997. "Estimation for a Hedonic Price Equation for Bordeaux Wine: Does Quality Matter?," Economic Journal, Royal Economic Society, vol. 107(441), pages 390-402, March.
When requesting a correction, please mention this item's handle: RePEc:eee:agecon:v:26:y:2001:i:2:p:115-133. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.