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Wine market prices and investment under uncertainty: an econometric model for Bordeaux Crus Classes


  • Jones, Gregory V.
  • Storchmann, Karl-Heinz


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
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  • Jones, Gregory V. & Storchmann, Karl-Heinz, 2001. "Wine market prices and investment under uncertainty: an econometric model for Bordeaux Crus Classes," Agricultural Economics, Blackwell, vol. 26(2), pages 115-133, November.
  • Handle: RePEc:eee:agecon:v:26:y:2001:i:2:p:115-133

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    References listed on IDEAS

    1. 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.
    2. 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.
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    Cited by:

    1. Caracciolo, Francesco & D’Amico, Mario & Di Vita, Giuseppe & Pomarici, Eugenio & Dal Bianco, Andrea & Cembalo, Luigi, 2016. "Private vs. Collective Wine Reputation," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IFAMA), vol. 19(3).
    2. Baldi, Lucia & Vandone, Daniela & Peri, Massimo, 2010. "Is Wine a Financial Parachute?," 2010 Internatonal European Forum, February 8-12, 2010, Innsbruck-Igls, Austria 100506, International European Forum on Innovation and System Dynamics in Food Networks.
    3. Pavese, Piermassimo & Zanola, Roberto, 2008. "Autochthon vs. blended wines: Do objective and sensory characteristics matter?," POLIS Working Papers 107, Institute of Public Policy and Public Choice - POLIS.
    4. Orley Ashenfelter & Karl Storchmann, 2010. "Measuring the Economic Effect of Global Warming on Viticulture Using Auction, Retail, and Wholesale Prices," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 37(1), pages 51-64, August.
    5. Jean-Michel Chevet & Sebastien Lecocq & Michael Visser, 2011. "Climate, Grapevine Phenology, Wine Production, and Prices: Pauillac (1800-2009)," American Economic Review, American Economic Association, vol. 101(3), pages 142-146, May.
    6. Ali, Héla Hadj & Lecocq, Sébastien & Visser, Michael, 2010. "The Impact of Gurus: Parker Grades and en primeur Wine Prices," Journal of Wine Economics, Cambridge University Press, vol. 5(01), pages 22-39, March.
    7. Ashenfelter, Orley & Storchmann, Karl, 2014. "Wine and Climate Change," Working Papers 164854, American Association of Wine Economists.
    8. Asgari, Ali & Woods, Timothy A. & Saghaian, Sayed H., 2016. "Prices of Domestic and Imported Riesling Wine in the U.S. Market: A Hedonic Price Approach," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 229703, Southern Agricultural Economics Association.
    9. Christopher R. Gustafson & Travis J. Lybbert & Daniel A. Sumner, 2016. "Consumer sorting and hedonic valuation of wine attributes: exploiting data from a field experiment," Agricultural Economics, International Association of Agricultural Economists, vol. 47(1), pages 91-103, January.
    10. repec:cup:jwecon:v:12:y:2017:i:01:p:3-15_00 is not listed on IDEAS
    11. Egon Franck & Stefan Winter, 2002. "Zur Effizienz des Marktes für feine Bordeauxweine," Working Papers 0012, University of Zurich, Institute for Strategy and Business Economics (ISU).
    12. De Salvo, Maria & Begalli, Diego & Capitello, Roberta & Signorello, Giovanni, 2015. "A spatial micro-econometric approach to estimating climate change impacts on wine firm performance: A case study from Moldavia region, Romania," Agricultural Systems, Elsevier, vol. 141(C), pages 48-57.
    13. Jean Desrochers & J. Francois Outreville, 2013. "Uncertainty, Ambiguity and Risk Taking: an experimental investigation of consumer behavior and demand for insurance," ICER Working Papers 10-2013, ICER - International Centre for Economic Research.
    14. Masset, Philippe & Weisskopf, Jean-Philippe & Faye, Benoît & Le Fur, Eric, 2016. "Red obsession: The ascent of fine wine in China," Emerging Markets Review, Elsevier, vol. 29(C), pages 200-225.
    15. Ormos, Mihály & Erdős, Péter, 2011. "Borok mint alternatív befektetési lehetőségek
      [Wines as an alternative investment]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 158-172.
    16. Dimson, Elroy & Rousseau, Peter L. & Spaenjers, Christophe, 2015. "The price of wine," Journal of Financial Economics, Elsevier, vol. 118(2), pages 431-449.
    17. Eric Giraud-Héraud & Yves Surry, 2001. "Les réponses de la recherche aux nouveaux enjeux de l’économie viti-vinicole," Post-Print hal-01200932, HAL.
    18. Giraud-Héraud, Eric & Surry, Yves, 2001. "Les réponses de la recherche aux nouveaux enjeux de l’économie viti-vinicole," Cahiers d'Economie et de Sociologie Rurales (CESR), INRA (French National Institute for Agricultural Research), vol. 60.
    19. Asgari, Ali & Reed, Michael R., 2016. "Price Determinants of California Wine in the U.S. Market: Does the Type Matter?," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 243123, Agricultural and Applied Economics Association.
    20. Antonis Michis & Anna Markidou, 2013. "Determinants of retail wine prices: evidence from Cyprus," Empirical Economics, Springer, vol. 45(1), pages 267-280, August.
    21. Ashenfelter, Orley, 2017. "The Hedonic Approach to Vineyard Site Selection: Adaptation to Climate Change and Grape Growing in Emerging Markets," Journal of Wine Economics, Cambridge University Press, vol. 12(01), pages 3-15, February.
    22. Giraud-Héraud Eric & Yves Surry, 2001. "Les réponses de la recherche aux nouveaux enjeux de l’économie viti-vinicole," Cahiers d'Economie et Sociologie Rurales, INRA Department of Economics, vol. 60, pages 5-24.
    23. repec:eee:ecmode:v:68:y:2018:i:c:p:555-569 is not listed on IDEAS
    24. Sanning, Lee W. & Shaffer, Sherrill L. & Sharratt, Jo Marie, 2007. "Alternative investments: the case of wine," Working Papers 37322, American Association of Wine Economists.
    25. Claudio Kugler, 2010. "Parker, Wine Spectator and Retail Prices of Bordeaux Wines in Switzerland: Results from Panel Data 1995 - 2000," Working papers 2010/09, Faculty of Business and Economics - University of Basel.

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    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models


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