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Do denominations of origin provide useful quality signals? The case of Bordeaux wines

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  • Livat, Florine
  • Alston, Julian M.
  • Cardebat, Jean-Marie

Abstract

This paper investigates whether the existing Denominations of Origin (DOs) provide useful quality signals for wine consumers. To test our conjecture that the large number of existing DOs is too many for the typical consumer, we investigate the patterns of co-movement among average monthly wholesale prices for red wines from the 11 main DOs in Bordeaux over 16 years, 1999–2014. Our results indicate that consumers substitute among these wines according to the similarity of semantic elements in the names of DOs on the labels, and not according to prices or terroir that could reflect intrinsic quality where the names as such cannot. This finding suggests that the current DOs are too numerous and complex to provide helpful quality signals to consumers. A substantial reduction of the number of DOs might be warranted to better address the broader informational issue in wine markets.

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  • Livat, Florine & Alston, Julian M. & Cardebat, Jean-Marie, 2019. "Do denominations of origin provide useful quality signals? The case of Bordeaux wines," Economic Modelling, Elsevier, vol. 81(C), pages 518-532.
  • Handle: RePEc:eee:ecmode:v:81:y:2019:i:c:p:518-532
    DOI: 10.1016/j.econmod.2018.06.003
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    Cited by:

    1. Catherine Haeck & Giulia Meloni & Jo Swinnen, 2018. "The Value of Terroir. A historical analysis of the Bordeaux and Champagne geographical indications," Working Papers of Department of Economics, Leuven 634338, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.

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    More about this item

    Keywords

    Quality signal; Wine; Denomination of origin; Cointegration; Substitution; Price;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy

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