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The Financial Value of Champagne Houses in a Cobweb Economy

Listed author(s):
  • Declerck, Francis
  • Cloutier, L. Martin
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    The objective of the paper is to simulate the corporate value of Champagne makers by taking into account the Champagne market evolution. These measurements are conducted by linking financial debt, performance and valuation to a vertical coordination model of production-consumption within a cobweb economy. The overall model uses the dynamic structure that underlies the strategic interactions amongst grape producers and wine makers. These segments coordinate grape production and trade by forming expectations about final consumption, price and stock risks. The paper examines the dynamics of the financial cash flows and net worth of Champagne houses for the 1977 – 2003 period using system dynamics (SD) modeling principles. The results presented in this paper report on key financial indicators for that period for financial debt, performance and valuation of Champagne makers. It provides a sound basis to pursue this work, because the model can further enhanced to anticipate the possible value Champagne makers for the coming crucial years since the Champagne appellation has reached its geographical limit determined by the protected designation of origin (PDO), while worldwide demand continues to grow.

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    Paper provided by European Association of Agricultural Economists in its series 110th Seminar, February 18-22, 2008, Innsbruck-Igls, Austria with number 49842.

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    Date of creation: Oct 2008
    Handle: RePEc:ags:eea110:49842
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    1. Cloutier, Lucien Martin & Rowley, Robin, 2003. "Simulation, quantitative economics and econometrics: electronic infrastructure and challenges to methodological standards," European Journal of Economic and Social Systems, Lavoisier, vol. 16(1), pages 11-32.
    2. Domenico Colucci & Vincenzo Valori, 2005. "Ways of learning in a simple economic setting: a comparison," Working Papers - Mathematical Economics 2005-01, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    3. Lajili, Kaouthar & Madunic, Marko & Mahoney, Joseph T., 2007. "Testing Organizational Economics Theories of Vertical Integration," Working Papers 07-0104, University of Illinois at Urbana-Champaign, College of Business.
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