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Quality classifications in competition: Price formation in the German wine market

  • Rössel, Jörg
  • Beckert, Jens

How do judgment devices influence price formation? We investigate this question through a study of the German wine market. The German wine market is characterized by the simultaneous existence of two classification systems: the official classification system referring to the quality in the glass, and the concept of terroir, introduced by a private association of quality winemakers, the Verband deutscher Prädikatsweingüter. We used a data set comprising 1,890 wines from 248 different wineries in the German wine-growing regions of Rheingau and Rheinhessen. Our results show that the two classification systems function as mutually exclusive strategic options for winemakers. We also show that the non-official classification of terroir is much more powerful in explaining price formation within the market.

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Paper provided by Max Planck Institute for the Study of Societies in its series MPIfG Discussion Paper with number 12/3.

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Date of creation: 2012
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Handle: RePEc:zbw:mpifgd:123
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  1. Ali-Kein, Hela Hadj & Lecocq, Sebastien & Visser, Michael, 2007. "The Impact of Gurus: Parker Grades and EN PRIMEUR Wine Prices," Working Papers 37292, American Association of Wine Economists.
  2. Almenberg, Johan & Dreber, Anna, 2009. "When Does The Price Affect The Taste? Results From A Wine Experiment," Working Papers 51755, American Association of Wine Economists.
  3. Jean-Marie Cardebat & Jean-Marc Figuet, 2004. "What explains Bordeaux wine prices?," Applied Economics Letters, Taylor & Francis Journals, vol. 11(5), pages 293-296.
  4. Cicchetti, Domenic V., 2007. "Assessing the Reliability of Blind Wine Tasting: Differentiating Levels of Clinical and Statistical Meaningfulness," Journal of Wine Economics, Cambridge University Press, vol. 2(02), pages 196-202, September.
  5. Richard Arnott & Joseph Stiglitz, 1990. "The Welfare Economics of Moral Hazard," NBER Working Papers 3316, National Bureau of Economic Research, Inc.
  6. Pierre Combris & Sebastien Lecocq & Michael Visser, 2000. "Estimation of a hedonic price equation for Burgundy wine," Applied Economics, Taylor & Francis Journals, vol. 32(8), pages 961-967.
  7. Michael B. Beverland, 2005. "Crafting Brand Authenticity: The Case of Luxury Wines," Journal of Management Studies, Wiley Blackwell, vol. 42(5), pages 1003-1029, 07.
  8. Landon, Stuart & Smith, Constance, 1997. "The Use of Quality and Reputation Indicators by Consumers: The Case of Bordeaux Wine," MPRA Paper 9283, University Library of Munich, Germany.
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