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

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  • Rössel, Jörg
  • Beckert, Jens

Abstract

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.

Suggested Citation

  • Rössel, Jörg & Beckert, Jens, 2012. "Quality classifications in competition: Price formation in the German wine market," MPIfG Discussion Paper 12/3, Max Planck Institute for the Study of Societies.
  • Handle: RePEc:zbw:mpifgd:123
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    References listed on IDEAS

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    1. Michael B. Beverland, 2005. "Crafting Brand Authenticity: The Case of Luxury Wines," Journal of Management Studies, Wiley Blackwell, vol. 42(5), pages 1003-1029, July.
    2. Beckert, Jens, 2000. "Economic sociology in Germany," economic sociology_the european electronic newsletter, Max Planck Institute for the Study of Societies, vol. 1(2), pages 2-7.
    3. Almenberg, Johan & Dreber, Anna, 2011. "When Does the Price Affect the Taste? Results from a Wine Experiment," Journal of Wine Economics, Cambridge University Press, vol. 6(01), pages 111-121, January.
    4. Richard Arnott & Joseph Stiglitz, 1986. "The Welfare Economics of Moral Hazard," Working Papers 635, Queen's University, Department of Economics.
    5. 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.
    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. 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.
    8. Jean-Marie Cardebat & Jean-Marc Figuet, 2004. "What explains Bordeaux wine prices?," Applied Economics Letters, Taylor & Francis Journals, vol. 11(5), pages 293-296.
    9. 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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    Cited by:

    1. Beckert, Jens & Rössel, Jörg & Schenk, Patrick, 2014. "Wine as a cultural product: Symbolic capital and price formation in the wine field," MPIfG Discussion Paper 14/2, Max Planck Institute for the Study of Societies.
    2. Brunke, Henrich & Lapsley, James T. & Mueller, Rolf A.E. & Tauscher, Ludwig, 2016. ""Tested Quality In The Glass": Wine Quality Certification In Germany," Working Papers 234641, American Association of Wine Economists.
    3. Carter, Elizabeth, 2015. "Constructing quality: Producer power, market organization, and the politics of high value-added markets," MPIfG Discussion Paper 15/9, Max Planck Institute for the Study of Societies.

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