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World Scientific Reference On Handbook Of The Economics Of Wine (In 2 Volumes) (Hardcover)
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World Scientific Reference On Handbook Of The Economics Of Wine (In 2 Volumes) (Hardcover)
Series: World Scientific Handbook in Financial Economics Series, 6
Expected to ship within 12 - 17 working days
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Over the last three decades, wine economics has emerged as a
growing field within agricultural economics, but also in other
fields such as finance, trade, growth, environmental economics and
industrial organization. Wine has a few characteristics that
differentiate it from other agricultural commodities, rendering it
an interesting topic for economists in general. Fine wine can
regularly fetch bottle prices that exceed several thousand dollars.
It can be stored a long time and may increase in value with age.
Fine wine quality and prices are extraordinarily sensitive to
fluctuations in the weather of the year in which the grapes were
grown. And wine is an experience good, i.e., its quality cannot be
ascertained before consumption. As a result, consumers often rely
on 'expert opinion' regarding quality and maturation prospects.This
handbook takes a broad approach and familiarizes the reader with
the main research strands in wine economics.After a general
introduction to wine economics by Karl Storchmann, Volume 1 focuses
on the core areas of wine economics. The first papers shed light on
the relevance of the vineyard's natural environment for wine
quality and prices. 'Predicting the Quality and Prices of Bordeaux
Wine' by Orley Ashenfelter is a classic paper and may be the first
wine economics publication ever. Ashenfelter shows how weather
influences the quality and the price of Bordeaux Grands Crus wine.
Since the weather condition of the year when the grapes were grown
is known, an econometric analysis may be constructed. It turns out
this model outperforms expert opinion, i.e., critical vintage
scores. At best, expert opinion reflects public information. The
subsequent papers, by Ashenfelter and Storchmann, Gergaud and
Ginsburgh, and Cross, Plantinga and Stavins, tackle the terroir
question. That is, they examine the relevance of a vineyard's
physical characteristics for wine quality and prices, but from
various dimensions and with different results. Next, Alston et al.
analyze a question of great concern in the California wine
industry: the causes and consequences of the rising alcohol content
in California wine. Is climate change the culprit?The next chapter
presents three papers that apply hedonic price analyses to fine
wine. Combris, Lecocq and Visser show that Bordeaux wine market
prices are essentially determined by the wines' objective
characteristics. Costanigro, McCluskey and Mittelhammer
differentiate their hedonic analysis for various market segments.
Ali and Nauges incorporate reputational variables into their
pricing model and distinguish between short- and long-run price
effects.The next section of this volume deals with one of the
unique characteristics of wine - its long storage life, which makes
it potentially an investment asset. Studying wine's increasing role
as an alternative asset class, Sanning et al., Burton and Jacobsen,
Masset and Weisskopf, Masset and Henderson, and Fogarty all examine
the rate of return to holding wine as well as the related risks.
Since these papers analyze different wines and different time
periods there is no 'one message.' However, all point out that,
while wine may diversify an investor's portfolio, wine's returns do
not beat common stock in the long run.The last two chapters examine
the role of wine experts. First, Ashenfelter and Quandt revisit the
1976 'Judgment of Paris' and show that aggregating the assessments
of several judges should go beyond 'adding points.' Depending on
the method employed, the results may vary, and some measure of
statistical precision is essential for interpreting the reliability
of the results. In two different papers, Cicchetti and Quandt
respond to the necessity to provide statistical tools for the
assessment of wine tastings.In a seminal paper, Hodgson reports a
remarkable field experiment in which similar wines were placed
before judges at a major competition. The results have the shocking
implication that how medals are awarded at a major California wine
fair is not far from being random. Ashton analyzes the performance
of professional wine judges and finds little support for the idea
that experienced wine judges should be regarded as experts.Do
experts scores influence the price of wine? The answer to this
question is less obvious then commonly thought since expert opinion
oftentimes only repeats public information such as wine quality
that results from the weather that produced the wine grapes. Hadj
Ali, Lecocq, and Visser as well as Dubois and Nauges find that high
critical scores exert only small effects on wine prices. However,
Roberts and Reagans show that a high critical exposure reduces the
price-quality dispersion of wineries.Lecocq and Visser analyze wine
prices and find that 'characteristics that are directly revealed to
the consumer upon inspection of the bottle and its label explain
the major part of price differences.' Expert opinion and sensory
variables appear to play only a minor role. In an experimental
setting using two Vickrey auctions, Combris, Lange and Issanchou
confirm the leading role of public information, i.e., the label
remains a key determinant for champagne prices. In a provocative
and widely discussed study drawing on blind tasting results of some
5,000 wines, Goldstein and collaborators find that most consumers
prefer less expensive over expensive wine.Finally, Weil examines
the value of expert wine descriptions and lets several hundred
subjects match the wines and their descriptors. His results suggest
that the ability to assign a certain description to the matching
wine is more or less random.Volume 2 covers the topics reputation,
regulation, auctions, and market organizational. Landon and Smith,
Anderson and Schamel, and Schamel analyze the impact of current
quality and reputation (i.e., past quality) on wine prices from
different regions. Their results suggest that prices are more
influenced by reputation than by current quality. Costanigro,
McCluskey and Goemans develop a nested framework for jointly
examining the effects of product, firm and collective reputation on
market prices.The following four papers deal with regulatory issues
in the US as well as in Europe. While Riekoff and Sykuta shed light
on the politics and economics of the three-tier system of alcohol
distribution and the prohibition of direct wine shipments in the
US, Deconinck and Swinnen analyze the European planting rights
system. The political economy of European wine regulation is then
covered by Melonie and Swinnen, before Anderson and Jensen shed
light on Europe's complex system of wine industry subsidies.The
next chapter is devoted to wine auctions. In three different
papers, Fevrier, Roos and Visser, Ashenfelter, and Ginsburgh
analyze the effects of specific auction designs on the resulting
hammer prices. The papers focus on multi-unit ascending auctions,
absentee bidders, and declining price anomalies.The last chapter,
supply and organization, is devoted to a wide range of issues.
First, Heien illuminates the price formation process in the
California winegrape industry. Then, Frick analyzes if and how the
separation of ownership and control affects the performance of
German wineries.Vink, Kleynhans and Willem Hoffmann introduce us to
various models of wine barrel financing, particularly to the
Vincorp model employed in South Africa. Galbreath analyzes the role
of women in the wine industry. He finds that (1) women are
underrepresented and (2) that the presence of a female CEO
increases the likelihood of women in winemaker, viticulturist, and
marketing roles in that firm. Gokcekus, Hewstone, and Cakal draw on
crowdsourced wine evaluations, i.e., Wine Tracker data, and show
that private wine assessments are largely influenced by peer scores
lending support to the assumption of the presence of a strong
herding effect.Mahenc refers to the classic model of information
asymmetries and develops a theoretical model highlighting the role
of informed buyers in markets that are susceptible to the lemons
problem. Lastly, in their paper 'Love or Money?' Scott, Morton and
Podolny analyze how the presence of hobby winemakers may distort
market outcomes. Hobby winemakers produce higher quality wines,
charge higher prices, and enjoy lower financial returns than
professional for-profit winemakers. As a result, profit-oriented
winemakers are discouraged from locating at the high-quality end of
the market.
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