PROOF. List of Figures. List of Tables. Acknowledgements. Notes on Contributors. Alcohol Consumption and Welfare

Transcription

1 Contents List of Figures List of Tables Acknowledgements Notes on Contributors Introduction and Overview 1 Eric Giraud-Héraud and Marie-Claude Pichery Part I Alcohol Consumption and Welfare 1 Life Satisfaction and Alcohol Consumption: An Empirical Analysis of Self-Reported Life Satisfaction and Alcohol Consumption in OECD Countries 11 Jan Bentzen and Valdemar Smith 1.1 Introduction Literature review and issues in the happiness income link Modelling of the happiness alcohol relationship Alcohol consumption and life satisfaction Estimating the happiness alcohol model Conclusions 22 2 Alcohol Demand, Externalities and Welfare-Maximising Alcohol Taxes 28 James J. Fogarty 2.1 Introduction The alcohol market Optimal alcohol tax model Calibration case study Conclusion 45 3 The Demand for (Non)Alcoholic Beverages in France and the Impact of Advertising 49 Ruben Hoffmann and Yves Surry 3.1 Introduction Model framework Data and estimation procedure Empirical results Conclusion 65 ix xi xv xvi v

2 vi Contents Part II Consumer Behaviour and Prices 4 The Economic Value of Wine Names That Reference Place in the US Market: Analysis of Champagne and Sparkling Wine 73 Hyunok Lee and Daniel A. Sumner 4.1 Introduction Previous econometric research on wine place names Data source and data description Econometric estimation of the hedonic price equations with market data Econometric results and interpretations of the price equation for sparkling wine sold in the United States Conclusion 85 5 The Price of Wine: Does the Bottle Size Matter? 88 Jean-François Outreville 5.1 Introduction Does the bottle matter? A measure of the relative scaled price index The market price of large bottles at auctions Conclusion and suggestions for further research 97 6 Wine Judging and Tasting 102 Matteo M. Galizzi 6.1 Introduction Literature review The wine judging system and expert panels in Italy: a price formation model? The three main professional guides in Italy, and their data on wines and awards Empirical analysis and results: the awards by the professional guides in Conclusion Willingness to Pay for Appellation of Origin: Results of an Experiment with Pinot Noir Wines in France and Germany 129 Pascale Bazoche, Pierre Combris, Eric Giraud-Héraud and Jean-Baptiste Traversac 7.1 Introduction Willingness to Pay (WTP) for Protected Designation of Origin and other wine characteristics Experiment design and method Data and results Conclusion 142

3 Contents vii Part III Wine Ranking and Financial Issues 8 How Best to Rank Wines: Majority Judgement 149 Michel Balinski and Rida Laraki 8.1 Introduction Traditional amalgamation schemes and the Judgement of Paris Why the traditional amalgamation schemes fail Majority judgement Majority judgement in use Conclusion Wine as an Alternative Asset Class 173 Philippe Masset and Jean-Philippe Weisskopf 9.1 Introduction Investment opportunities on the market for fine wine Academic literature Empirical study of the market for fine wine The case of the US wine market The case of the Swiss wine market Conclusion Financial Reaction to the Business Cycle in Periods of Difficulties: The Case of French Wine Companies 200 Paul Amadieu, Jean-Pierre Couderc and Jean-Laurent Viviani 10.1 Introduction Theoretical foundations of hypotheses Data, variables and method Results Conclusion 221 Part IV Intermediary Markets and Strategic Decisions 11 The Technical Efficiency of Wine Grape Growers in the Murray Darling Basin in Australia 231 Tim Coelli and Orion Sanders 11.1 Introduction Sample data and variable selection Methods Empirical Results Conclusion Product Assortment and the Efficiency of Farms 250 Gordana Manevska-Tasevska 12.1 Introduction Dimensions of product assortment 253

4 viii Contents 12.3 Method Data and variables Results Discussion and conclusions Determinants of Wine-Bottling Strategic Decisions: Empirical Evidence from the Italian Wine Industry 266 Giulio Malorgio, Cristina Grazia, Francesco Caracciolo and Carla De Rosa 13.1 Introduction Conceptual framework Data, variables and model specification Results Discussion and final remarks Export Intentions of Wineries 297 Isabel Bardají, Belén Iráizoz and Julio Estavillo 14.1 Introduction Theoretical foundation and hypothesis development Research design Results Conclusion 312 Part V New Topics 15 Wine Tourism and On-Site Wine Sales 327 Françoise Bensa and Marie-Claude Pichery 15.1 Introduction The actors of wine tourism and their expectations Wine tourism in terms of experiential marketing Methodology Analysis of results Conclusion The High and Rising Alcohol Content of Wine 350 Julian M. Alston, Kate Fuller, James Lapsley, James T. Lapsley? George Soleas and Kabir Tumber Introduction Increasing sugar content in California grapes International evidence on the rising alcohol content of wine Regressions of alcohol percentage against the heat index Conclusion 361 Index 365

5 Introduction and Overview Eric Giraud-Héraud and Marie-Claude Pichery Who would have thought in 1990 what we have been able to achieve in 20 years? VDQS, 1 the old French certification neglected by the wine authorities, has become the beacon for the Vineyard Data Quantification Society. It was founded by a group of academic researchers coming mainly from applied econometrics and members of the AEA (Applied Econometrics Association, founded in 1973) and was based on the challenge of developing contributions of knowledge on the economics of the wine and grape sector. After more than 20 international conferences, our initial challenge can be regarded as having been met largely successfully; each year, new studies, scientifically validated by a rigorous process, provide new elements of reflection (and action) to the decision makers of the wine world. When Henri Serbat, misuses of authority as President of the VDQS- EuAWE, 2 suggested that the time had come to collect the best research papers in order to create a handbook, we immediately agreed, even though we did not at the time realise the magnitude of the task required to create such a work of reference. But now we are able to offer you a collection of writings embracing all economic aspects of the wine sector. The following 16 chapters show the richness of the contributions of economists in their preferred area (not only for tasting). The works presented in this book have in common the use of econometric techniques and mathematical formalisation to describe today s new challenges facing consumers, producers (growers and traders), investors and the public regulators of the sector. Some of the topics discussed have been recently developed by economists (for example global warming, wine tourism, etc.) although they had previously mostly been covered by specialists in management, marketing and geography. Other fields correspond to new investigations into traditional topics (for example ranking wines or consumer behaviours) and new analyses in strategic choice (for example how to bottle wine or to sell bulk wine, to select grape varieties for replanting, or to distinguish attitudes, intentions and behaviour in exporting). This book also provides an opportunity to draw up an inventory of the positioning of 1

6 2 Eric Giraud-Héraud and Marie-Claude Pichery the different market players and to explore the alternative to regulations for public policy. The book begins by addressing the consumption of alcohol and the purpose of welfare by analysing the characteristics of the demand for wine and alcohol substitutes, substances which provide considerable satisfaction to consumers without being generally regarded as basic necessities. The chapter by Jan Bentzen and Valdemar Smith analyses such point of view, focusing on drinking patterns and their change in OECD countries through the relationship between alcohol consumption and self-reported indices of life satisfaction. These authors argue that changes in drinking patterns can affect life satisfaction both negatively and positively. A detailed survey of literature on the link between income and happiness is followed by a model for the happiness alcohol relationship including controls for shifts in aspirations. A panel data set for 21 OECD countries covering the period 1961 to 2005 is used to obtain empirical measures of the different effects. The results may help explain the demand for alcoholic beverages in terms of both level and structure, a particularly complex phenomenon which fundamentally depends on a series of variables that go well beyond consumer income and changes in prices and product features. Chapter 2, by James J. Fogarty, clarifies the economic measure of consumer satisfaction and describes the loss of welfare created by coercive taxation and a policy of artificial price increases. The author develops an original optimal alcohol tax model which distinguishes three types of consumer: moderate, informed (on the private cost of consumption) abuser, and uninformed abuser. Introducing specific rates for beer, wine and spirits, the approach used balances the savings from externality cost reductions due to alcohol taxations against the welfare losses that alcohol taxes impose on responsible consumers. Based on Australian data, current alcohol taxation approaches are evaluated, and estimates are presented of the welfare loss associated with current approaches versus optimal alcohol tax rates. The chapter by Ruben Hoffman and Yves Surry analyses the ways in which advertisement expenditure influences the demand for alcoholic and non-alcoholic beverages in France. Using annual data for the period 1977 to 2004, a conditional dynamic demand system is estimated econometrically for spirits, champagne and sparkling wines, still wine, beer and non-alcoholic beverages. Advertising expenditure is modelled as affecting per capita demand for alcoholic and non-alcoholic beverages through a translation parameter. Special attention is given to the impact of the Evin Law implemented in 1991 in France which restricted the use of advertising for alcoholic beverages. The results show that the law has affected consumer demand for alcoholic beverages and support is found for the existence of subsistence levels which in the model is captured by translation variables. The second part of the book focuses more on consumer behaviours and prices. In Chapter 4, Hyunok Lee and Daniel A. Sumner develop an analysis

7 Introduction and Overview 3 of the economic value of wine names through the place names or geographic indicators used to identify wines. Given that region of origin is difficult or impossible to duplicate, they investigate the place name Champagne in the sparkling wine market in the United States. Using an econometric model, they measure the price effects on using this place name, and compare the prices of wines from Champagne relative to other French sparkling wines that do not claim the place name Champagne. In this chapter, the authors explore an econometric approach within a hedonic price framework using data on sparkling wines collected from the Wine Spectator. The model includes wine characteristics such as the label name, the region, the score, the vintage and the release year. They establish that the place name Champagne systematically translates into much higher prices. Indeed, the price of wine appears to be explained by a multitude of considerations related to changes in agricultural production, and also by consumer demand, which is especially difficult to control. Jean-Franccois Outreville illustrates this paradox in Chapter 5 by showing how difficult it is even to postulate a correlation (ceteris paribus) between the size of the bottle and the selling price of the product. Does the bottle size affect the price? In order to answer this question, his contribution investigates the relationship between price and bottle size for the same wine, controlling for vintage and quality. Different kinds of data are collected: prices posted on company websites for Champagne and auction hammer prices from the Chicago Wine Company for Bordeaux wine. The results show that in the case of Champagne the posted price of bottles increases more than proportionally with the size of the bottle. This relationship is verified independently of the perceived quality of the wine (producer, vintage) or the region of production. It is postulated that the hypothesis of scarcity may explain this relationship. However, investigation based on prices determined at auctions for Bordeaux wines mitigates these results, as there the premium for larger bottles is much smaller than for posted prices. Next, Matteo M. Galizzi proposes a better understanding of the economic rationality of the consumer for the purchase of a hedonic product. In a meticulous literature review, the author develops the need to appeal to the behavioural sciences to understand the hidden rationality of consumer satisfaction, and show how the product can be influenced by many parameters that extend well beyond price, to both quality and a set of specifications for labelling and reputation. The experimental analysis is based on plentiful and precise qualitative and quantitative information (including aromas, awards, grape variety, regional provenance, prices, expert rankings) provided by three wine guides in Italy, edited by the Associazione Italiana Sommelier, the Seminario Permanente Luigi Veronelli and Slow Food-Gambero Rosso. An empirical analysis founded on a probit model provides a contribution which reports ample evidence on the most significant determinants of actual wine judging in Italy.

8 4 Eric Giraud-Héraud and Marie-Claude Pichery In this connection, Pascale Bazoche, Pierre Combris, Eric Giraud-Héraud and Jean-Baptiste Traversac illustrate in Chapter 7 how experimental economics clarify more precisely the effect of labelling and quality certificates on consumer demand. These authors propose estimating consumers willingness to pay (WTP) for wine characteristics using incentive-compatible laboratory experiments with participants randomly selected from the general populations of France and Germany. The main question is to identify the value of a supposedly well-known Appellation of Origin (namely Appellation d Origine Contrôlée Bourgogne). Results show that sensory characteristics and label information influence French and German consumers differently. They also reveal that for middle-range wines the Appellation of Origin information is of little value outside the country of origin. Moreover, it appears that the small differences observed in the average WTP for each wine, in each country and information condition, do not result from consumers lack of discrimination. The third part of the book addresses wine ranking and financial issues and permits a better understanding of consumer behaviour by using the fact that it is known that the various buying guides, rankings, and other public certificates of quality abound in the area of wine more than in any other food sector. But how is it possible to account for a very high heterogeneity of possible judgements, even those made by renowned expert oenologists? Michel Balinski and Rida Laraki show how the problems of aggregation of judgements, even though traditionally regarded as inextricably bound up by the Arrow paradox, can be solved by innovative methods. In the case of wine tasting, based on the data from the famous tasting organised in Paris on 22 May 1976, the authors show that the traditional methods of ranking wines give too much importance to extreme opinions highly favourable or deeply unfavourable and so often do not arrive at truly consensual decisions. Hence, a new method of aggregation is presented, with the reasons why it is better than any known method, in both theory and practice. Called majority judgement, its use in several scenarios of marking by judges is described, revealing that it is meaningful; strategy-proof in grading; partially strategyproof in ranking; and coherent, thus difficult to manipulate. In fact, they show that at the time of that Jugement de Paris, 3 California did not defeat Gaul! Their research into social choices may allow a challenge to be made to rankings as famous as those of Bordeaux wines in What is known, however, is the importance of such classification to the behaviour of the various stakeholders in the economy. Indeed, in the case of super premium and icon wines, this type of classification is not a simple guide to the consumption of a food product, but it is also (and perhaps especially) a financial investment guide for investors and speculators disinterested in hedonic pleasure, and essential to the economist who wants to understand the operation of markets. Philippe Masset and Jean-Philippe Weisskopf clarify this view by establishing the opportunity and the specificity of such a financial product and its profitability. After a presentation on investing in estates

9 Introduction and Overview 5 or companies active on the wine market, they show how a small number of bottled fine wines are now viewed as an integral part of a range of assets at an investor s disposal. Research questions consequently tend to look at the interaction between wine and other asset classes, portfolio diversification benefits, and differences in risk components of wine as well as its behaviour across economic cycles. This chapter synthesises results on these different topics (international market and trade, associated costs and taxes, characteristics of carefully selected bottled wines, choice of investment-grade wines, creation of wine indices and wine funds, duration of wine investment and so on) and endeavours to give an up-to-date view of the specific market for fine wines. This is followed by Paul Amadieu, Jean-Pierre Couderc and Jean-Laurent Viviani s examination of the investment policies and financing implemented by French wine businesses in times of crisis, and especially in connection with business cycles. This study includes a description of these policies and their consequences on the financial performance of these companies: level of cash (and ability to maintain it), financial profitability, and possibly financial risk. Taking into account the dynamic of financial structure, investment policy and cash management, the authors show why it is difficult to understand the consequences of the crisis for each company in this economic sector. They stress the sensitivity of financial performance to the business cycle, and four aspects are particularly examined: working capital management, human resources, financing and investment policy. The fourth part of the book discusses intermediary markets and strategic decisions of wine growers. The chapters address both the marketing and the technical efficiency of the strategic choices of production. The first situation, set out by Tim Coelli and Orion Sanders, concerns Australian wine grape growers who have faced difficult market conditions in recent years (reductions in grape prices and increases in irrigation water prices having a significant effect on farm profitability) and then supported significant pressure to be as efficient as possible. An exploratory study, using a subset of the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) irrigation survey, consisting of data from the Murray and Murrumbidgee river basins in Australia, allows production frontiers and the efficiency levels of the individual farmers to be estimated. Another field, developed by Gordana Manevska-Tasevska, is concerned with the influence of grape assortment in terms of assortment size and product function/product consistency on the technical efficiency of grapegrowing family farms in Macedonia. This subject is of great interest and importance while decisions have to be taken for restructuring and modernising viticulture for the winemaking Western Balkan Countries (WBCs) and the Early Transition Countries (ETCs). Rural development programmes have encouraged grape producers to uproot old vineyards consisting of regional/local grape varieties and replace them with recognised European

10 6 Eric Giraud-Héraud and Marie-Claude Pichery grape varieties. These producers need to develop a long-term strategy, with a compromise between table grapes and wine grapes; moreover, adjustments to match EU regulations and practices, including wine regulations, are considered to be the key to improving the competitiveness and environmental sustainability of the Macedonian wine sector. A two-stage Data Envelopment Analysis (DEA) method extended with bootstrapping is applied to the threeyear average ( ) of a panel dataset for 300 farms. The analysis reveals very high potential for revenue increases. Farmers with lower variety diversification, specialising in growing local and regional varieties and table grape varieties, achieved higher efficiency. The results led the author to suggest that the ongoing revitalisation and investments in Macedonian grape assortment should primarily be directed towards regionally recognised and table grape varieties. In the following chapter, based on the population of processing wineries in Italy, Giulio Malorgio, Cristina Grazia, Francesco Caracciolo and Carla De Rosa investigate producer interest in adhering to product certification systems emphasising quality over quantity marketed. Concerning Geographical Indications (GIs), this chapter aims at empirically investigating wineries strategic choices of bottled volumes. Starting from a dataset covering the entire population of Italian wineries that processed wine in 2008, the authors estimated a sequential probit model to characterise wineries long- and short-term strategies. Notably, this model is applied in order to examine the influence on bottled volumes of GI wines of a winery s size, structural and organisational characteristics, procurement characteristics, territory and product range. Results show that high-volume strategies are likely to be favoured by scale economies in the processing activity and scope economies arising from sourcing grapes from multiple geographical areas and suppliers. Moreover, the results empirically corroborate the volume-constraining nature of DOC/DOCG with respect to IGT, this latter allowing greater flexibility in exploiting market opportunities. Finally, the authors provide some concluding remarks on the possible product development and marketing strategies for Italian GI wineries. In a sample of Spanish wineries, Isabel Bardají, Belen Iraizoz and Julio Estavillo, noting the trends in demand and trade and the profound transformation of the wine industry that has been observed in recent years, consider that the move towards foreign markets appears inevitable, but foreign market entry represents a major break from the usual business approach of most producers. Changes in the decision-making process require behavioural modifications which may react to the increasing difficulty of selling to the domestic market (due to seeking new markets and increasing exports). The authors, especially interested in strategic decisions, focus on the motives underlying decisions by exploring the internal determinants of export behaviour. Their analysis consists in explaining the relationship between attitudes, intentions and behaviour. The primary purpose is to

11 Introduction and Overview 7 identify the explanatory factors of the export intentions of Spanish wineries. An additional contribution in this chapter is to test the TPB (theory of planned behaviour) in the formation of export intentions. By using the ordinary least squares (OLS) method, with a stepwise technique in order to determine export intentions, predictions of specific export intentions are obtained with a two-stage procedure. The results show that exporting is a key issue for most wineries facing a competitive environment, although the domestic market continues to be the main outlet for most. The main finding suggests that export intention varies across firms, ranging from an active export strategy to the consideration of exports as a mere possibility. Some variables influencing the wineries intentions have been identified. The last part of the book is devoted to new issues that have hitherto furnished a very limited number of publications in the literature on wine economics. Franccoise Bensa and Marie-Claude Pichery explore how the renewed interest in local agriculture (due to specific consumer demand and the need to consider the carbon footprint of food) can promote on-site or direct wine sales and stimulate wine tourism. The authors argue that studies carried out by national and local tourism boards show that the classic tourist visiting a wine region is no longer satisfied with just buying a product: instead, he/she expects to have an unforgettable experience by visiting the vineyards and meeting the producers face to face. Because of this new phenomenon, winemakers must now go beyond simply working in the vineyard or in the cellar, and adapt to those new tourists and develop relevant marketing skills. By using the method of structural equation applied to two surveys in France (Burgundy and Alsace) among winemakers, the chapter draws an accurate, up-to-date portrait of the wine tourism-related activities implemented by winemakers, and evaluates the consequences of these activities on on-site sales. The analysis of the sample shows, in Burgundy as in Alsace, that even if the wine tourism activities offered by the winemakers do not have an immediate influence on on-site sales to individuals, they do nevertheless permit the creation of a relationship of confidence with the consumer that encourages the growth of customer loyalty and the increase in sales over the long term. This shows that in fact wine tourism activities are important, both in order to attract consumers and to build a relationship between them and the domain, and indeed these are the principal motivations declared by winemakers offering wine tourism activities. As a result, the three principal elements that push the development of these activities are, in order of importance: increasing direct sales, creating customer loyalty, and attracting new customers. Finally, the last chapter, by Julian Alston, Kate B. Fuller, James T. Lapsley, George Soleas and Kabir P. Tumber, allows us to relate many of the issues developed in this book to the major challenge of global warming. These authors show how it is possible to distinguish the changes generated by the external economic environment from those introduced as a deliberate strategy by companies to increase the alcohol content of wines offered to

12 8 Eric Giraud-Héraud and Marie-Claude Pichery consumers. Indeed, many economists and others are interested in the phenomenon of the rising alcohol content of wine and its potential causes. Has the alcohol content of wine risen? And if so, by how much, where, and when? What roles have been played by climate change and other environmental factors compared with evolving consumer preferences and expert ratings? The authors explore these questions using international evidence, combining time-series data on the sugar content of wine grapes in the United States and on the alcohol content of wine from a large number of countries that have experienced different patterns of climate change and the influence of shifts in policy and demand. They conclude that the alcohol content of wine has increased significantly, and that this increase can be attributed more to decisions made by grape growers and winemakers than to any exogenous effects of climate change. Alston et al. s chapter clearly highlights the role of economic and social analyses in the wine sector. It seems that the understanding of economic mechanisms and the strategic decisions of stakeholders throughout the supply chain provide new perspectives on the evolution of this agriculture sector. The formalised approaches presented throughout this book are used to measure these effects and facilitate critical analysis of the ideas presented by the various authors. Wine, a symbolic example of the agrifood sector, is a particularly fertile field of investigation for testing economic theories, statistical methods and operational research analyses. This is the whole point of this book; we hope it will satisfy a wide audience of social scientists, professionals and regulators of the wine industry and, of course, all wine lovers! Notes 1. VDQS = Vin Délimité de Qualité Supérieure was a French certification system abandoned in 2012 in order to simplify the labelling of wines. 2. VDQS = Vineyard Data Quantification Society; EuAWE = European Association of Wine Economists. 3. The Jugement de Paris (24 May 1976), a blind tasting by an almost exclusively French jury, declared that California dethroned the greatest wines of Burgundy. That day marked the discovery of New World wines by the often reactionary international commentators palates.

13 Index advertising, advertising expenditure, 52 3, 56 7, 65 cross-advertising effects, 67 aesthetic goods, 173 alcohol content, alcohol taxation, 29, 32 5 alcoholic beverages, 13, 14, 16, 17, 21, 28, 33, 35, 44, appellations, appellation of origin, 75 6, 88, 92, 330, 332, 334 Arrow s paradox, 160 asset reduction, assortment dimension, 253, 254 auction, 89, 96 7, 98, 131, 174, 185, 189 auction markets, 89 experimental auctions, 131 wine auction, 131, 174 Argentina, 231 Australia, 17, 19, 23, 30, 33, 36, 40, 41, 42, 43, 45, 52, , 356, 357, 359, 360, 361 Austria, 17, 19, 22, 30 authenticity, 330, 331, 332 awards, 103, 104, 106, 109, Belgium, 17, 19, 22, 30, 154 Belgium Black s method, 154 Borda s method, 154, 155, 157, brand, 129, 130, 131, 133 brand strategy, 266 Canada, 17, 19, 23, 30, 52, 350, 356, 357, 358, 359, 360 certification, 129, 131, 132 certification system, 129 champagne, channel of distribution, 334, 335, 337 characteristics, 88 sensory, sensorial characteristics, 88, 104, 105, 106, 108, 111, 112, 120, 122, 124, 124, 130, 131, 142 Chile, 30, 231, 233 climate change, 350 1, 356, 361 cluster, 301 Cobb-Douglas, 232, 233, 238 9, 241, 247 competitive advantage, 266, 267 Condorcet, 153 5, 160, 162 Condorcet majority-criterion, 154 Condorcet-loser, 154 Condorcet-winner, 153, 154, 155 Paradox of Condorcet, 154, 160, 162 consumers consumers preference, 11 moderate consumers, 37 9, 45 consumption, alcohol consumption, 11 26, 28 32, 35, 36, 37 40, 41, 42, 44, 45 6 domestic wine consumption, 11 propensity to consume, 68n3 consumption experience, 330, 332 cost, 35 6, 37, 38, 42 3, 44, 45, 74, 76, 79, 80, 88, 90, 93, 175, 185 6, 189, 2020, 203, 204, 205, 214 adjustments costs, 204 administrative costs, 312, 313 cash costs, 236 competitive cost, 74 cost of production, 79, 88, 93 cost-per-bottle, 88, 93 equipment costs, 232 externality cost, 35 6, 37 8, 42 4, 46 fertiliser and chemical costs, 233 firing costs, 204 holding costs, 186 insurance costs, 175, 185, 189 labour costs, 233, 236 machinery costs, 232, 233 private cost, 36, 37, 42 start-up costs, 88 storage costs, 175, 185, 188, 189 tangible costs, 36, 42 total production costs, 241 trading costs, 175, transaction costs, 178, 185, 186, 285, 290 water costs,

14 366 Index counterfeit, 175, 178, 184 5, 186 risks of counterfeit, 175, 178, 184 5, 186 country fixed (specific) effects, 15, 21 cross-price effects, 39, 43, 44, 45 demand, demand shifts, 351 Denmark, 17, 19, 22 diversification, 202 drinking patterns, 11, 12, 13, 21, 22 efficiency, 184 Egypt, 28 elasticity (ies), 31 2, 41 3, 44 5, 46, 54, 55, 56, 63 5, 66, 67, 238, 240, 241, conditional elasticities, 56, 63 5 elasticities of output, 238 expenditure elasticity, 54, 63 5 Hicksian elasticities, 56, 64, 65 Marshallian price elasticities, 56 production elasticities, 238 scale elasticities, 238, 240, empirical analysis, 104, 110, 111, environmental factors, 299, 301, 311 Evin law, 53, 54, 57, 58, 59 60, 61, 63, 65, 66, 67, 69n16 estates, 176 8, 183 excise taxes, 32, 36, 41, 46 experience, 102, 105, 106, 109, 112, 120, 122 experiential marketing, 328, experts, 102 3, 105, , 112, 114, 116, 117, 123, 124 experts opinions, 102, 103, 105, 109 experimental economics, 6 farm efficiency, 250, 252 3, 254, 255, 256, 258, financial performance, 202, 204, 205, 206, 209, 211, 214, 215, 221, 226 Finland, 17, 19, 22, 30 France, 17, 19, 22, 29, 30, 49 69, , 108, 112, , , 174, 176, 179, 180, , 231, , 356, 357, 358, 360, 361 functional form, 232, 238 9, 241, 247 funds, 174, 175, 178, 186 8, 195 6, 197n11 Germany, 17, 19, 22, 30, 89, 96, Greece, 17, 19, 22, 30 grade scale, 156 grape production, 250, 251, 257, 259, 261, 262 guides, 103 4, 106 9, , 126n1, 126n4 health, 13, 18, 28 9, 35, 44 hedonic price functions, 74, 75, 76, 79 80, 82, 88, 130 hedonic tests, 131 heteroscedasticity, 257 Hong Kong, 174 Hungary, 30, 90 Iceland, 30 IGT system, 267, 268, 270, 278, 289, 290, 291 index, 12, 16, 20, 21, 25 satisfaction index, 12, 16, 17, 21, 25 wine index, 189, 192 indices, wine-indices, 174, 191, 192, 195 information, 102, 103, 104 6, 108, , 112 reputational information, 105 investment, investment-grade, 177, , 190 irrigation waterscale, 235 Ireland, 17, 19, 22, 30 Israel, 30 Italy, 17, 19, 22, 30, , 179, 180, 186, 231, , 356, 357, 358, 359, 361 Japan, 17, 19, 23, 30 judges, 102 3, 106, 107, 109 grades, evaluations, opinion, 149, 150 2, 154, 156, 157 8, 160 3, ranking, 149, 150, 152 5, 162 3, 164 5, 169, 170, 171 judgments, Judgment of Paris, , 162, 163, 164 majority judgment,

15 Index 367 jury s decision, 153, 157, 160, 162, 164, 171 k-means clustering, 340 k-means tests, 340 legal barriers, 312, 313 life satisfaction, likelihood ratio test, 239, 240, 241, 246 loyalty, 332 3, 342, 345, 346 Luxembourg, 30 Macedonia, maximum likelihood, 238, 241, 246 Mexico, 30 Netherlands, 17, 19, 22, 30 network, 329, 333 distribution network, 329 tourist network, 333 New Zealand, 17, 19, 23, 30, 75, 355, 356, 357, 359, 360 niche markets, 267, 291 Norway, 17, 19, 22, 30 notoriety, 344 numerical grades, OECD, 11 26, 29, 31 oenology, 336, 340, 341 ordinal rank-scale, 156 panel data, , 215, 217, , 220, 222 3, 224, 232, 233, , 246 panel data model, 232 unbalanced panel data set, 233, 240, 246 Papua New Guinea, 254 patrimony, 329, 330 patrimony of appellations, 330 perceptions, 105 6, 331, 333 psychological perception, 331 sensorial perceptions, 106 point-summing methods, 151 2, 157, 158, 159, 160, 162, 165, 167, 169 Poland, 30 Portugal, 17, 19, 22, 30, 112, 357, 359, 360 preference, 161, 165 majority preference, 161 price, 18 cross-price effect, 61, 63, 64, 67 posted prices, 95, 96, 97 8 price formation, 104, reservation price, 135, 143 retail price, 33, 41, 42 probit model, 136 7, 268, producers, 102 3, 108, , 111, , 120, 122 production function, 236, 238, 239, 240, 243 Cobb-Douglas production frontier, 232 3, 238 9, 241, 247 stochastic frontier analysis, 232, 233, 236 9, 243, 246 translog production frontiers, 232, 238 9, 241, 243, proximity, 311, 333 4, 343, 345 cultural proximity, 333, 343 interpersonal proximity, 343 relational proximity, 333, 345 spatial proximity, 333 purchasing decisions, 104, 105 quality, 60, 61, 95, 96, 97 8, 102 4, 107 8, , 111, 112, 113, 114, 122, 124, 129, 130, 132, 142, 266 7, 269, 270, 272, 283, 285, 289, 290, 291, 291n1, 291n3 expected quality, 132 intrinsic quality, 102, 103, 109, 110, 112, 122 perceived quality, 88, 92, 95, 97, 132 quality control, 267, 285 quality differentiation, quality signal, quality wine, 49, 57, 61, 109 sensorial quality, 103, 111, 122, 124 wine s quality, Quandt s method, 152, 159 ranking, 103, 104, 107, 124, 131, 141, 149, 150, 152 5, 162 3, 164 5, 169, 170, 171 comparative rankings, 107 individual, participants rankings, 131

16 368 Index ranking (continued) majority-ranking, 162 3, 164, 165, 169, 171 quality ranking, 103, 104, 124 rating, 77, 82, 85, 175, 179, 189, 190, 195, 350 expert ratings, 350 hedonic ratings, 106 rating scores, 77, 82 wine-quality ratings, 179, 189, 190 risk, 300, 301, 305, 308, , 313 overall risk, 305 reputation, 74, 88, 130, 131, 178, 179, 185, 220, 266, 267, 281, 287, 288, 289, 290, 292n17, 329 collective reputation, 267, 288, 289, 290 individual producers reputation, 266 rootstocks, 267, 270 Rotterdam demand system, 54, 55, 56, 57, 58, 64, 66 scale of production, 232 economies of scale, 232, 247, 266, 267, 268, 289, 290 returns to scale, 232 3, scarcity, 88, 89, 90, 92, 95, 96, 97, 98 9, 174, 178 9, 189, 202 sensorial analysis, Sensory analysis, 104, 330, 331 shadow prices, 240, 244 5, 247 Slovak Republic, 30 South Africa, 231, 232, 355, 357, 359, 360 Spain, 11, 17, 19, 22, 30, , 357, 359 sparkling (wine), spill-over effect structural change, 53, 67 substitutes, 15 perfect substitutes, 15 substitution effects, 18 supply chain, 203 Sweden, 17, 19, 22, 30 Switzerland, 17, 19, 23, 30 tasters, 102 3, 107, 108, 109, 112 wine-tasters, 102, 107, 108, 109, 112 tasting, 76, 78, 81, 82, 84, 85, , 131, 132, 133 4, 135 6, 137, 138, 142, 328 9, 330 2, 334, 336, 338, 340, 341, blind tasting, 131, 133, 135, 136, 137, 138, 142 tasting rooms, 133 tasting score, 76 tasting session, 132 wine tastings, 76, 103 4, 105, 107, , 111, , 116, 122, 123, 124, 150 taxes, excise taxes, 32, 36, 41, 46 per capita tax, 32 pre-tax price, 39, 40 1 tax rates, 32 3, 36, 40, 41, 43 5 technical change, 240, 241, 242, 246, 247 technical (in)efficiency, , 255 7, 258, , 261, 262 terroir, 290, 291n2 tourism, enotourism, trade trade organisation, 329, 344, 346, 348 trading markets, 96 Turkey, 30 United Kingdom (UK), 17, 19, 23, 30, 52, 68n2, 174, 185, 186, 188 United States (US), 17, 19, 23, 30, 33, 52, 73 86, 174, 179, 180, 182, 191, 327, 356, 357, 359, 360, 361, 362 variety, 75 6, 351 5, 362 grape variety, 75 6, 129, 130, 133, 251, 254, 258, 262, 291n2, 334, 351 5, 362 vote, 153 4, majority vote, 153 4, websites, 184, 185 welfare economics, WHO, 29, 46n1, 68n1 willingness to pay, 76, 79 80, 95, 103, 105, 106, wine producing countries, 11, 17, 22 wine grapes, 350, 351, 352, 354, 361, 362, 362n4, 362n7

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