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The Dynamics of Advertising and Contract Choice on the Champagne Wine Market*

Published online by Cambridge University Press:  08 June 2012

Hervé Lanette  and
Daniel Steichen
Hervé Lanette
Affiliation:
University of Amiens, I.U.T. de l'Aisne Département Techniques de Commercialisation, 2 rue Pierre Curie, 02000 Laon,France, e-mail: [email protected]
Daniel Steichen
Affiliation:
University of Amiens, I.U.T. de l'Aisne Département Techniques de Commercialisation, 2 rue Pierre Curie, 02000 Laon,France, e-mail: [email protected]
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Abstract

There are two main players in the Champagne wine industry; grape growers and Champagne houses. The former grow grapes and either produce their own Champagne wine or sell their fruit to Champagne houses. The latter only produce Champagne wine and do not grow grapes. However, Champagne houses invest heavily in advertisements to establish and maintain their brand's reputation. The grape market is characterized by the dominance of long-term supply contracts over spot contracts. Drawing on various theoretical models we suggest that the Champagne houses' advertising strategy and its associated positive externalities (spillover effects) on grape growers is a way of stabilizing vertical relations, i.e., keeping grape growers from producing Champagne wine themselves and thus maintaining a certain degree of monopoly power. (JEL Classification: C78, M37, D86, L14, Q18)

Type
Articles
Information
Journal of Wine Economics , Volume 5 , Issue 2 , Spring 2010 , pp. 310 - 326
Copyright
Copyright © American Association of Wine Economists 2010

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