An analysis of over 4000 wines entered in 13 U.S. wine competitions shows little concordance among the venues in awarding Gold medals. Of the 2,440 wines entered in more than three competitions, 47 percent received Gold medals, but 84 percent of these same wines also received no award in another competition. Thus, many wines that are viewed as extraordinarily good at some competitions are viewed as below average at others. An analysis of the number of Gold medals received in multiple competitions indicates that the probability of winning a Gold medal at one competition is stochastically independent of the probability of receiving a Gold at another competition, indicating that winning a Gold medal is greatly influenced by chance alone. (JEL Classification: D02, Q19)

In markets for experience goods, publications exist to help consumers decide which products to purchase. However, in most cases these publications accept advertising from the very firms whose products they review, raising the possibility that they bias product reviews to favor advertisers. To test for biased product reviews, I exploit the fact that, of the two major U.S. wine publications, only Wine Spectator accepts advertising. Although the average Wine Spectator ratings earned by advertisers and non-advertisers are similar, I find that advertisers earn just less than one point higher Wine Spectator ratings than non-advertisers when I use Wine Advocate ratings to adjust for differences in quality. However, 1 find only weak evidence that the selective retasting of advertisers' wines contributes to the higher ratings. Moreover, conditional on published ratings, Wine Spectator is no more likely to bestow awards upon advertisers. I conclude that while advertising may influence ratings on the margin, Wine Spectator appears largely to insulate reviewers from the influence of advertisers. (JEL Classification: L15, M37)

The increasing industrialization of the wine supply chain is often associated with a greater vertical coordination. Our paper shows that a spot market institutional arrangement like brokerage can still be a relevant coordination mechanism to mitigate the contractual hazards due to quality problems. Indeed, a broker can be viewed as an expert that can help the merchant to monitor the grower's wine quality process. More precisely, if the merchant cannot credibly monitor the wine making process, it is Pareto improving to delegate this task to a broker. (JEL Classification: D82, L80, M12)

Logistic regressions identified determinants of red and white wine purchases in formal and casual restaurants, using a detailed dataset of over 26,000 consumer-level food away-from-home purchases in two Canadian provinces during 2000–2005. Meal context regressors, and prior behavior associated mainly with unobserved heterogeneity, contributed most of the explanatory power, with observable demographic regressors playing a modest role. The main strategic recommendation is thus to focus wine marketing resources on the restaurant environment, with less emphasis on targeting specific audiences. (JEL Classification: C25, D12)

This paper examines the social desirability to disclose pertinent information to participants in an optimal auction environment. In particular, we consider aspects of information which will affect all potential buyers in a uniform fashion. In the case of wine, such information may be interpreted as an unobservable dimension such as the quality or the storage condition of a bottle of wine. We show that when the participants in the auction are symmetrically uninformed in such a dimension, it may be socially optimal not to resolve this common uncertainty. Under the sufficient conditions provided to generate this outcome, efficiency will be restored in the optimal auction. (JEL Classification: D44, D82)

The articles in this symposium analyze the economics of evolving international wine markets, including issues associated with taxes, measures of quality, reputation, consumer preferences, globalization, and emerging markets in China. This special symposium consists of peer-reviewed papers presented at the “Competitive Forces Affecting the Wine and Winegrape Industries: An International Conference on World Wine Markets,” sponsored by the Washington State University Impact Center, the Center for Wine Economics and Business of the Robert Mondavi Institute for Wine and Food Sciences and the Giannini Foundation of Agricultural Economics, University of California, in Davis, California, August 8–10, 2007, and the American Association of Wine Economists in Portland, Oregon, August 14–16, 2008.

The first paper, by Rachael Goodhue, Jeffrey LaFrance and Leo Simon, provides a theoretical analysis of the impact of taxes on the quantity and quality produced by a competitive firm of goods like wine for which market value. They consider the effects of various tax systems on wine quality and quantity distortions.

We consider the impact of taxes on the quantity and quality produced by a competitive firm of goods, such as wine, for which market value accrues with age. Our analysis found the following: an increase in the volumetric retail tax collected at sale increases quality, so that the basic Alchian-Allen effect holds. However, an increase in the volumetric storage tax collected each period decreases quality, as does an increase in the ad valorem storage tax. The effect of an increase in the ad valorem retail tax on quality is indeterminate. Increases in any of the four taxes reduce the quantity of wine produced. Any two-tax system that includes a volumetric sales tax spans the full range of feasible tax revenues with positive tax rates. For any tax system that reduces quality relative to the firm's no-tax equilibrium, there is another tax system that increases tax revenues, eliminates the quality distortion, and does not increase the quantity distortion. Many wine industry observers believe that most, if not all, existing tax systems tend to result in the suboptimal provision of quality. Our results suggest that the wide variety of wine tax systems is not prima facie evidence that these systems, or most of them, are inefficient. Provided the system includes a volumetric sales tax it may be efficient, regardless of which of the other instruments, or how many of them, are used. Assertions regarding inefficiency must be evaluated on an empirical case-by-case basis. Our analysis provides a theoretical framework for such research. (JEL Classification: D2, H2, Q1)

An unrestricted source differentiated LA/AIDS model was used to estimate Korean wine demand. In doing so, this study tested the null hypotheses of product aggregation, block separability and substitutability. The test results show that the unrestricted source differentiated model is significantly different from the aggregated model, separated model, and restricted source differentiated model at the conventional level. By using this system-wide model, this study estimated price and expenditure elasticities to identify the price effect on Korean wine consumption. (JEL Classification: F10, F11, F13)

Econometric demand and supply models of agricultural commodities and crops have been around for a long time with extensive research and adaptations being made in the grain and livestock sectors. This much attention has, however, not been afforded to long term commodities. This paper presents a partial equilibrium framework for modeling long term commodities using the South African wine industry as an example. The model structure is presented and two different approaches to closing the model are compared. The usefulness of the model is tested in the form of baseline projections and the analysis of a typical “what if” question. (JEL Classification: D5, L66, Q11)

We develop a simple model of the effects of reputation on prices. An increasing fraction of consumers who are “naive” (less informed about quality) results in a stronger sensitivity of prices to ratings of quality. We then argue that this may be a factor in price dynamics for goods that become more widely traded as a result of globalization. We then provide some empirical analysis of these ideas using data on prices and Robert Parker's ratings of wines. Wine prices are strongly related to ratings, and even more so for higher quality wine categories. In addition, changes in Parker ratings for the same wine result in large price changes. Price elasticities with respect to ratings have risen dramatically since 1993. One plausible explanation for this is the growing globalization of the fine wine market, which increases the prevalence of naive wine consumers. (JEL Classification: D8, F1, L1, Q1)

This paper examines the effect of the movie Sideways on US wine consumption. Specifically, we examine the affects of the movie on the consumption of Merlot, which is derided in the movie and the affect on Pinot Noir, which is praised. We examine the trends in consumption before and after the movie and perform statistical tests for structural changes in consumption. We also test for changes in consumption of each varietal by price point. (JEL Classification: C22)

Globalization has created an international wine market and global brands. However, consumers continue to regard regional origin as a dominant criterion in their wine buying decisions. Indicators of collective regional reputation as well as individual producer (or brand) reputation guide consumers in their buying decisions. We measure regional and brand reputation indicators for 27 growing regions around the world. Regional reputation is based on a region's overall quality performance through time. Positive and negative brand reputation based on relative regional peer performance is a distinct feature of this empirical application. Noting competing as well as common interest among regional producers, we hypothesize that wines from producers with a high quality reputation rely more on their own strengths and will depend less on their region's reputation and vice versa. We also test whether this assertion is valid over time covering six recent vintages. We apply a hedonic model to measure the significance of these regional and brand reputation indicators in determining wine prices. Our model largely confirms our hypothesis, but it also suggests that for some regions (Germany and New Zealand), high quality brands rely heavily on overall regional reputation. In other regions (including Napa and Sonoma Valley), high reputation brands seem to lose their strength and start to rely on regional reputation. Regions holding on to their strong individual brand reputations include the Rhone Valley, Spain, and Bordeaux. The analysis sheds light on how regional and producer brands are performing as wine markets mature in terms of global branding and consumers becoming more knowledgeable about wine regions, quality, and reputation. (JEL Classification: D4, L1, Q13)

Recent papers by Hodgson (2008) and Gawel and Godden (2008) have questioned the consistency of expert wine judges in a wine competition setting. In the latter paper, a methodology introduced in psychometric research to measure judge reliability corrected for chance was used to quantify judge consistency (Cohen, 1968). This paper extends that notion, suggesting a value of 0.7 for Cohen's weighted kappa might be used to define an expert wine judge. With that criterion, less than 30% of judges who participated in either of the two studies would be considered “expert.” (JEL Classification: C1, L15)

In this article, we evaluate how sensory qualities of wine, such as astringency, bitterness, aroma, and flavor, affect consumers' willingness to pay for wine. In order to accomplish this objective, we utilize data collected from untrained consumers, a trained panel, and laboratory measurements of tannin intensity. From this data, a consumer-preference model, a consumer-intensity model, a trained-panel model, and an instrumental-measurement model are estimated and compared. Overall, the consumer-preference model is the most accurate in predicting consumers' willingness to pay. As expected, the closer a wine is to a consumer's ideal, the more they are willing to pay. Astringency has a mostly positive effect, and bitterness has a negative effect. Comparing the accuracy of the other models, the instrumental-measurement model is the next best, followed by trained-panel model, and the consumer-intensity model. This suggests that the instrumental measurements can be used as an effective alternative to trained panels. This is important because trained panels may be less practical to use on an ongoing basis. (JEL Classification: Q13, M31)

The emergence of grape wine as a mainstream alcoholic beverage in China is relatively new. However, rapidly increasing wine consumption in China provides a significant trade potential for the United States and other wine exporting countries. This paper investigates the Chinese wine market using retailer data with a focus on imported wines. Supermarkets are identified as major retail outlets for foreign wines, and this paper uses data from a recent supermarket wine survey in China. Our data indicate that about half of our sample stock foreign wines. On average, 21 percent of total wine shelf space is allocated to foreign wines and larger stores are associated with larger shares of shelf space for foreign wines. Among foreign wines, French wine dominates. Of 31 supermarkets that sell foreign wines, 26 stores carry French wine, and in all but two of these stores more than half of the foreign wine shelf space is devoted to French wine. Australia, Chile, Italy and the United States follow in terms of number of stores carrying wines. Supermarkets in our sample allocate most of their shelf space to red wine for both domestic (93%) and foreign (82%) wines. The average median price for foreign wines (94 yuans per bottle) was more than double the equivalent price for domestic wines (42 yuans). (JEL Classification: N55, Q13, Q19)

The objective of this research is to devise a reliable and accurate scoring algorithm for awarding medals at a major U.S. wine competition that was described earlier by Hodgson (2008). The new algorithm is comprised of a two-tiered method that considers an award on the basis of a total medal score averaged across four judges per each evaluated wine; and a reliability algorithm that grades the degree of inter-judge reliability according to the following criteria: <70% = Poor or Unacceptable; 70%–79% = Fair; 80%–89% = Good; and 90%–100% = Excellent agreement (Cicchetti, 2001). The method has advantages over a previous scoring method that based its decision upon incorrect estimates of majority opinion; and unacceptable levels of inter-judge agreement. (JEL Classification: C1, L15, Q13)