How big is the “lemons” problem? Historical evidence from French wines

Pierre Mérel (), Ariel Ortiz-Bobea and Emmanuel Paroissien
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Pierre Mérel: UC Davis - University of California [Davis] - UC - University of California

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Abstract: This paper provides empirical evidence on the welfare losses associated with asymmetric information about product quality in a competitive market. When consumers cannot observe product characteristics at the time of purchase, atomistic producers have no incentive to supply costly quality. We compare wine prices across administrative districts around the enactment of historic regulations aimed at certifying the quality of more than 250 French appellation wines to identify welfare losses from asymmetric information. We estimate that these losses amount to more than 7% of total market value, suggesting an important role for credible certification schemes.

Keywords: Asymmetric information; Adverse selection; Quality uncertainty; Welfare; Wine appellation (search for similar items in EconPapers)
Date: 2021-09
New Economics Papers: this item is included in nep-agr, nep-com, nep-cul and nep-his
Note: View the original document on HAL open archive server: https://hal.science/hal-04148936v1
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Citations: View citations in EconPapers (3)

Published in European Economic Review, 2021, 138, pp.103824. ⟨10.1016/j.euroecorev.2021.103824⟩

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Related works:
Journal Article: How big is the “lemons” problem? Historical evidence from French wines (2021)
Working Paper: How Big is the “Lemons” Problem? Historical Evidence from French Wines (2021)
Working Paper: How Big is the “Lemons” Problem? Historical Evidence from French Wines (2020)
Working Paper: How Big is the “Lemons” Problem? Historical Evidence from French Wines (2020)
Working Paper: How Big is the “Lemons” Problem? Historical Evidence from French Wines (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04148936

DOI: 10.1016/j.euroecorev.2021.103824

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