How Big is the “Lemons” Problem? Historical Evidence from French Wines

Pierre Mérel (), Ariel Ortiz-Bobea and Emmanuel Paroissien

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Abstract: This paper provides empirical evidence of large welfare losses associated with asymmetric in- formation 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 represent up to 13% of total market value, suggesting an important role for credible certification schemes.

Keywords: asymmetric information; adverse selection; quality uncertainty; welfare; wine appellation; information asymétrique; sélection adverse; qualité incertaine; bien-être; appellation des vin (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-agr, nep-com and nep-ind
Note: View the original document on HAL open archive server: https://hal.science/hal-02507225v1
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Citations: View citations in EconPapers (1)

Published in [Research Report] Inconnu. 2020, 53 p

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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 (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)
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