How to promote quality perception in wine markets: brand advertising or geographical indication?

Chengyan Yue, Stéphan Marette () and John Beghin ()
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Chengyan Yue: Department of Applied Economics - UMN - University of Minnesota [Twin Cities] - UMN - University of Minnesota System

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Abstract: We investigate producers' choice between geographical indications (GI) and brand advertising (BA) as pure marketing strategies to convey information to consumers. Producers also decide whether or not to select an effort level for improving the quality of their products. We identify conditions under which GI and BA emerge with and without quality effort, depending on the relative costs and effectiveness of marketing strategies and quality improvement. Beyond the conventional equilibrium cases of GI-no-quality-effort and BA-with-quality-effort, we identify several other equilibrium strategies. Under plausible parameter characterization, and in spite of the free-riding problem of collective reputation, producers choose GI and quality improvement efforts at equilibrium. This occurs when the cost of marketing is high, the relative cost of quality effort is low relative to the former, and when the effectiveness of marketing promotions is low. BA without quality improvement also emerges as an equilibrium strategy for the opposite cost structure (low cost of promotion, high cost of effort relative to promotion, and higher effectiveness of promotion). Finally, the joint selection of both instruments BA and GI is examined. We motivate and illustrate our analysis with the European and New-World wine industries.

Date: 2013
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Published in Non-Tariff Measures with Market Imperfections: Trade & Welfare Implications in the Frontiers of Economics & Globalization, Emerald Press, 2013, ISBN: 978-1-78190-754-2. ⟨10.1108/S1574-8715(2013)0000012008⟩

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Related works:
Working Paper: How to Promote Quality Perception in Wine Markets: Brand Advertising or Geographical Indication? (2013)
Working Paper: How to Promote Quality Perception in Wine Markets: Brand Advertising or Geographic Indication? (2006)
Working Paper: How to Promote Quality Perception in Wine Markets: Brand Advertising or Geographical Indication? (2006)
Working Paper: How to Promote Quality Perception in Wine Markets: Brand Advertising or Geographical Indication? (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01173011

DOI: 10.1108/S1574-8715(2013)0000012008

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