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Do denominations of origin provide useful quality signals? The case of Bordeaux wines

Florine Livat, Julian Alston and Jean-Marie Cardebat ()

Economic Modelling, 2019, vol. 81, issue C, 518-532

Abstract: This paper investigates whether the existing Denominations of Origin (DOs) provide useful quality signals for wine consumers. To test our conjecture that the large number of existing DOs is too many for the typical consumer, we investigate the patterns of co-movement among average monthly wholesale prices for red wines from the 11 main DOs in Bordeaux over 16 years, 1999–2014. Our results indicate that consumers substitute among these wines according to the similarity of semantic elements in the names of DOs on the labels, and not according to prices or terroir that could reflect intrinsic quality where the names as such cannot. This finding suggests that the current DOs are too numerous and complex to provide helpful quality signals to consumers. A substantial reduction of the number of DOs might be warranted to better address the broader informational issue in wine markets.

Keywords: Quality signal; Wine; Denomination of origin; Cointegration; Substitution; Price (search for similar items in EconPapers)
JEL-codes: C32 D83 Q11 Q18 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:81:y:2019:i:c:p:518-532

DOI: 10.1016/j.econmod.2018.06.003

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