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Growers vs. Merchants Bargaining on the Price of Champagne Grapes and The Role of Contracts when Bargaining is Unbalanced*

Published online by Cambridge University Press:  08 June 2012

Claire Chambolle  and
Olivier Saulpic
Claire Chambolle
Affiliation:
INRA, LORIA, 65 Boulevard de Brandebourg, 94205 Ivry sur Seine; Laboratoire d'Econométrie de l'Ecole Polytechnique, 1 rue Descartes, 75005 Paris; e-mail:[email protected] and [email protected].
Olivier Saulpic
Affiliation:
ESCP-EAP, 79, avenue de la République, 75011 Paris, e-mail:[email protected].
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Abstract

The contract between growers and merchants for the exchange of grapes on the Champagne market is a long-term agreement based on quantities. Commitments on quantities are made for several years and negotiated individually between growers and merchants. Each year, prices are negotiated at the interprofessional level, the interprofessional committee including members of the growers union, members of the merchants union and a government commissioner. It turns out that industrial organization theory, and more precise mechanisms outlined by incomplete contract theory are relevant to the analysis of such contracts in which prices and quantities are negotiated sequentially and by different groups of actors. We show that imposed pricing by the interprofessional organization can, in some cases, balance the bargaining power between growers and merchants and thus increase social welfare. At a time when the European Common Organization of Wine Markets casts doubt on interprofessional organizations, this result tends to justify their positive role. (JEL classifi cation: L42, L50)

Type
Articles
Information
Journal of Wine Economics , Volume 1 , Issue 2 , Fall 2006 , pp. 95 - 113
Copyright
Copyright © American Association of Wine Economists 2006

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