In the literature, there is no standard approach for estimating the return to wine or testing for a portfolio risk diversification benefit from holding wine. Using auction data for Australian wine, we show that the estimation method has a material impact on the estimated wine return distribution and that the type of diversification benefit test used influences whether or not wine is found to provide a portfolio risk diversification benefit. Our results indicated that a simple modification to the hedonic model, which we call a pooled model, is an appropriate method for estimating the return to infrequently traded heterogeneous assets such as wine. Across the various approaches to testing for a risk diversification benefit, we find direct estimation of the efficient frontier with bootstrapped confidence intervals to be the most transparent and comprehensive method of illustrating wine's potential for lowering portfolio risk. (JEL Classifications: G11, C61, C13)

Consumers are always looking for new types of wines. Producers compete for their attention by trying to product differentiate at the same time as they are responding to technological improvements, climate change, and evolving demand patterns. In doing so, wineries are increasingly highlighting their regional and varietal distinctiveness. This paper examines the extent to which the choice of winegrape varieties in wine regions has already changed over the first decade of the twenty-first century in both the Old World and New World. In doing so, it reports a varietal intensity index of different regions and an index of similarity of varietal mix between regions. The study is based on a new database of vine-bearing areas circa 2000 and 2010 for nearly 1,300 DNA-distinct winegrape varieties, spanning over 600 regions in 44 countries that together account for 99 percent of the world's wine production. (JEL Classifications: D24, L66, Q13, Q15)

As in the 17 years leading up to 2005, as shown in Gokcekus and Fargnoli (2007), there was no change in quality between 2006 and 2012. There was more variety and, perhaps most importantly, the average real price of wines on Wine Spectator's Top 100 List declined even faster. However, rather than wines from the New-New World and Non-incumbent countries, it was wines from Italy, Spain, and Portugal—New-Old World—that were primarily responsible for these beneficial changes (greater variety and more affordable wines in the Top 100 List) for American wine drinkers. (JEL Classifications: F120, F140, C200)

The purpose of this paper is to assess the role of expert opinion on the pricing of Bordeaux wines. To this end, we compile an original dataset including (1) retail prices, (2) scores attributed to wines from France, Spain, and the United States by nine experts from 2000 to 2010, and (3) the meteorological conditions under which the grapes were produced. With this dataset, we aim to determine the presence of bias rooted in the subjectivity of the experts. We assume that the expert wine scores have two main components: (1) an objective one that is driven by the fundamentals of wine production (the quality of soil, producers' skills, and climate conditions) and (2) a subjective one that is determined by the individual opinion of the experts. We use control function techniques to compare the respective impacts of these two factors and find that prices are influenced more deeply by the fundamental quality of the wine than they are by the judge's subjectivity. Furthermore, we notice the great impact of “highest ratings” on pricing, which we interpret as a “marketing effect”: the most favorable score is likely to be the most publicized, which influences the price of the respective wine. (JEL Classifications: C21, D89, L15)

The influence of expectations on the sensory perception of wines is investigated in three studies in which New Jersey and California red wines are blind tasted. Studies 1 and 2, in which only the color of the wines is known prior to tasting, demonstrate that neither wine club members nor experienced wine professionals can distinguish between New Jersey and California wines in terms of personal enjoyment. In contrast, Study 3, in which tasters are informed that some (though not which) of the wines are from New Jersey, finds that when a wine is believed to be from New Jersey it receives lower enjoyment ratings than when the identical wine is believed to be from California—regardless of whether the wine is actually from New Jersey or California. The results enhance our understanding of the role of expectations in the interpretation of subjective experiences. Implications for wine producers and wine consumers are explored. (JEL Classification: C91)

This article analyzes the contractual relationship between a wine cooperative (winery) and its member (growers). This relationship is plagued by moral hazard and adverse selection problems in grape quality. Indeed, growers can be opportunistic since the cooperative is unable to observe: (1) their effort level due to imperfect monitoring technology; and (2) their productive abilities (types) due to adverse selection. Because the growers' vineyard practices and efforts are one of the main determinants of grape quality, the cooperative implements an incentive compensation system to induce growers to make the maximum effort toward the achievement of quality. This compensation scheme is similar to that in tournaments (Green and Stokey, 1983; Knoeber, 1989; Lazear and Rosen, 1981; Prendergast, 1999). In our case, the cooperative promotes competition between growers by offering a promotion to a higher-quality contract, while, at the same time, organizing the contest by creating homogeneous groups of growers using a menu of contracts and monitoring through regular visits to the vineyard. Using a database of 1,219 contracts, we test the effect of: (1) the cooperative's tournament compensation scheme; (2) the menu of contracts and monitoring mechanism. The results of our econometric estimations provide some confirmation of both effects. (JEL classifications: L14, D82, Q13)