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 study revisits the relationship between economic variables and alcohol consumption from a macro perspective. Focusing explicitly on the asymmetries of the responsiveness of alcohol consumption during the expansion and contraction phases of the business cycle, asymmetric panel estimators are employed. We employ a nonlinear autoregressive distributed lag model for a panel of 24 countries for the period 1961 to 2014. Findings show that expansion leads to a long-term increase in average alcohol consumption, while during contraction, the level of average alcohol consumption persists. Expansion, together with a pronounced reduction in the unemployment rate could, however, lead to a net reduction of gross alcohol and wine consumption. Nonetheless, if the recession corresponds with a surge in unemployment, this leads to a long-run increase in the level of total gross alcohol consumption but a decrease in wine and beer consumption. Reduction in unemployment does not lead to a reduction in beer consumption, as pre-expansion levels of beer consumption persist. (JEL Classifications: E32, I19, L66)

This article examines the time-varying risk premium with reference to investments in fine wines. Unlike previous studies, our article focuses on this issue within the context of the financial crisis. To do this, we propose the use of a conditional capital asset pricing model and a multivariate generalized autoregressive conditional heteroskedasticity model on several appellation wines worldwide. We find that Bordeaux fine wines were more volatile during the financial crisis and are less volatile in non-crisis periods. In addition, while the volatility of Burgundy wines is second only to Bordeaux wines, non-French fine wines (Australia, Italy, and USA) exhibit inverse volatility trends to French fine wines. (JEL Classifications: C50, G01, G11, Q13)

Climate change may drive shifts in global agriculture that will affect remaining natural lands, with important consequences for the conservation of species and ecosystems. Wine production is an excellent model for examining this type of impact, because suitable climate is central to product quality and production is centered in Mediterranean climate regions that are all global biodiversity hotspots. Adaptation to climate change in existing vineyards may involve water use to ameliorate heat stress or drought, resulting in additional conservation issues. Global studies of wine, climate, and conservation have highlighted the need for more detailed regional analyses to better understand these complex multiple issues. Here we examine impacts of climate change on winegrape suitability in California and its possible implications for nature conservation and water use. Under two global climate models and two emissions scenarios, winegrape suitability in California is projected to decline overall and to move into undeveloped areas that provide important habitats for native species. Coastal and upslope areas retain and improve in suitability, respectively, while inland areas see the largest losses in suitability. Areas of declining suitability are regions in which heightened water use for vineyard adaptation may lead to declines in stream flow or conflicts with other water uses. Continued growth in global demand for wine and reduced production in areas of declining suitability will drive expansion into newly suitable areas, potentially impacting important species native to California. Existing vineyards in areas of declining suitability will likely need to adapt to remain viable. Advance planning for a changing climate and adaptation options that are not water intensive (e.g. vine orientation, trellising, or varietal switch) will help reduce potential water conservation issues in those areas. (JEL Classifications: Q15, Q54, Q57)

Weather derivatives are a relatively new form of financial security that can provide firms with the ability to hedge against the impact of weather related risks to their activities. Participants in the energy industry have employed standardized weather contracts trading on organized exchanges since 1999 and the interest in non-standardized contracts for specialized weather related risks is growing at an increasing rate. The purpose of this paper is to examine the potential use of weather derivatives to hedge against temperature related risks in Canadian ice wine production. Specifically we examine historical data for the Niagara region of the province of Ontario, Canada, the largest icewine producing region of the world, to determine an appropriate underlying variable for the design of an option contact that could be employed by icewine producers. Employing monte carlo simulation we derive a range of benchmark option values based upon varying assumptions regarding the stochastic process for an underlying temperature variable. The results show that such option contracts can provide valuable hedging opportunities for producers, given the historical seasonal temperature variations in the region. (JEL Classification: G13, G32, Q14, Q51, Q54)

In an ever-more-competitive global market, vignerons compete for the attention of consumers by trying to differentiate their product while also responding to technological advances, climate changes and evolving demand patterns. In doing so, they highlight their regional and varietal distinctiveness. This paper examines the extent to which the winegrape varietal mix varies within and among states of the United States and relative to the rest of the world, and how that picture has been evolving. It reports varietal intensity indexes for different regions, indexes of similarity of varietal mix between regions and over time, and price-based quality indexes across regions and varieties within and among the three west-coast States. Broadly speaking, the mix of winegrape varieties in the United States is not very different from that in the rest of the world and, since 2000, it has become even less differentiated and closer to that of France and the world as a whole. But individual U.S. regions vary considerably in the mix of varieties in which they specialize and in the quality of grapes they produce of a given variety; and region-by-variety interactions have complex influences on the pattern of quality and production. We use measures of regional varietal comparative advantage and a Nerlovian partial adjustment model to account for some of the shifting varietal patterns in the U.S. vineyard and in winegrape production. (JEL Classification: D24, L66, Q13)

This paper examines empirically two distinguishing aspects of the world's wine regions: their degree of specialization in certain varieties, as measured by a varietal intensity index; and their similarity with the varietal mix of other regions, as measured by a varietal-based regional similarity index. Twelve of the most important wine-producing countries, that together account for all but one-eighth of the world's winegrapes, are included in the analysis. The data refer to circa 2000 (or 1999 for EU member countries, since that is their most recent census data). These indexes provide a baseline against which to compare more recent and future vintages. They will be especially useful as producers and regulators respond at varying speeds to the impacts of climate changes, in addition to market developments, on the optimal location of production of different varieties around the world. (JEL Classifications: D24, L66, Q13, Q15)

This study applies a multivariate model to examine the dynamics of mean and volatility transmission between fine wine and crude oil prices using daily observations from January 2004 to December 2011. The results suggest that the crude oil mean determines the wine market. In each series, volatility persistence is high and significant; innovations in each market seem to include figures that are valuable to risk managers seeking to predict volatility in other markets. During the financial crisis of 2008, wine and oil conditional volatilities climbed but then returned to their overall pre-crisis levels. (JEL Classifications: G11, G15, Q14, Q40)

Global consumption patterns for alcoholic beverages are evolving, with some convergence in per capita consumption among nations as traditionally beer-drinking nations increase their consumption of wine and, conversely, wine-consuming nations shift towards beer. This article explores regional patterns of alcoholic beverage consumption within the United States. One purpose is to see if similar patterns of spatial convergence in consumption patterns can be observed within countries as have been documented in international comparisons. A more fundamental purpose is to explore the converse question and seek to better understand the persistent differences in alcoholic beverage consumption among groups. These issues are addressed using annual U.S. national and state-level data over four decades and, for the more recent period, supermarket scanner data at finer scales of geopolitical aggregation. Socioeconomic and other demographic variables appear to play significant roles in accounting for the spatial differences in consumption patterns, although the details vary across different models and data sets. The analysis of demand using less-aggregative data for a shorter time period reveals some shortcomings in the corresponding analysis based on state-level data over a longer time period, but with poorly measured prices. These findings might extrapolate to studies making international comparisons using national aggregate data. (JEL Classifications: D12, L66)

In this paper, we study firm reputation by investigating the interaction between individual reputations of Italian wineries and a large set of (possible) determinants. With respect to winery reputation, we find a positive effect for firm age and size and producer's intrinsic motivations and a negative effect for outsourcing, while horizontal differentiation, ownership status, and hiring well-known consultants play no role. Further, collective reputation and institutional regulation exert a significantly positive effect on individual reputation. (JEL Classification: L14, L15)

Domestic products have a disproportionately high market share on many goods markets. We examine the contribution of preferences to such “home bias”, using detailed data on wine sales in New Hampshire (weekly sales by brand by store for one year). In counterfactual simulations, where we use the same set of products as currently available, the U.S. market share falls from 58 percent to 38 percent if all country-of-origin effects are set equal. Home bias on this market is not explained by higher marginal costs for imports or by lesser store coverage of imported brands. The evidence rather points to higher foreign fixed costs of entry, coupled with a preference for U.S. wines, as the main sources for the high domestic market share. (JEL Classification: F12, F14, L13, L66)

We study whether quality assessments made by wine experts and by consumers (based on prices obtained at auction between 1980 and 1992), can be explained by variables describing endowments (land characteristics, exposures of vineyards) and technologies (from grape varieties and picking, to bottled wines). However, since technological choices are likely to depend on endowments, the effects can only be identified using an instrumental variables approach. We show that technological choices affect quality much more than natural endowments, the effect of which is negligible. (JEL Classification: L66, Q12, Q13, Q16)

The modern era of wine journalism has provided abundant information about wines and widespread use of numerical rating systems. A tiny difference, especially at the top of the distribution of ratings, may have striking consequences on wine sales and investment returns. This article provides a general framework to obtain a consensus among tasters’ opinions (reflected as numerical wine ratings) via three subsequent stages: normalization, approval, and aggregation. It is inspired by contributions in political science, social choice, game theory, and operations research. We apply it to the Judgment of Paris as well as to rank 2018 en-primeur Bordeaux wines, rated by five international experts. (JEL Classifications: C18, L15, L66)

Results for a total of 804 double-blind tastes by experienced tasters during nine tasting events are reported. T-test results reject the hypothesis that flight-position bias affects results. The distribution of ranks for a wine is a mixture distribution, and tests concerning the variance of that mixture distribution do not isolate the variance due to the randomness mixture component alone. T-statistics for the mean ranks of high- and low-ranking wines are over several standard deviations from a random expectation. T-tests show that the statistical significance of the difference between wine ranks is positively related to the difference in their mean ranks. At a 95% level of significance, the difference in ranks between the first- and second-place wines appears to be significant in 33% of tastings. At 95%, the difference in ranks between the first- and last-place wines appears to be significant in 100% of tastings. Monte Carlo simulation shows that much of those differences could be illusory and due to ranking procedures that lead to Type I errors. While the mean correlation coefficient between price per bottle and mean preference is a weakly positive 0.23, this may not indicate an inefficient market. (JEL Classifications: A10, C00, C12, D12)

Wine consumers and producers make decisions partly on ratings of wine critics. Research into reliability (correspondence of repeated ratings of the same wines by one critic) and consensus (correspondence of ratings between critics or competitions) have yielded low estimates. However, Ashton (2013), looking at the consensus among only prominent critics of red Bordeaux, vintages 2004–2010, found a correlation of around 0.60. Here, I revisit these data, and extend the analyses to the years 2011–2016 for the same wines, but with additional new critics. Agreement among the critics (r = 0.57) of these new years is comparable to those found by Ashton (r = 0.60), with a slight upward trend. Overall, critics agree more about what they do not like. Regarding prices and ratings, wines score below-average ratings when they cost less than 35 euro, and higher ratings between 35 and 100 euro. In wines more than 100 euro there is no correlation between ratings and price. (JEL Classification: C99)

There has been ongoing interest in studying wine judges' performance in evaluating wines. Most of the studies have reached a similar conclusion: a significant lack of consensus exists in wine quality ratings. However, a few studies, to the author's knowledge, have provided direct quantification of how much consensus (as opposed to randomness) exists in wine ratings. In this paper, a permutation-based mixed model is proposed to quantify randomness versus consensus in wine ratings. Specifically, wine ratings under the condition of randomness are generated with a permutation method, and wine ratings under the condition of consensus can be produced by sorting the ratings for each judge. Then the observed wine ratings are modeled as a mixture of ratings under randomness and ratings under consensus. This study shows that the model can provide excellent model fit, which indicates that wine ratings, indeed, consist of a mixture of randomness and consensus. A direct measure is easily computed to quantify randomness versus consensus in wine ratings. The method is demonstrated with data analysis from a major wine competition and a simulation study. (JEL Classifications: C10, C13, C15)

This study investigates factors influencing coordination of the California grape and wine supply chain. Results corroborate prior findings that quality considerations and needs to protect investments in specialized or durable assets significantly increase usage of more formal coordination mechanisms, such as formal contracts and vertical integration or ownership. Consistent with findings for other industries, such investments are associated with greater contract complexity and inclusion of enforcement provisions, while trade partners' prior experience working together decreases contract complexity. Furthermore, our results suggest that quality considerations extend to greater use of formal contracts further downstream. (JEL Classifications: L1, L2, Q13)

The behavior of the macro or mass-production segment of the U.S. brewing industry appears to be paradoxical. Since the end of Prohibition in 1934, the number of independent brewers has continuously declined while the major national brewers, such as Anheuser-Busch, Miller, and Coors, have gained market share. In spite of this decline in the number of competitors, profits and market power have remained low in brewing. Iwasaki et al. (2008) explain this result by providing evidence that changes in marketing and production technologies favored larger brewers and forced the industry into a war of attrition, in which only a handful of firms could survive. This led to fierce competition, especially from the 1960s through the mid 1980s. Since the late 1990s, the war appears to have subsided. Thus, the purpose of this study is to determine whether price competition diminished after the mid-1990s. We find evidence that competition has diminished but not enough to substantially increase market power. (JEL Classification: D22, L11, L66)

In wine tastings, in which several tasters (judges) taste several wines, it is important to insure objectivity to the extent possible. This is usually accomplished by holding the tasting “blind,” i.e., covering the bottles so that the tasters do not know which wine is in which bottle. At some agreed upon point in the proceedings, the tasters reveal what they think about the various bottles. Ideally, this revelation would take place by secret ballot, lest a taster's choices be influenced by what he or she hears another taster say. But in any event, there are two standard ways of rating the wines. The older method is to assign them “grades” on a scale of, say, up to 100 points (Parker) or up to 20 points as in the famous face-off between California wines and French Bordeaux wines in 1976 (see Ashenfelter et al., 2007). As Ashenfelter at al. point out, this has the distinct disadvantage that a judge with greater dispersion in his or her grades will have a greater influence on the average score that each wine achieves.

This article examines the main determinants of differences in ask prices set by investors for single malt whiskies from Islay in Scotland using an original dataset collected from a web trading platform specializing in whisky investment. We find strong evidence that the vintage age (the number of years between the distillation date and the data collection date) positively affects investor asking prices. More precisely, given that the characteristics of whisky, unlike wine, do not change over time once bottled, we disentangle the vintage age effect by subdividing the vintage age into whisky age (the time spent in the cask) and bottle age (the time spent in the bottle). Our results show that whisky age has a more pronounced impact (8.9% per year on average) than bottle age (6.7%). Other findings include the significant influence of distillery reputation, with a moderating effect for independent bottling (i.e., not in-house by the distiller itself) and a positive impact for cask strength whiskies compared to diluted ones. (JEL Classifications: G11, L15, Q11)