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)

The purpose of this paper is to study the impact of weather conditions on prices of Bordeaux wines. Unlike previous studies (based on data from the main weather station in Mérignac), we use climatological variables from many local stations. Two models are compared: one where prices are related to Mérignac weather conditions, and one where prices are related to local conditions (weather variables measured in the station the nearest to the château). Although a (non-nested) test suggests that the model based on local data is better, the two specifi cations lead to very similar results. This is reassuring news for researchers interested in the relationship between weather and prices, but who do not have access to spatial variations in climate. (JEL Classification: Q19)

In the author's earlier research, five quite reliable and six quite unreliable subsets of tasters were identified, from among the full sample of eleven wine tasters, at the heralded 1976 Paris blind Chardonnay and Bordeaux/Cabernets wine competitions. This study shows quite conclusively that the consistent tasters and the inconsistent ones provided quite different results when compared both to each other and to the results based upon the full sample of eleven tasters. Results demonstrate the following: one should be wary of findings based solely upon an omnibus approach (i.e., results based only on the full sample of 11 tasters); that a next logical step is not only to continue to identify consistent tasters, but to design future studies in which these reliable judges are used to teach neophyte imbibers to also achieve high levels of wine tasting consistency; and that in continuing to investigate other important empirically derived oenological information, we should not, in the process, lose sight of the sheer hedonic pleasure of the next glass of wine.

I am an economist, appearing on this panel as an individual at the request of FTC staff. I own a small vineyard in Napa Valley, California, have sold grapes to large and small wineries, and am familiar with the positions taken by many of the people in the wine industry regarding the opportunities and limitations surrounding direct sales of wine to consumers. My intention, however, is to speak here as an advocate for consumers rather than as an advocate for the wine business. My work as a professional economist concentrates primarily on consumer behavior, with applications in marketing, health, and the environment. I do not have a specialty in the economics of the wine industry. I am the E. Morris Cox Professor of Economics at the University of California, Berkeley, and have served as President of the Econometrics Society and as vice-president of the American Economics Association. In 2000, I won the Nobel Prize in Economics for my work on consumer choice behavior.

In common with most economists, I believe that consumers benefit from free markets operated with the minimum government regulation required for consumer protection. The history of government regulation of markets is littered with examples of restrictions, ostensibly adopted on behalf of consumers, that instead protect concentrated economic interests at the consumers' expense. The restrictions on direct purchase of premium wines and their interstate shipment that have been adopted by a number of States are, I believe, another example of abuse of the regulatory process to protect concentrated economic interests, going far beyond the minimum regulations needed to maintain the integrity of State taxation and to protect minor consumers.

To what extent can the future price of icon wines be anticipated from information available at the time of their initial sale by wineries? Using a seemingly unrelated regression model we show that weather variables and changes in production techniques, along with the age of the wine, have significant power in explaining the secondary market price variation across different vintages of each of three icon Australian red wines. The results have implications for winemakers in determining the prices they pay for grapes and charge for their wines, and for consumers/wine investors as a guide to the prospective quality of immature icon wines. (JEL codes: C23, D12, D44, D80, G12)

The paper has three basic objectives: (1) to discuss and analyze the subtleties of ranking wines in blind tastings, (2) to analyze the degree of agreement or disagreement among the tasters (judges) and (3) to shed some light on the problem of identifying the wines and to determine when the identifications of the judges might be called statistically significant. The first issue utilizes the rank sums or the related measure, “votes against,” and discusses the appropriateness of a statistical test introduced by Kramer. The second introduces Kendall's W coefficient of concordance and discusses some other, related measures. The third derives the finite sample distribution of the number of correct identifications under the null hypothesis of random identifications, from which critical values can be obtained, both for the case in which each wine has to be identified exactly and the case in which there is a small number of different types of wine that have to be identified. (JEL Classification numbers: C12, C15, C49, C59)

This paper presents a theory of price determination for winegrapes in California. As the California wine economy developed, winegrape contracts took on a role as one of the centerpieces of this transformation. The theory is presented and it is shown how two important factors, weather and fi nancial uncertainty, served to shape the contracts. Hence, long term planting contracts for new vineyards, specifying the price, helped ameliorate the uncertainty to growers. Similarly, shorter contracts played a similar role for established vintners. The model deals with two types of growers: those with contracts made well before the year in question and those who will sign a contract in the Spring of the year of harvest. This paper hopes to illuminate these elements and their interaction. The model is then empirically estimated and tested. (JEL classifi cation: K12, Q11)

Analyses are made of two wine tastings, one of red and one of white wines, to compare French and American styles. It is concluded that there are differences between the wines and, in the case of the reds, national differences. It is shown that even skilled tasters can often be out by as much as 3 when judging on a scale from 0 to 20. For the statistician, Bayes factors are contrasted with F-values. (JEL classification: C11)

The hedonic technique is applied to wines. In the price equation we include objective characteristics appearing on the label, as well as sensory characteristics and a grade assigned by expert tasters. We have three almost identically structured data sets (two on Bordeaux wines, and one on Burgundy wines). The results are used to make comparisons between two of the most important wine regions in France, and comparisons over time (the two Bordeaux data sets are sampled at different points in time). (JEL Classification: D49.)

Another puzzle is the lack of correlation between price and pleasure. Perhaps it is not so surprising that a first-rate example of a little known wine can seem much more memorable than something more famous selling at ten times the price; part of the thrill is the excitement of discovery and the feeling of having beaten the system. What is more extraordinary is the wild price variation at the very top end. Demand bubbles up mysteriously, apparently fuelled by fashion and rumour as much as by intrinsic quality.—Jancis Robinson, Confessions of a Wine Lover, Penguin Books, 1997.

This paper examines price and quality in the California wine industry using medals won in nine tasting events in 1995 as indexes of quality. For each tasting event, there were four possible medals: double gold, gold, silver, and bronze. Using stepwise least squares regression analysis, we estimate hedonic price functions for the 1884 wines in our sample treating quality as exogenous to price. We also look at results for some wine types, including chardonnay and cabernet sauvignon. The results are largely as expected. The San Francisco Wine Competition appears to be the best predictor of quality with the Orange County and Sacramento (California State Fair) competitions the second best predictors of quality. (JEL Classifi cation: D4, L6)

En primeur sales of Bordeaux grands crus occur every spring on the Bordeaux marketplace and represent the main source of supply for wine merchants. We address two specific issues related to the en primeur strategy. First, we study whether en primeur prices are good estimates of wines' qualities, as well as how they may reveal any relevant information to uninformed buyers. Second, we consider which roles en primeur sales may play between traders, given the market informational and competitive structures. (JEL classification: D42, D82, L15.)

Two series of Vickrey auctions have been performed to assess the effect of packaging information (bottle and label) on the reservation prices of ordinary consumers for five brut non-vintage Champagnes. As in other studies on wine tasting, packaging information is found to explain much more of the variation in willingness to pay than sensory information. Participants are unable, or unwilling, to put different values on the Champagnes after blind tasting, but significant differences in reservation prices appear when labels are disclosed. Detailed analysis of choices reveals a large heterogeneity in individual behaviors and valuations of the Champagnes included in this study. (JEL Classification: C91, D12)