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  5. Asymmetric Information and Organizational Forms in Wine Markets
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Asymmetric Information and Organizational Forms in Wine Markets

Paper Session

Sunday, Jan. 4, 2026 12:30 PM - 2:15 PM (EST)

Philadelphia Marriott Downtown
Hosted By: Agricultural and Applied Economics Association
  • Chair: Gianni De Nicolò, Johns Hopkins University

Quality Certification under Uncertainty: An Analysis of Wine Competition Ratings

Gianni De Nicolò
,
Johns Hopkins University

Abstract

Wine competitions serve as certifiers of quality by awarding medals that influence consumer choice and producer strategies. Yet current rating protocols generate uncertainty from two sources: \textit{rating risk}, due to variation in jury assignments and score aggregation within competitions, and \textit{competition risk}, arising from inconsistent standards across events. We propose a standardized rating system that addresses rating risk by normalizing judges’ scores and grouping wines into statistically significant quality classes. Using data from a wine competition, we show that this method reduces score variance and stabilizes award allocations. Extending the analysis, we use a model of intermediary certifiers to capture competition risk and show that heterogeneity in rating protocols diminishes the informational value of medals, raising consumer search costs and lowering producer profits. Standardization across competitions strengthens the credibility of ratings, improves welfare, and enables more efficient submission strategies for producers.

Wine Cooperatives and Returns on Assets

Angelo Zago
,
University of Verona

Abstract

This paper examines the financial performance of wine cooperatives. It introduces a theoretical model that conceptualizes cooperatives as vertically integrated firms, encompassing both the grape production stage managed by members and the wine-making stage operated by the cooperative itself. This model decomposes the total profitability of the wine value chain into these two distinct stages. The empirical analysis uses data from wine cooperatives in Italy and Spain to test the model’s predictions. Additionally, survey data are employed to analyze the distribution of profitability across the two stages. The model suggests that cooperatives managed by professional administrators prioritize profitability in the wine-making segment, while those controlled by members focus on maximizing returns on assets for individual growers.

About Rioja Splitting: Politics or Economics?

Omer Gokcekus
,
Seton Hall University

Abstract

This paper investigates whether Rioja Alavesa’s pursuit of a separate Denominación de Origen Calificada (DOC) is driven by economic incentives or political motivations. Using content analysis and regression modeling based on Wine Spectator and Tim Atkin ratings data, the study finds that Rioja Alavesa wines command a significant price premium (16.1%), supporting the economic argument for market differentiation. However, quality ratings do not significantly differ from other Rioja wines, suggesting that branding and perception, rather than intrinsic quality, drive the premium. Additionally, Rioja Alavesa wineries tend to be smaller and less reliant on aging-based classifications, reinforcing concerns about structural disadvantages within the existing system. These findings highlight the economic rationale for a separate DOC while acknowledging the political complexities involved. The paper concludes with policy implications that may apply to other geographical indications experiencing similar tensions.
JEL Classifications
  • Q1 - Agriculture
  • L6 - Industry Studies: Manufacturing