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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, Room 408
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.

Rioja Alavesa’sPursuit of DOC Status: A Question of Economics or Politics?

Omer Gokcekus
,
Seton Hall University

Abstract

This study investigates whether Rioja Alavesa’s pursuit of a separate Denominación de Origen Calificada (DOC) is driven primarily by economic incentives or by political and identity-based motivations. We combine a thematic analysis of public discourse (news coverage, industry documents, and producer and critic commentary) with regression evidence based on Wine Spectator and Tim Atkin ratings and price data for DOCa Rioja wines. The econometric results show that Rioja Alavesa wines command a statistically significant price premium of 16.1% after controlling for expert scores, production volume, vintage, and aging-based designations. However, expert ratings do not differ significantly between Rioja Alavesa and other Rioja sub-regions, indicating that the observed premium reflects market positioning and institutional differentiation rather than superior expert-rated quality. Additional evidence shows that Rioja Alavesa producers operate at smaller average scale and rely less on aging-based classifications, consistent with claims of misalignment between terroir-oriented strategies and the existing DOCa Rioja governance and signaling framework. While political and Basque identity narratives appear in the discourse, they are less prominent than economic and institutional arguments and function mainly as legitimizing frames. Overall, the findings characterize the DOC initiative as economically coherent but institutionally constrained, illustrating broader limits of collective reputation systems under increasing internal heterogeneity.
JEL Classifications
  • Q1 - Agriculture
  • L6 - Industry Studies: Manufacturing