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Journal of Agricultural & Food Industrial Organization

Ed. by Azzam, Azzeddine

CiteScore 2017: 0.76

SCImago Journal Rank (SJR) 2017: 0.325
Source Normalized Impact per Paper (SNIP) 2017: 0.402

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Prices as Quality Signals: Evidence from the Wine Market

Hubert Schnabel / Karl Storchmann
Published Online: 2010-02-08 | DOI: https://doi.org/10.2202/1542-0485.1283

In this paper we empirically analyze whether prices serve as signals. Specifically, and following the hypothesis by Bagwell and Riordan (1991), we examine whether (1) higher quality and (2) low consumer information levels about quality are associated with prices that are above the full information equilibrium. We refer to two price samples of identical wines and analyze the difference between both. The first sample consists of prices for informed wholesalers who can taste the wines before purchase. The second sample comprises retail prices for the imperfectly informed public. We find support for the Bagwell-Riordan model, i.e., price signals respond positively to wine quality and negatively to increasing information. For our sample, the information effect by far dominates the quality effect.

Keywords: wine; price signals

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Published Online: 2010-02-08

Citation Information: Journal of Agricultural & Food Industrial Organization, Volume 8, Issue 1, ISSN (Online) 1542-0485, DOI: https://doi.org/10.2202/1542-0485.1283.

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