Forward Market and Signals of Quality

Mahenc, Philippe; Meunier, Valérie

doi:10.2307/1593742

Cited by 9 publications

(11 citation statements)

References 16 publications

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“…The theoretical literature (Shaked and Sutton, 1982;Shapiro, 1983;Tirole, 1996;Mahenc and Meunier, 2003; among others) mainly considers firm's activity of quality signaling (through advertising, product labeling, reputation, experts' ratings, etc. ), while most empirical studies (Ackerberg, 2003;Caves and Greene, 1996;Jin and Leslie, 2003;etc.…”

Section: Introductionmentioning

confidence: 99%

Identifying the effect of unobserved quality and expert reviews in the pricing of experience goods: Empirical application on Bordeaux wine

Dubois

Nauges

2010

International Journal of Industrial Organization

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Section: Introductionmentioning

confidence: 99%

Identifying the effect of unobserved quality and expert reviews in the pricing of experience goods: Empirical application on Bordeaux wine

Dubois

Nauges

2010

International Journal of Industrial Organization

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“…Moreover, it may be instructive to extend the present analysis by considering that the Bordeaux primeur release has the features of forward trading. A model along this line can be found in Mahenc and Meunier (2003). This work exhibits forward pooling equilibria which can be here interpreted as follows : low-quality producers earn positive speculative prots by selling forward at primeur prices that are both uninformative and upward-distorted, while high-quality producers need uninformative primeur prices to reduce the cost of signaling quality on the market of bottled-wine.…”

Section: The Model With Informed Buyersmentioning

confidence: 99%

Influence of Informed Buyers in Markets Susceptible to the Lemons Problem

Mahenc

2004

American J Agri Economics

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er mars 2004Résumé I show that the presence of informed buyers is necessary but not always sucient for producers to use prices as signals of product quality.A suciently high fraction of informed buyers eliminates the lemons problem. A small fraction of informed buyers mitigates the lemons problem, provided that buyers' prior belief of high quality is suciently pessimistic : price reveals high quality at a signaling cost which increases with market power. However, if buyers' prior belief of high quality is optimistic when the market is poorly informed, then the lemons problem is not overcome.

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“…In addition to potential market failure due to imperfect competition, the asymmetric information between sellers and buyers is likely to create price distortion. This is because high-quality producers have an incentive to signal the high quality of their wine through the choice of a primeur price (see Shapiro 1983;Mahenc and Meunier 2003;Mahenc 2004). …”

Section: Reputation and Quality In The Pricing Of Primeur Winementioning

confidence: 99%

“…Using theoretical arguments, Mahenc and Meunier (2003) have shown that only high primeur prices can provide an effective signal of high quality since it is more costly to produce highquality than low-quality wine.…”

Section: Reputation and Quality In The Pricing Of Primeur Winementioning

confidence: 99%

The Pricing of Experience Goods: The Example ofen primeurWine

Ali

Nauges²

2007

American J Agri Economics

114

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The market for "primeur" wine in the Bordeaux region allows producers to sell wine that is still in barrels. As with all experience goods, producers send quality signals to uninformed buyers. Using original data on Bordeaux wines, we show that the pricing behaviour of producers depends to a large extent on their reputation, and much less on short-term changes in quality (as measured by experts' grades). We also find that the primeur price has an informative role, since a 10 percent increase in primeur price leads to a 3 percent increase in prices on the market for bottled wine.Keywords: Bordeaux wine, experience good, panel data, quality signal, reputation. Suggested running head:The pricing of en primeur wine While writing this article, Héla Hadj Ali was working as a research fellow at INRA (National Institute for Research in Agriculture), Toulouse (France). Céline Nauges is a senior research fellow at INRA, Toulouse (France).The authors wish to thank Pierre Dubois, Valérie Meunier, Katrin Millock, Michel Simioni, Alban Thomas, Ian M. Sheldon (the editor), Michael Visser, and two anonymous reviewers for their useful comments and suggestions that materially improved the article. The usual caveats apply.-1 -Most food products can be classified as experience goods (Nelson 1970;1974) because their quality can rarely be ascertained before actual consumption.1 A substantial part of the theoretical literature dealing with experience goods has focused on sellers' activity to inform consumers in their purchases, particularly the role of signaling and reputation. Prices, advertising expenditure (Milgrom and Roberts 1986) and warranties (Grossman 1981) are textbook illustrations of how a monopolist can signal the high quality of his product in a game with asymmetric information. Shapiro (1983) emphasized the role of reputation in a perfectly competitive environment by describing how consumers form rational expectations on the quality of experience goods based on the quality of goods produced in the past.In the particular case of food products, producers often choose labeling as a signal of quality. Bureau and Valceschini (2003) showed that labeling helps promote differentiated products and allows small producers to benefit from a well-established collective reputation.More generally, the use of food labels is said to create the potential for price premia (Henneberry and Armbruster 2003).Quantitative measures of these "price premia" are quite rare, as well as, more generally, analyses of the pricing strategy and signaling activity of producers in markets for food products. This is especially the case when compared with hedonic studies that measure the consumers' assessment of food product attributes (see McCluskey and Loureiro 2003, for a review). This article contributes to the empirical literature on experience goods by analysing the pricing behaviour of wine producers from the well-known Bordeaux region in France.Original data on two markets (for "primeur" wine and for bottled wine) provide a unique opportunity to obt...

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Forward Market and Signals of Quality

Cited by 9 publications

References 16 publications

Identifying the effect of unobserved quality and expert reviews in the pricing of experience goods: Empirical application on Bordeaux wine

Identifying the effect of unobserved quality and expert reviews in the pricing of experience goods: Empirical application on Bordeaux wine

Influence of Informed Buyers in Markets Susceptible to the Lemons Problem

The Pricing of Experience Goods: The Example ofen primeurWine

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