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UBC Theses and Dissertations

Terroir and reputation : the economics of British Columbia wine industry in three essays. Pankowska, Katarzyna


Terroir and collective reputations are two principal and interconnected elements believed to influence wine price and sales. In this dissertation, I examine the role of terroir (measurable features of the grape land) and collective reputation (eligibility for Vintners Quality Alliance, VQA) in determining the price, volume, and revenue of wine sales in British Columbia (BC). My research is highly relevant because this New World wine-producing region is currently altering its terroir-based geographical organization and sub-regional collective reputation, and plans to introduce new appellations and sub-appellations. My first chapter provides an empirical overview of the BC wine industry including market structure, market shares, and regulations. My first analytical chapter on terroir consists of using hedonic regression to connect wine prices and terroir. By matching grape and wine production at a micro level, I examine how agronomic characteristics of grape land affect the price of wine due to variation in grape quality. In this analysis, I make an extensive use of a detailed dataset consisting of vineyards' terroir characteristics. In my second analytical chapter of collective reputation, I use a three-stage endogenous dummy variable regression model to identify the average effect of VQA status on the average volume share, the average revenue share, and the average price of wine. I find somewhat limited evidence that vineyards' natural elements are important determinants of the price of BC wine. In my hedonic regression, the factors that seem to matter more are wine variety and brand. I also find that a relatively large number of wine brands represent VQA and that VQA certification positively influences the volume of sales for BC-made wines. My results also show that VQA certification has an insignificant impact on the average price and the average sales revenue of BC-made wines. Therefore, my results imply that VQA certification allows rent dissipation via over-certification. This over-certification allows arbitraging away of producers' rents.

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