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Price Formation in the California Winegrape Economy*

Published online by Cambridge University Press:  08 June 2012

Dale Heien
Dale Heien
Affiliation:
University of California Davis, Department of Agricultural and Resource Economics. Email:dale@primal.ucdavis.edu.
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Abstract

This paper presents a theory of price determination for winegrapes in California. As the California wine economy developed, winegrape contracts took on a role as one of the centerpieces of this transformation. The theory is presented and it is shown how two important factors, weather and fi nancial uncertainty, served to shape the contracts. Hence, long term planting contracts for new vineyards, specifying the price, helped ameliorate the uncertainty to growers. Similarly, shorter contracts played a similar role for established vintners. The model deals with two types of growers: those with contracts made well before the year in question and those who will sign a contract in the Spring of the year of harvest. This paper hopes to illuminate these elements and their interaction. The model is then empirically estimated and tested. (JEL classifi cation: K12, Q11)

Type
Articles
Information
Journal of Wine Economics , Volume 1 , Issue 2 , Fall 2006 , pp. 162 - 172
Copyright
Copyright © American Association of Wine Economists 2006

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