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Price Formation in the California Winegrape Economy

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  • Heien, Dale

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)

Suggested Citation

  • Heien, Dale, 2006. "Price Formation in the California Winegrape Economy," Journal of Wine Economics, Cambridge University Press, vol. 1(2), pages 162-172, October.
    • Handle: RePEc:cup:jwecon:v:1:y:2006:i:02:p:162-172_00
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    Cited by:

    1. Luca Bossi & Vladimir Petkov, 2013. "Monopoly, Time Consistency, and Dynamic Demands," Journal of Industry, Competition and Trade, Springer, vol. 13(3), pages 339-359, September.

    More about this item

    JEL classification:

    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices

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