The Pricing Efficiency of German Wine Cooperatives: A Hedonic Metafrontier Approach

Cooperatives have long been criticised for their inefficiency due to high internal coordination costs and inefficient decision-making. This is a particular disadvantage in the production and marketing of agri-food products that have heterogeneous (hedonic) quality attributes. However, cooperatives continue to be widespread in agriculture, notably in the wine sector, because they can achieve scale economies and reduce transaction cost for their members. This paper compares the efficiency of cooperatives and non-cooperatives in the German wine sector with respect to their ability to place wines on the market at prices above their measurable quality attributes. The results from a stochastic metafrontier panel of 1,223 wine prices from two wine guides suggest that consumers should purchase wine from cooperatives if they are seeking market prices that correspond closely with a wine’s quality. In turn, members of wine cooperatives should ask themselves why non-cooperatives are typically better at attracting an even greater willingness to pay for the respective quality of their wines.