Category Signaling: Biodynamic and Organic Winemaking in Alsace

We propose that category membership can operate as a collective market signal for quality. This requires that gaining category membership is more costly for low-quality producers. The strength of such signals increases with the distinctiveness, or contrast, of the category. Our empirical study focuses on biodynamic and organic viticulture in Alsace. The codes for both categories proscribe the use of fertilizers and pesticides. But the biodynamic category has higher contrast due to additional farming rules and eccentric practices that make it stand out to a considerable degree. And, unlike the organic category, biodynamics is not perceived to overlap significantly with sustainable viticulture. We find that wineries of higher quality have higher hazards of becoming biodynamic but not organic. Ratings by critics tasting blind increase significantly for wineries after they become members of either the biodynamic or organic categories. However, a parallel analysis finds that ratings by critics who know the identity of the producer favor biodynamic but not organic wines.