AMERICAN ASSOCIATION OF WINE ECONOMISTS AAWE WORKING PAPER No. 119 Economics REPUTATION TAPPING Bradley J. Rickard, Jill J. McCluskey and Richard W. Patterson October 2012 ISSN 2166-9112 www.wine-economics.org Reputation Tapping Bradley J. Rickard, Assistant Professor (contact author) Charles H. Dyson School of Applied Economics and Management Cornell University Ithaca, NY 14853 Tel: +1.607.255.7417 E-mail:
[email protected] Jill J. McCluskey, Professor School of Economic Sciences Washington State University Pullman, WA 99164 Richard W. Patterson, Graduate Student Department of Policy Analysis and Management Cornell University Ithaca, NY 14853 Abstract Models of collective reputation are extended here to consider the effects from regional marketing efforts that attempt to establish links to famous production regions—a phenomenon we define as “reputation tapping”. We collect data from a laboratory experiment and estimate consumer response to information that ties U.S. wine regions to French wine regions. Results show that reputation tapping is significant for wines from emerging regions and important among subjects that are relatively knowledgeable about wine. Our findings also suggest that full protection of geographical indications would require the regulation of activities beyond those by individual firms. Keywords: Appellations; Auctions; BDM; Collective reputation; European Union; Geographical indications; Willingness to pay; Wine. JEL Classification: L14, Q13, Q17 October 2012 This research is part of a larger project titled “Improved grape and wine quality in a challenging environment: An eastern U.S. model for sustainability and economic vitality” that is funded by the USDA/NIFA/SCRI program under grant #2010-01183. i Reputation Tapping Introduction The economic importance of reputation has been widely studied, and much attention has been given to understanding the relationship between quality and reputation (e.g., Shapiro 1983; Landon and Smith 1998).