Economics of Collective Reputation and Wine

Yesterday Jared and I presented on the economics of collective reputation and wine.  Reputation can be defined as defined as the general beliefs or opinions others have about a person or a brand.  A shared brand name such as geographical names have been given to identify high quality food, such as greek olives and parma ham.  This relates to some of the places near us in Italy but with wine, for example Tuscany and Champaign.  

Having a good collective reputation leads to many strong advantages, for example a small firm will be able to reap the benefits of reputation without having to establish itself.  Tirole made an attempt to model group reputation as an aggregate of individual reputation, meaning new members will inherit the good or bad reputation of a group when joining.  There can be a negative result when more members join a firm, this means there is a correlation between collective reputation and the number of producers.

There are three main determinants that can be identified for collective reputation.  The first being the characteristics of the coalition, the second being the quality standards set by the coalition and the governing body, the third being the context in which firms operate. 

In second portion of the article it describes some of the ways wine has been rated and represented in Italy.  There is Vertical Differentiation, and Horizontal Differentiation.  The main ways wine is graded in Italy is the Hugh Jackson's wine guide.  This article relates to when we visited the organic vineyard two days ago, we can see some of the economics that relates to Rosi's business.