Re: French Boycott 2

Thought you were going to say Nickeled and Dimed which is a required reading for incoming Freshmen at UNC-Chapel Hill.

It shows how capitalists will ruin the world.

Hey, supply and demand is a major factor when creating any product. If there is no demand and no need there will be no sales. If the supply is abundant the pricing typically declines. This is not just for wine.

Do you think Harley Davidson Motorcycles really can't make more bikes. No this is how you romance a market. Create demand by limiting supply. However again there is a cost that also determines the minimum pricing.

To say that all wine pricing is set on supply and demand would be slightly inaccurate in my opinion. However it too plays a factor along with issues such as raw materials, packaging, production labor, managment fees, advertising and promotion, land use fees, admin fees, return to shareholders, taxes, employee benefits...don't forget taxes and a margin above all to make a fair return and have retained earnings to invest back into the company for future growth or replantings....its more than just supply and demand.

Dick, in the end it will probably be easier just to agree to disagree. It seems to me your Harley Davidson example better makes my point than yours. Of course Harley can make more bikes - Screaming Eagle could make also more wine but in both cases abundance would hurt their perceived scarcity, a commodity some customers are willing to pay extra for. And I've already said that cost sets a minimum price below which a producer can't make money. But I still think very few customers would be willing to pay Harley extra money for their bikes because they want to ensure Harley's profitability by reimbursing their production costs. Instead, they are willin to pay Harley's asking price for the looks, for that Harley rumble, because Harleys are scarce and they will be the only Harley owners on their block, and so on. If Harley's marketers couldn't convince potential customers of one or more of those, the customer wouldn't pay Harley's price. Harley would go out of business, as they already almost have. In other words, Harley's production costs don't set the market price for a Harley.

What I've said about market pricing only applies in an efficient market. Defense contractors, for example, in their very distorted market with few buyers and even fewer sellers, often *do* seem to get away with charging the government based on their costs. But with many consumers and many producers, the wine business is extremely competitive. There are so many choices out there, a consumer has to be convinced he is getting value for their money. Every consumer judges for himself what constitutes value, just as in the case of the Harley - they like the label, they like the wine, they want to be the only one on their block to own a case of Chateau Petrus. Granted, the wine market isn't one hundred perfectly efficient but it's close. So you're right, normal market forces don't *entirely* determine the market price of wine - maybe only 99.5%. But if you don't mind, I'll just round 99.5 to 100 and call it *all* supply and demand ;^)

- Mark W.

I think everyone is making this a little hard.

1. Supply and cost are really the same thing. If a producer can't cover its (opportunity) costs, it will not supply the product. Sure, the producer may guess wrong in the short run and take a loss, but not in the long run.

1. Demand and willingness to pay are also the same thing. If people are willing to pay prices above the opportunity cost of production, the price will reflect this and the producer will, by definition, earn economic rents. Of course, in the long run, land values will reflect the premium prices paid for wines grown on choice parcels of land in Napa and elsewhere.

So, of course, prices are determined by supply and demand.

Tom Schellberg

The whole idea of dilution and increasing crop yeilds by irrigation seems a little odd for desert climates. Without irrigation, nothing would grow in eastern Washington. Overcropping and dilution can happen, but generally the wines are quite well extracted. Just shows the problem of applying the standards of one wine growing area to another.

I think the point made a while back that the regions wine laws are self-serving is well taken. No sugar added in California, no irrigation in France. Of course not.

Tom Schellberg