The German Wine Law from an Information Economics Perspective

Abstract

The German wine law has been made responsible as one of the reasons for the critical market position of German wines inside and outside Germany. As a consequence, a new wine law (the profile wine concept) has been introduced in year 2000. As consumers are increasingly looking for variety and change the wine denomination becomes a critical purchasing criterion beside bottle and brand design. The main function of a wine law is to reduce the perceived purchasing uncertainty of consumers. We analyse the factors that determine the degree of consumer uncertainty when buying wine. This uncertainty can be reduced by the information economics mechanism of signalling. We derive signalling requirements that an efficient wine law should fulfill. Subsequently we analyse how the former German wine law and the new profile wine concept comply with these requirements by analysing their effects on three distinctive consumer groups within the concept of the triangle of goods characteristics. We conclude by opposing governmental regulation on the wine market with possible self regulation possibilities within the industry.