Ody-Brasier & Vermeulen (2014). The Price You Pay: Price-setting as a Response to Norm Violations in the Market for Champagne Grapes

Authors:
Amandine Ody-Brasier – Yale School of Management
Freek Vermeulen – London Business School

Interviewers:
Jaemin Lee – INSEAD
Daphne Teh – INSEAD

Article link: http://asq.sagepub.com/content/59/1/109

Question 1. Your paper examines the question of how norm violations influence price setting in the market. What inspired you to research this question? Were the hypotheses and results commensurate with your life experiences?

The research question and hypothesis were largely inspired by our interviews with Champagne grape growers and house CEOs. During our fieldwork, what we found really intriguing was the discrepancy between the common belief that grape prices are homogeneous and growers’ individual pricing practices. Growers seemed to charge different prices to buyers depending on how much they like them but, at the same time, they did not expect the other growers to engage in the same behavior. In other words, they individually admitted to charging lower prices to certain houses but they expected the other growers to behave rationally and maximize their profits by charging the highest possible price in all situations. This prompted us to further investigate the phenomenon.

Question 2. When we work on a research project, we find those moments that get us more excited about the paper—whether that’s getting access to really interesting data, getting significant effects for an interesting idea, or getting positive feedback from a scholar we admire, etc. What were the highlights and your favorite moments working on this project?

What was encouraging from the very beginning of the project was the extent to which it piqued our colleagues’ interest (in addition to ours). The more time we spent examining the setting, the more we realized that this study could really improve our understanding of how markets work. This remained an intuition until we started conducting the quantitative analyses. For me, seeing regression results consistent with what our field work suggested was probably the most satisfying aspect of this project. I was also thrilled by the size of the effects: it implied that the extent to which one likes (or dislikes) a buyer matters in a non-trivial way for market prices.

Question 3. What was the biggest challenge for your paper during the review process?

The biggest challenge was to provide adequate support for our theorized mechanism. To rule out alternative explanations, such as weak social integration, we had to go back to the field and collect new data. These included survey data and a proprietary longitudinal dataset on Champagne grape sales transactions. The data collection took almost a year, but after including these new data in our analyses, we were thrilled to be able to show that our results remained robust. We think it really improved the quality of the final manuscript.

Question 4. We were particularly impressed with the level of details in the data and your analysis. What made you go through all those different tests and how long did it take?

While we had conducted a host of robustness checks prior to the original submission, the review process prompted us to engage in a number of supplemental analyses. In addition to the analyses mentioned above, we spent much more time thinking seriously about selectivity. There was a concern that selectivity in houses’ behavioral choices could be driving our results, so we came up with various models that could factor selectivity out. The original draft was submitted in 2011, so it took about three years from start to finish.

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