Luxury markets are examples of how producers politically construct the rules for value, or what Lucien Karpik calls, “the authenticity regime” (2010). These markets are distinguished by limited supply, hierarchical and elite-defined notions of quality, and prices that vastly exceed production costs. They rely heavily on politically constructed market signals to indicate quality, signals that can include shared geographic brands, firm brands, and expert reviews.
Market organization rests upon formal and informal institutions, institutions that favor some market actors over others. The ability of protective regulation to create market slack is closely related to effective supply chain cooperation. This cooperation takes a degree of local trust and national institutional legitimacy. For these reasons, producers with low levels of social trust and national institutional legitimacy may struggle to construct shared brands and implement a successful model of high value-added markets.
Wine markets are especially dependent upon market protection through the mechanism of national regulation. In my paper, I explore the dynamic between trust, supply chain cooperation, and subsequent regulatory efficacy. I specifically use the examples of the French, German, and Italian case to describe the effects of different levels of trust on the structure of the supply chain. I argue that in the wine market, strong levels of institutionalized cooperation and the resulting high levels of trust are critical to the efficacy of luxury wine regulation and its subsequent market impact. In systems where levels of trust among supply chain actors is high, producers can create a protected market space and have an opportunity to secure market protection through the creation of producer-driven production regimes (“supply-dominant production”). In systems where trust in other actors is low and informational asymmetries dominate, producers are more fragmented, their markets are less protected, and they operate in competitive consumer-driven markets (“demand-dominant production”).
