Abstract

http://ssrn.com/abstract=133631
 
 

References (20)



 
 

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Love or Money? The Effects of Owner Motivation in the California Wine Industry


Fiona M. Scott Morton


Yale School of Management; National Bureau of Economic Research (NBER)

Joel M. Podolny


Yale School of Management

October 1998


Abstract:     
Many industries are characterized by heterogeneous objectives on the part of firm owners. Owners of private firms, in particular, are likely to maximize utility, rather than profits. In this paper, we model and measure motivations of owners in on particular industry, the California wine industry. In both a formal model and an empirical analysis, we examine the implications of these motivations for market behavior. We find evidence that owners with strong non-financial motivations choose higher prices for their wines, controlling for quality; owners with strong profit-maximizing motives choose lower prices for their wines, controlling for quality. We also find that utility-maximizers are more likely to locate at the higher end of the quality spectrum, whereas profit-maximizers are more likely to locate at the lower end. We explore how the presence of a significant number of utility maximizers within an industry affects the competitive interactions within that industry. We conclude that some winery owners 'consume' features of their product or business as a substitute for profits and, in the process, provide softer price competition for for-profits. Additionally, in aggregate, their preference for quality can prevent entry into the high-quality segment on the part of profit-maximizing firms.

Number of Pages in PDF File: 45

JEL Classification: L21, L22, L66

working papers series





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Date posted: October 29, 1998  

Suggested Citation

Scott Morton, Fiona M. and Podolny, Joel M., Love or Money? The Effects of Owner Motivation in the California Wine Industry (October 1998). Available at SSRN: http://ssrn.com/abstract=133631 or http://dx.doi.org/10.2139/ssrn.133631

Contact Information

Fiona M. Scott Morton (Contact Author)
Yale School of Management
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-5569 (Phone)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Joel M. Podolny
Yale School of Management ( email )
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
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References:  20
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