When Being in the Minority Pays Off: Relationships among Sellers and Price Setting in the Champagne Industry

Ody-Brasier, A and Fernandez-Mateo, I (2017) When Being in the Minority Pays Off: Relationships among Sellers and Price Setting in the Champagne Industry. American Sociological Review, 82 (1). pp. 147-178. ISSN 0003-1224

Abstract

Economic sociologists have studied how social relationships shape market prices by focusing mostly on vertical interactions between buyers and sellers. In this paper, we examine instead the price consequences of horizontal relationships that arise from intergroup processes among sellers. Our setting is the market for Champagne grapes. Using proprietary transaction-level data, we find that female grape growers—a minority in the growers’ community—charge systematically higher prices than do male grape growers. We argue that the underlying mechanism for this unexpected pattern of results involves the relationships developed and maintained by minority members. More specifically, in-depth fieldwork reveals that female growers get together to compensate for their isolation from the majority. This behavior enables them to overcome local constraints on the availability of price-relevant information, constraints that stem from prevailing norms of market behavior: individualism and secrecy. We discuss the implications of these findings for the study of how relationships shape price-setting processes, for the sociological literature on intergroup relations, and for our understanding of inequality in markets.