Potential market failures in the Portuguese wine industry

The wine industry is characterized by a monopolistic competition market structure, with high product differentiation. In this study, based on the predictions of microeconomic theory as applied to market equilibrium and market failure, the statistical data on production, trade and domestic consumption, as well as the governance model adopted, were analyzed. The main goal was to examine potential market failures in the Portuguese wine industry, concentrating mainly on those related to information asymmetry and transaction costs. The analysis shows that while Portugal constitutes a significant source of low-priced wines, both for its home consumers as well as for those abroad, most wines lack reputation and therefore have little potential to transfer value to upstream economic agents, and almost no possibility of increasing consumers' willingness to pay. Though there is detailed information on production, exports and trade, limited information exists on domestic consumption. Given the small dimension of some wine regions, the governance model adopted does not benefit from scale economies and requires higher transaction costs. O setor do vinho e caracterizado por uma estrutura de mercado de concorrencia monopolistica, com elevada diferenciacao de produtos. Neste estudo, baseado nas predicoes da teoria microeconomica aplicadas ao equilibrio do mercado e a falhas de mercado, foram analisados dados estatisticos sobre producao, comercio e consumo interno, bem como o modelo de governacao adotado. O principal objetivo foi detetar potenciais falhas de mercado na industria vinicola portuguesa, concentrando-se principalmente naquelas relacionadas com assimetrias de informacao e custos de transacao. Os resultados mostram que Portugal e, sobretudo, um mercado de vinhos de baixo preco, tanto no consumo interno como nas exportacoes, com a maioria dos vinhos a carecer de reputacao e, portanto, com pouco potencial para gerar e transferir valor para os agentes economicos a montante, e fracas possibilidades de os consumidores aumentarem a disposicao a pagar. Embora exista informacao detalhada sobre a producao, as exportacoes e o comercio, a mesma e limitada no consumo interno. Dada a pequena dimensao de algumas regioes vitivinicolas, o modelo de governacao adotado nao beneficia de economias de escala e suporta elevados custos de transacao.