Article | Administrative Science Quarterly

On the Causality and Cause of Returns to Organizational Status: Evidence from the Grands Crus Classés of the Médoc

by Daniel Malter

Abstract

This paper identifies the causal symbolic effect of status on the prices organizations charge for their products. I exploit the classification of the châteaux of the Médoc, which sorted 61 wine producers into five growth classes in 1855, as a fixed hierarchical symbol of class status. The classification has defied attempts at revision for more than 150 years. This means that a château's rank in the classification cannot be reversely affected by the quality or price of its wine, which greatly facilitates the estimation of the causal effect of status. To determine whether status serves as a signal of quality under uncertainty or satisfies the motive of conspicuous consumption, I study a period of time during which the uncertainty about quality has arguably declined because the Internet has made wine ratings ubiquitously available. I identify a symbolic effect of status on prices that increases in a time of decreasing uncertainty, which suggests the motive of conspicuous consumption as a driver of the effect. But the results caution that we might commonly overestimate the symbolic value of status if we underestimate the disproportional value that markets place on the pinnacle of quality, the enduring nature of reputation, and the effect of endogenous quality choices on estimates of status effects.

Keywords: organizational status; reputation; quality signals; conspicuous consumption; wine classification of 1855; grand cru; Status and Position; Quality; Reputation; Price; France;

Citation:

Malter, Daniel. "On the Causality and Cause of Returns to Organizational Status: Evidence from the Grands Crus Classés of the Médoc." Administrative Science Quarterly 59, no. 2 (June 2014): 271–300.