Commitment to commercialization and quality choices in the Champagne wine producer-distributor relationship

We study the interaction in the Champagne wine producer/distributor relationship between the commitment of the producer to commercialization of a low quality wine and the high quality adjustment of the distributor. We show that this commitment can allow the producer to acquire all the pro t of the supply chain. However, at equilibrium, the distributor chooses a quality level that is superior to that obtained at the optimum of vertical integration, and manages to get a part of the pro t. The results we obtain allow us to analyze the evolution of wine supply chains when a new distributor appears and enters in competition with the producer