Much research has examined Akerlofââ?¬â?¢s ââ?¬Å?lemonsââ?¬Â problem, however, very little has addressed\r\nconvergence to a Spence signaling equilibrium. We examine this convergence issue by testing\r\nwhether the explained variance in wine prices for California Cabernet Sauvignon improves as\r\nthe same set of wines progress through subsets of consecutive years. The data are from Wine\r\nSpectator and organized in subsets of common wines for 2004 to 2005, 2003 to 2005, 2002 to\r\n2005, and 2001 to 2005. We perform regressions of wine price on quality attributes for each\r\nyear in each data subset. Using the R-square and mean square error from these regressions, we\r\nthen perform a trend analysis to examine the factors influencing the improvement of the Rsquare\r\nthrough each year and each wine subset. We find that position or year in the wine\r\nsubset is a significant determinant of goodness of fit after accounting for year and sample\r\naffects. This result, while not conclusive, may suggest some degree of wine price convergence\r\nwithin these subsets of wines.
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