The Financial Value of Champagne Houses in a Cobweb Economy

The objective of the paper is to simulate the corporate value of Champagne makers by takinginto account the Champagne market evolution. These measurements are conducted by linkingfinancial debt, performance and valuation to a vertical coordination model of production-consumptionwithin a cobweb economy. The overall model uses the dynamic structure that underliesthe strategic interactions amongst grape producers and wine makers. These segmentscoordinate grape production and trade by forming expectations about final consumption, priceand stock risks. The paper examines the dynamics of the financial cash flows and net worth ofChampagne houses for the 1977 – 2003 period using system dynamics (SD) modeling principles.The results presented in this paper report on key financial indicators for that period for financialdebt, performance and valuation of Champagne makers. It provides a sound basis topursue this work, because the model can further enhanced to anticipate the possible valueChampagne makers for the coming crucial years since the Champagne appellation has reachedits geographical limit determined by the protected designation of origin (PDO), while worldwidedemand continues to grow.