Assessing the market potential of brandy produced in Armenia

The basic facts of economic development of countries in transition reveal the importance of identifying the comparative advantage. Restructuring the economy and reallocation of resources change the characteristics of the previous equilibrium and create a new equilibrium, which implies also changes in comparative advantage ratings. Based on the analysis of production, consumption and industrial processing of grapes in Armenia and applying the methodology of Domestic Resource Cost analysis this book investigates the resource allocation efficiency for production of grapes, wine and brandy in Armenia. The analysis of the international market of brandy provides background for assessing the market opportunities of Armenian brandy, applying the methodology of spatial equilibrium analysis in the form of an interregional trade model (using GAMS). The optimal values of production, consumption and export quantities of brandy, the equilibrium prices, values of consumer and producer surpluses and net social welfare are presented. Conducting sensitivity analysis the study does investigations on the effects of certain policy decisions on grape and brandy production and derives conclusions, based on which it draws recommendations and policy implications.