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A Game Theoretic Approach To Organic Foods: An Analysis Of Asymmetric Information And Policy

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  • McCluskey, Jill J.

Abstract

Demand for healthy, safe and environmentally friendly food products has been increasing. In response, producers are marketing organic and other quality-differentiated foods, sometimes claiming to have followed sound environmental and animal welfare practices. These products frequently have unobservable quality attributes. If the profit-maximizing producer is able to deceive the consumer with a false claim, then he or she will enjoy a higher price with lower production costs (compared to the full disclosure outcomes). The analysis described in this paper shows that repeat-purchase relationships and third party monitoring are required for high-quality credence goods to be available. Policy implications of this analysis for national organic food standards are discussed.

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Bibliographic Info

Article provided by Northeastern Agricultural and Resource Economics Association in its journal Agricultural and Resource Economics Review.

Volume (Year): 29 (2000)
Issue (Month): 1 (April)
Pages:

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Handle: RePEc:ags:arerjl:31334

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Web page: http://www.narea.org/
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Keywords: Demand and Price Analysis;

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  1. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-83, December.
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  10. Barro, Robert J., 1986. "Reputation in a model of monetary policy with incomplete information," Journal of Monetary Economics, Elsevier, vol. 17(1), pages 3-20, January.
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  12. Hooker, Neal H. & Caswell, Julie A., 1995. "Regulatory Targets And Regimes For Food Safety: A Comparison Of North American And European Approaches," Proceedings: The Economics of Reducing Health Risk from Food, June 6-7, 1995, Washington, D.C. 25964, Regional Research Project NE-165 Private Strategies, Public Policies, and Food System Performance.
  13. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-29, March-Apr.
  14. Teisl, Mario F. & Roe, Brian & Hicks, Robert L., 2002. "Can Eco-Labels Tune a Market? Evidence from Dolphin-Safe Labeling," Journal of Environmental Economics and Management, Elsevier, vol. 43(3), pages 339-359, May.
  15. Antle, John M., 2001. "Economic analysis of food safety," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 19, pages 1083-1136 Elsevier.
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  17. Darby, Michael R & Karni, Edi, 1973. "Free Competition and the Optimal Amount of Fraud," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 67-88, April.
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