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Behaviors in the market for safe vegetables under information asymmetry: modeling approach

Author

Listed:
  • Hoi Quoc Le

    (National Economics University)

  • Thi Minh Nguyen

    (National Economics University)

Abstract

The paper proposes a theoretical model that depicts a shop owner’s behavior in the market for safe vegetables under informational asymmetry between sellers and buyers. In the model, the shop owner claims his shop provides safe vegetables and is maximizing profit by mixing ordinary vegetables with safe vegetables. The buyers make their decision about buying or not buying vegetables from the shop based on their own belief in the information supplied by the sellers. The results from numerical studies show that low credibility leads to limited efficiency of inspection activities. Raising credibility can make the whole society better off, including the sellers as well as the buyers. In addition, the ratio of safe vegetables as well as the total sale of genuinely safe vegetables will also increase. Hence, the paper calls for a trustworthy inspection system so that consumers can have higher trust in the credibility of the information they receive.

Suggested Citation

  • Hoi Quoc Le & Thi Minh Nguyen, 2018. "Behaviors in the market for safe vegetables under information asymmetry: modeling approach," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 8(3), pages 381-392, December.
    • Handle: RePEc:spr:eurase:v:8:y:2018:i:3:d:10.1007_s40822-018-0093-5
    DOI: 10.1007/s40822-018-0093-5
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Safe vegetable market; Asymmetry information; Modelling;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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