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Producer's choice of certification

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Author Info

  • Langinier, Corinne
  • Babcock, Bruce A.

Abstract

Consumers are in general less informed than producers about the quality of agricultural goods. To reduce the information gap, consumers can rely on standards (labels, certifications, geographic indications) that insure quality and origin of the goods. However, these standards do not always fully reveal information. Some of them may just signal that the good is more likely to be of high quality. We investigate what kind of standards are most desirable for producers, and for society in general knowing that any system is costly to implement. One of our findings is that for intermediate values of certification costs, certification that fully reveals information makes high quality producers better off, but make the entire industry worse off. In this case, the benefit from the revelation of the quality does not outweigh certification costs and the loss incurred by low quality producers. Furthermore, the industry may be better off under partial revelation of information rather than full revelation for some values of the certification costs.

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Bibliographic Info

Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2005 Annual meeting, July 24-27, Providence, RI with number 19510.

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Date of creation: 2005
Date of revision:
Handle: RePEc:ags:aaea05:19510

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Related research

Keywords: Asymmetric information; certification; clubs; quality.; Consumer/Household Economics; L11; L15; D82; D71;

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References

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  1. Gary Biglaiser & James W. Friedman, 1999. "Adverse Selection with Competitive Inspection," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 8(1), pages 1-32, 03.
  2. Marette, Stephan & Crespi, John M & Schiavina, Allesandra, 1999. "The Role of Common Labelling in a Context of Asymmetric Information," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 26(2), pages 167-78, June.
  3. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August.
  4. Albano, Gian Luigi & Lizzeri, Alessandro, 2001. "Strategic Certification and Provision of Quality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(1), pages 267-83, February.
  5. Crespi, John M. & Marette, Stephan, 2003. "Some Economic Implications Of Public Labeling," Journal of Food Distribution Research, Food Distribution Research Society, vol. 34(03), November.
  6. Bergès-Sennou Fabian & Bontems Philippe & Réquillart Vincent, 2004. "Economics of Private Labels: A Survey of Literature," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 2(1), pages 1-25, February.
  7. GABSZEWICZ, Jean J. & THISSE, Jacques-François, . "Price competition, quality and income disparities," CORE Discussion Papers RP -370, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Stéphan Marette & John Crespi, 2003. "Can Quality Certification Lead to Stable Cartels?," Review of Industrial Organization, Springer, vol. 23(1), pages 43-64, August.
  9. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  10. John M. Crespi & St)phan Marette, 2001. "How Should Food Safety Certification be Financed?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 852-861.
  11. Biglaiser, Gary & Friedman, James W., 1994. "Middlemen as guarantors of quality," International Journal of Industrial Organization, Elsevier, vol. 12(4), pages 509-531, December.
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Cited by:
  1. Daniela Benavente, 2010. "The Economics of Geographical Indications: GIs Modelled As Club Assets," IHEID Working Papers 10-2010, Economics Section, The Graduate Institute of International Studies.
  2. Daniela Benavente, 2010. "Geographical Indications: The Economics of Claw-Back," IHEID Working Papers 11-2010, Economics Section, The Graduate Institute of International Studies.

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