Food safety and nutritional quality – Firms’ strategies and Public intervention
AbstractThe aim of our paper is to determine the conditions under which firms tend to offer the best nutritional quality of food products, and the public regulation required to obtain this in a context where diet and nutritional status plays an important part in maintaining health and preventing disease, and with increasing pressure for public intervention on food quality in developed countries. To this end, we develop a duopoly model where products can be horizontally (variety) and vertically (quality) differentiated. We analyze the perfect Nash equilibriums in a two period competition game where in the first stage, the firms decide simultaneously on the variety and the quality of the product to be sold and in the second stage, firms set prices. The model firstly highlights that in the absence of the public intervention, the spontaneous choice of the firms will not lead to the desired level of nutritional quality. An imposition of a minimum quality threshold is also necessary. Secondly, without assistance from authorities, firm that engages in the “upmarket” may have some difficulties such as the loss of customers due to a high price associated with high quality, a loss of traditional taste (for example, products containing less sugar), or a high cost of innovation (to induce the loss of customers) which casts doubt on the wisdom of taking such an approach. To correct this, the subvention and tax policies are suggested.
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Bibliographic InfoPaper provided by International Association of Agricultural Economists in its series 2009 Conference, August 16-22, 2009, Beijing, China with number 51749.
Date of creation: 2009
Date of revision:
Nutritional product; health cost; public regulation; vertical and horizontal differentiation.; Agricultural and Food Policy; Food Consumption/Nutrition/Food Safety; Industrial Organization; L13; L15; L51; Q18;
Find related papers by JEL classification:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- GABSZEWICZ, Jean J. & THISSE, Jacques-François, .
"Price competition, quality and income disparities,"
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- Ibanez, Lisette & Stenger, Anne, 2000. "Environment and Food Safety in Agriculture: Are Labels Efficient?," Australian Economic Papers, Wiley Blackwell, vol. 39(4), pages 452-64, December.
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
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