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Common Labels and Market Mechanisms

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Author Info
Christine Boizot-Szantai
Sebastien Lecocq
Stephan Marette

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Abstract

In this article, the impact of common labels is investigated with both theoretical and empirical approaches. Recent statistics regarding the egg market in France suggest that retailer brands largely adopt common labels. A simple theoretical framework enables us to determine the conditions under which producers and/or retailers with different product qualities decide to post a common label on their products. In particular, a situation of multiple equilibria (one where the label is used by the high-quality seller only and one where it is used by the low-quality seller only) is exhibited when the cost of the label is relatively large. The demand is then estimated for different segments of the French egg market, including producer/retailer brands with/without common labels. The estimates are used to derive expenditure and price elasticities and allow us to calculate welfare measures revealing a relatively large willingness-to-pay for labels.

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Publisher Info
Paper provided by Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University in its series Food and Agricultural Policy Research Institute (FAPRI) Publications with number 05-wp405.

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Date of creation: Sep 2005
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Handle: RePEc:ias:fpaper:05-wp405

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Related research
Keywords: competition demand estimation labels product differentiation.

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References listed on IDEAS
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  1. Wesley Nimon & John C. Beghin, 1998. "Are Eco-Labels Valuable? Evidence from the Apparel Industry," Center for Agricultural and Rural Development (CARD) Publications 99-wp213, Center for Agricultural and Rural Development (CARD) at Iowa State University. [Downloadable!]
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  2. Crespi, John M & Marette, Stephan, 2001. " How Should Food Safety Certification Be Financed?," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 83(4), pages 852-61, November. [Downloadable!] (restricted)
  3. Hayes, Dermot J. & Lence, Sergio H. & Stoppa, Andrea, 2004. "Farmer-Owned Brands?," Staff General Research Papers 11285, Iowa State University, Department of Economics.
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  4. Hayes, Dermot J. & Lence, Sergio H. & Babcock, Bruce A., 2005. "Geographic Indications and Farmer-Owned Brands: Why Do the U.S. and E.U. Disagree?," Staff General Research Papers 12418, Iowa State University, Department of Economics.
  5. Blundell, Richard & Robin, Jean Marc, 1999. "Estimation in Large and Disaggregated Demand Systems: An Estimator for Conditionally Linear Systems," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(3), pages 209-32, May-June. [Downloadable!]
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  6. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August. [Downloadable!] (restricted)
  7. Banks, James & Blundell, Richard & Lewbel, Arthur, 1996. "Tax Reform and Welfare Measurement: Do We Need Demand System Estimation?," Economic Journal, Royal Economic Society, vol. 106(438), pages 1227-41, September. [Downloadable!] (restricted)
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  8. Hayes, Dermot J. & Lence, Sergio H., 2004. "New Brand of Agriculture? Farmer-Owned Brands Reward Innovation (A)," Staff General Research Papers 11289, Iowa State University, Department of Economics.
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  9. James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November. [Downloadable!] (restricted)
  10. Marette, Stephan & Crespi, John M & Schiavina, Allesandra, 1999. "The Role of Common Labelling in a Context of Asymmetric Information," European Review of Agricultural Economics, Oxford University Press for the Foundation for the European Review of Agricultural Economics, vol. 26(2), pages 167-78, June.
  11. Ulrich Enneking, 2004. "Willingness-to-pay for safety improvements in the German meat sector: the case of the Q&S label," European Review of Agricultural Economics, Oxford University Press for the Foundation for the European Review of Agricultural Economics, vol. 31(2), pages 205-223, June.
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