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Regulatory Choice between a Label and a Minimum-Quality Standard, The

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  • Stéphan Marette

Abstract

This paper revisits the issue of the regulatory choice between a mandatory label and a minimum-quality standard. When the cost of regulation is relatively low, we show that the socially optimal choice depends on the producers' cost structure for complying with regulation and improving quality. Under a marginal cost for improving quality, the mandatory labeling is sufficient for reaching the socially optimal level of quality. Under a fixed cost for improving quality, we show that each instrument or the combination of both instruments may emerge at the equilibrium.

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File URL: http://www.card.iastate.edu/publications/DBS/PDFFiles/05wp416.pdf
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Bibliographic 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-wp416.

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Date of creation: Dec 2005
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Handle: RePEc:ias:fpaper:05-wp416

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Keywords: cost of regulation; information; standard.;

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  1. Crampes, C. & Hollander, A., 1992. "How Many Karats Is Gold: Welfare Effects of Easing a Denomination Standard," Cahiers de recherche 9225, Universite de Montreal, Departement de sciences economiques.
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