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

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Author Info
Stephan Marette

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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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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-wp416.

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

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Related research
Keywords: cost of regulation information standard.

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  1. Robert A. Pollak, 1995. "Regulating Risks," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 179-191, March. [Downloadable!] (restricted)
  2. Crampes, Claude & Hollander, Abraham, 1995. "How Many Karats Is Gold: Welfare Effects of Easing a Denomination Standard," Journal of Regulatory Economics, Springer, vol. 7(2), pages 131-43, March.
    Other versions:
  3. Mojduszka, Eliza M & Caswell, Julie A, 2000. " A Test of Nutritional Quality Signaling in Food Markets Prior to Implementation of Mandatory Labeling," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 82(2), pages 298-309, May. [Downloadable!] (restricted)
  4. Pollak, Robert A, 1998. "Imagined Risks and Cost-Benefit Analysis," American Economic Review, American Economic Association, vol. 88(2), pages 376-80, May. [Downloadable!] (restricted)
  5. Beales, Howard & Craswell, Richard & Salop, Steven C, 1981. "The Efficient Regulation of Consumer Information," Journal of Law & Economics, University of Chicago Press, vol. 24(3), pages 491-539, December.
  6. Sloan, Frank A. & Smith, V. Kerry & Taylor, Donald Jr., 2002. "Information, addiction, and 'bad choices': lessons from a century of cigarettes," Economics Letters, Elsevier, vol. 77(2), pages 147-155, October. [Downloadable!] (restricted)
  7. A. Mitchell Polinsky & William P. Rogerson, 1983. "Products Liability, Consumer Misperceptions, and Market Power," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 581-589, Autumn. [Downloadable!] (restricted)
    Other versions:
  8. Doughety, Andrew F & Reinganum, Jennifer F, 1997. "Everybody Out of the Pool: Products Liability, Punitive Damages, and Competition," Journal of Law, Economics and Organization, Oxford University Press, vol. 13(2), pages 410-32, October.
  9. Marino, Anthony M, 1998. "Regulation of Performance Standards versus Equipment Specification with Asymmetric Information," Journal of Regulatory Economics, Springer, vol. 14(1), pages 5-18, July. [Downloadable!] (restricted)
  10. Stephan Marette & John Crespi, 2005. "The Financing of Regulatory Agencies," Journal of Regulatory Economics, Springer, vol. 27(1), pages 95-113, September. [Downloadable!] (restricted)
  11. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August. [Downloadable!] (restricted)
  12. Ian M. Sheldon, 2002. "Regulation of biotechnology: will we ever 'freely' trade GMOs?," European Review of Agricultural Economics, Oxford University Press for the Foundation for the European Review of Agricultural Economics, vol. 29(1), pages 155-176, March.
  13. Viscusi, W Kip, 1997. "Alarmist Decisions with Divergent Risk Information," Economic Journal, Royal Economic Society, vol. 107(445), pages 1657-70, November. [Downloadable!] (restricted)
  14. Jaehong Kim, 1997. "Inefficiency of the Subgame Optimal Entry Regulation," RAND Journal of Economics, The RAND Corporation, vol. 28(1), pages 25-36, Spring. [Downloadable!] (restricted)
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