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Grading, Minimum Quality Standards, and the Labeling of Genetically Modified Products

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Author Info
Lapan, Harvey E.
Moschini, GianCarlo

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Abstract

We relate the labeling of genetically modified (GM) products to the theory of grading and minimum quality standards. The model represents three stages in the supply chain, assumes a vertical product differentiation framework, allows for the accidental commingling of non-GM products, and treats regulation as a purity threshold for non-GM products. We find that a non-GM purity level that is too strict leads to the disappearance of the non-GM product, and that some quality standard benefits farmers. Indeed, the standard that is optimal from the perspective of producers is stricter than what is optimal for consumers and for societal welfare.

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File URL: http://www.blackwell-synergy.com/doi/full/10.1111/j.1467-8276.2007.01002.x
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Publisher Info
Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 12553.

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Length: 41 pages
Date of creation: 23 Mar 2006
Date of revision:
Publication status: Published in American Journal of Agricultural Economics, August 2007, Vol. 89, No. 3, pp. 769-83.
Handle: RePEc:isu:genres:12553

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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
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Web page: http://www.econ.iastate.edu
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Related research
Keywords: biotechnology; grading; identity preservation; food labeling; minimum quality standards; regulation; uncertainty.;

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Find related papers by JEL classification:
L5 - Industrial Organization - - Regulation and Industrial Policy
O3 - Economic Development, Technological Change, and Growth - - Technological Change
Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture

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References listed on IDEAS
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.:
  1. Stivers, Andrew, 2003. "Quality standards with exogenously distributed quality," Economics Letters, Elsevier, vol. 80(1), pages 131-136, July. [Downloadable!] (restricted)
  2. Falck-Zepeda, Jose Benjamin & Traxler, Greg & Nelson, Robert G, 2000. " Surplus Distribution from the Introduction of a Biotechnology Innovation," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 82(2), pages 360-69, May. [Downloadable!] (restricted)
  3. Moschini, Giancarlo & Lapan, Harvey & Sobolevsky, Andrei, 2000. "Roundup Ready Soybeans and Welfare Effects in the Soybean Complex," Staff General Research Papers 1799, Iowa State University, Department of Economics.
  4. Shapiro, Carl, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, MIT Press, vol. 98(4), pages 659-79, November. [Downloadable!] (restricted)
  5. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August. [Downloadable!] (restricted)
  6. Valletti, Tommaso M, 2000. "Minimum Quality Standards under Cournot Competition," Journal of Regulatory Economics, Springer, vol. 18(3), pages 235-45, November. [Downloadable!] (restricted)
  7. Harvey E. Lapan & GianCarlo Moschini, 2004. "Innovation and Trade with Endogenous Market Failure: The Case of Genetically Modified Products," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 86(3), pages 634-648, 08. [Downloadable!] (restricted)
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  8. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August. [Downloadable!] (restricted)
  9. Bruce Gardner, 2003. "U.S. Food Quality Standards: Fix for Market Failure or Costly Anachronism?," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 85(3), pages 725-730, 08. [Downloadable!] (restricted)
  10. Murray Fulton & Konstantinos Giannakas, 2004. "Inserting GM Products into the Food Chain: The Market and Welfare Effects of Different Labeling and Regulatory Regimes," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 86(1), pages 42-60, 02. [Downloadable!] (restricted)
  11. Bullock, D. S. & Desquilbet, M., 2002. "The economics of non-GMO segregation and identity preservation," Food Policy, Elsevier, vol. 27(1), pages 81-99, February. [Downloadable!] (restricted)
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  12. Maxwell, John W., 1998. "Minimum quality standards as a barrier to innovation," Economics Letters, Elsevier, vol. 58(3), pages 355-360, March. [Downloadable!] (restricted)
  13. Carolyn Dimitri, 2003. "Agricultural Marketing Institutions: A Response to Quality Disputes," Journal of Agricultural & Food Industrial Organization, Berkeley Electronic Press, vol. 1(1). [Downloadable!]
  14. Leland, Hayne E, 1979. "Quacks, Lemons, and Licensing: A Theory of Minimum Quality Standards," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1328-46, December. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. GianCarlo Moschini, 2008. "Biotechnology and the Development of Food Markets: Retrospect and Prospects," Center for Agricultural and Rural Development (CARD) Publications 08-wp477, Center for Agricultural and Rural Development (CARD) at Iowa State University. [Downloadable!]
    Other versions:
  2. Bonroy, O. & Lemarie, S., 2008. "Downstream labeling and upstream competition," Working Papers 200804, Grenoble Applied Economics Laboratory (GAEL). [Downloadable!]
  3. Marette, Stéphan, 2007. "Minimum Safety Standard, Consumers’ Information, and Competition (The)," Staff General Research Papers 12718, Iowa State University, Department of Economics. [Downloadable!]
    Other versions:
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