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A Game Theoretic Approach To Organic Foods: An Analysis Of Asymmetric Information And Policy

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  • McCluskey, Jill J.

Abstract

Demand for healthy, safe and environmentally friendly food products has been increasing. In response, producers are marketing organic and other quality-differentiated foods, sometimes claiming to have followed sound environmental and animal welfare practices. These products frequently have unobservable quality attributes. If the profit-maximizing producer is able to deceive the consumer with a false claim, then he or she will enjoy a higher price with lower production costs (compared to the full disclosure outcomes). The analysis described in this paper shows that repeat-purchase relationships and third party monitoring are required for high-quality credence goods to be available. Policy implications of this analysis for national organic food standards are discussed.

Suggested Citation

  • McCluskey, Jill J., 2000. "A Game Theoretic Approach To Organic Foods: An Analysis Of Asymmetric Information And Policy," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 29(1), April.
  • Handle: RePEc:ags:arerjl:31334
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    References listed on IDEAS

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    Keywords

    Demand and Price Analysis;

    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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