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Labeling Policies and Market Behavior: Quality Standard and Voluntary Label Adoption

  • Bottega Lucie

    (EQUIPPE - LILLE 3 Université Charles-de-Gaulle - Lille 3)

  • Delacote Philippe

    (INRA, Agroparistech, Engref, Laboratoire d’économie forestière)

  • Ibanez Lisette

    (INRA, UMR 1135 LAMETA; NRA, UMR 356 Économie Forestière)

This paper focus's on the third-party certifiers' strategy when choosing a required label quality, and the consequent market outcome. We consider two different objectives of the certifier: maximizing global demand for the labeled product (wide public policy), or maximizing global quality of the market (global quality policy). In a duopoly set up with firms bearing different costs with respect to quality provision, firms always opt for differentiation strategies: only one adopts the label. However, the labeling firm is not necessarily the most efficient one. In the case of a wide public policy, the efficient firm will produce labeled products only if costs of labeling are sufficiently low. In the case of a global quality policy, the low cost firm will always push the high-cost firm into the labeling program.

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Article provided by De Gruyter in its journal Journal of Agricultural & Food Industrial Organization.

Volume (Year): 7 (2009)
Issue (Month): 2 (December)
Pages: 1-18

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Handle: RePEc:bpj:bjafio:v:7:y:2009:i:2:n:3
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