IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Downstream labeling and upstream price competition

  • Bonroy, Olivier
  • Lemarié, Stéphane

This paper analyses the economic consequences of labeling in a setting with two vertically related markets. Labeling on the downstream market affects upstream price competition through two effects: a differentiation effect and a ranking effect. The magnitude of these two effects determines who in the supply chain will receive the benefits and who will bear the burden of labeling. For instance, whenever the ranking effect dominates the differentiation effect, the low-quality upstream firm loses from labeling while all downstream actors are individually better off. By decreasing the low-quality input price, the label acts as a subsidy and leads to an increase of the downstream market welfare. This analysis furthers our understanding of the economic consequences of labeling in cases like those of GMOs or restaurants.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/pii/S001429211100105X
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 56 (2012)
Issue (Month): 3 ()
Pages: 347-360

as
in new window

Handle: RePEc:eee:eecrev:v:56:y:2012:i:3:p:347-360
Contact details of provider: Web page: http://www.elsevier.com/locate/eer

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.:

as in new window
  1. Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-14, May.
  2. Brian Roe & Ian Sheldon, 2007. "Credence Good Labeling: The Efficiency and Distributional Implications of Several Policy Approaches," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(4), pages 1020-1033.
  3. Stéphan Marette, 2007. "Minimum Safety Standard, Consumers' Information, and Competition, The," Center for Agricultural and Rural Development (CARD) Publications 07-wp441, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  4. Pilar Useche & Bradford L. Barham & Jeremy D. Foltz, 2006. "Integrating Technology Traits and Producer Heterogeneity: A Mixed-Multinomial Model of Genetically Modified Corn Adoption," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(2), pages 444-461.
  5. Paolo G. GARELLA & Emmanuel PETRAKIS, 2007. "Minimum quality standards and consumers’ information," Departmental Working Papers 2007-12, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  6. Sergio H. Lence & Stéphan Marette & Dermot J. Hayes & William E. Foster, 2006. "Collective Marketing Arrangements for Geographically Differentiated Agricultural Products: Welfare Impacts and Policy Implications," Center for Agricultural and Rural Development (CARD) Publications 06-mwp9, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  7. Bonroy, O. & Constantatos, C., 2007. "On the use of labels in credence goods markets," Working Papers 200709, Grenoble Applied Economics Laboratory (GAEL).
  8. Darby, Michael R & Karni, Edi, 1973. "Free Competition and the Optimal Amount of Fraud," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 67-88, April.
  9. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, March.
  10. Charles Noussair & StÈphane Robin & Bernard Ruffieux, 2004. "Do Consumers Really Refuse To Buy Genetically Modified Food?," Economic Journal, Royal Economic Society, vol. 114(492), pages 102-120, 01.
  11. Lucie Bottega & Jenny De Freitas, 2009. "Public, Private and Nonprofit Regulation for Environmental Quality," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(1), pages 105-123, 03.
  12. Lusk, Jayson L. & Jamal, Mustafa & Kurlander, Lauren & Roucan, Maud & Taulman, Lesley, 2005. "A Meta-Analysis of Genetically Modified Food Valuation Studies," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 30(01), April.
  13. 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.
  14. Miklós-Thal, Jeanine & Rey, Patrick & Vergé, Thibaud, 2010. "Vertical relations," International Journal of Industrial Organization, Elsevier, vol. 28(4), pages 345-349, July.
  15. Shaked, Avner & Sutton, John, 1982. "Relaxing Price Competition through Product Differentiation," Review of Economic Studies, Wiley Blackwell, vol. 49(1), pages 3-13, January.
  16. Stéphan Marette, 2007. "Minimum safety standard, consumers’ information and competition," Journal of Regulatory Economics, Springer, vol. 32(3), pages 259-285, December.
  17. Lapan, Harvey E. & Moschini, GianCarlo, 2007. "AJAE Appendix: Grading, Minimum Quality Standards, and the Labeling of Genetically Modified Products," American Journal of Agricultural Economics Appendices, Agricultural and Applied Economics Association, vol. 89(3), August.
  18. Wauthy, X., 1994. "Quality Choice in Models of Vertical Differentiation," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1994033, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  19. Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
  20. Harvey Lapan & GianCarlo Moschini, 2007. "Grading, Minimum Quality Standards, and the Labeling of Genetically Modified Products," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(3), pages 769-783.
  21. 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, Agricultural and Applied Economics Association, vol. 86(1), pages 42-60.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:56:y:2012:i:3:p:347-360. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.