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Public Regulation as a Substitute for Trust in Quality Food Markets: What if the Trust Substitute cannot be Fully Trusted?

Author

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  • Giovanni Anania
  • Rosanna Nisticò

Abstract

Most food products can be classified as credence goods, and regulations exist to provide consumers with a substitute for the lacking information and trust. Rather than having no regulation in place, producers of high-quality goods are better off when a compromise is reached that leads to an imperfect regulation. Some of the producers of low-quality goods benefit by cheating under a not fully credible regulation. Even producers of low-quality goods who will never label their products as being of high quality may profit from the introduction of an imperfect regulation.

Suggested Citation

  • Giovanni Anania & Rosanna Nisticò, 2004. "Public Regulation as a Substitute for Trust in Quality Food Markets: What if the Trust Substitute cannot be Fully Trusted?," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 160(4), pages 681-701, December.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200412)160:4_681:praasf_2.0.tx_2-i
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    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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