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Credence Good Labeling: The Efficiency and Distributional Implications of Several Policy Approaches

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  • Brian Roe
  • Ian Sheldon

Abstract

A model of vertical product differentiation is used to analyze the labeling of credence goods, focusing on the manner by which quality is communicated. The results indicate that firms prefer private labeling options. In addition, firms may hire private certifiers as well as paying for mandated government labels when the government's quality benchmark substantially deviates from firms' private quality choices. The average consumer prefers a mandatory, discrete label with a high-quality standard while poor consumers prefer a mandatory, discrete label with a low standard. Copyright 2007, Oxford University Press.

Suggested Citation

  • 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.
  • Handle: RePEc:oup:ajagec:v:89:y:2007:i:4:p:1020-1033
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    File URL: http://hdl.handle.net/10.1111/j.1467-8276.2007.01024.x
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    References listed on IDEAS

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    1. Hayes, Dermot J. & Lence, Sergio H., 2002. "Farmer-Owned Brands?," Staff General Research Papers Archive 12707, Iowa State University, Department of Economics.
    2. Stéphan Marette & John Crespi, 2003. "Can Quality Certification Lead to Stable Cartels?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 23(1), pages 43-64, August.
    3. Hayes, Dermot J. & Jensen, Helen H., 2003. "Lessons from the Danish Ban on Feed-Grade Antibiotics," Choices, Agricultural and Applied Economics Association, vol. 18(3).
    4. Sergio H. Lence & Dermot J. Hayes, 2002. "U.S. Farm Policy and the Volatility of Commodity Prices and Farm Revenues," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, pages 335-351.
    5. Dermot J. Hayes & Sergio H. Lence & Andrea Stoppa, 2004. "Farmer-owned brands?," Agribusiness, John Wiley & Sons, Ltd., vol. 20(3), pages 269-285.
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