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Moral hazard, vertical integration, and public monitoring in credence goods

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  • Henrik Vetter
  • Kostas Karantininis

Abstract

Moral hazard is a problem in markets where the qualities or characteristics of products cannot be verified with certainty by consumers. Here we demonstrate that vertical integration is one possible way of dealing with such problems. When the saving of monitoring costs is the driving force behind vertical integration, public monitoring freely available to the market may prevent vertical integration. Copyright 2002, Oxford University Press.

Suggested Citation

  • Henrik Vetter & Kostas Karantininis, 2002. "Moral hazard, vertical integration, and public monitoring in credence goods," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 29(2), pages 271-279, June.
  • Handle: RePEc:oup:erevae:v:29:y:2002:i:2:p:271-279
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    Cited by:

    1. Goldsmith, Peter D. & Turan, Nesve A. & Gow, Hamish R., 2004. "Firms, Incentives, And The Supply Of Food Safety: A Formal Model Of Government Enforcement," 2004 Annual meeting, August 1-4, Denver, CO 20343, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Chengyan Yue & Terrance M. Hurley & Neil Anderson, 2011. "Do native and invasive labels affect consumer willingness to pay for plants? Evidence from experimental auctions," Agricultural Economics, International Association of Agricultural Economists, vol. 42(2), pages 195-205, March.
    3. Rommel, Jens & Sagebiel, Julian & Müller, Jakob R., 2016. "Quality uncertainty and the market for renewable energy: Evidence from German consumers," Renewable Energy, Elsevier, vol. 94(C), pages 106-113.
    4. Fabrice Etilé & Sabrina Teyssier, 2012. "Signaling Corporate Social Responsibility: Third-Party Certification vs. Brands," Working Papers halshs-00736551, HAL.
    5. Pascucci, Stefano & Cicatiello, Clara & Franco, Silvio & Pancino, Barbara & Davide, Marino, 2011. "Back to the Future? Understanding Change in Food Habits of Farmers' Market Customers," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IFAMA), vol. 14(4).
    6. repec:spr:agfoec:v:5:y:2017:i:1:d:10.1186_s40100-017-0088-7 is not listed on IDEAS
    7. Wandel, Jürgen, 2011. "Integrierte Strukturen im Agrar- und Ernährungssektor Russlands: Entstehungsgründe, Funktionsweise, Entwicklungsperspektiven und volkswirtschaftliche Auswirkungen. Band I und II," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 63, number 63.
    8. Gabriele Jahn & Matthias Schramm & Achim Spiller, 2005. "The Reliability of Certification: Quality Labels as a Consumer Policy Tool," Journal of Consumer Policy, Springer, vol. 28(1), pages 53-73, December.
    9. Fabrice Etilé & Sabrina Teyssier, 2012. "Signaling Corporate Social Responsibility: Third-Party Certification vs. Brands," PSE - Labex "OSE-Ouvrir la Science Economique" halshs-00736551, HAL.
    10. Lombardi, Alessia & Pascucci, Stefano & Cembalo, Luigi & Dentoni, Domenico, 2012. "Governance Mechanisms in Food Community Networks," 2012 International European Forum, February 13-17, 2012, Innsbruck-Igls, Austria 144980, International European Forum on Innovation and System Dynamics in Food Networks.
    11. Crespi, John M. & Marette, Stephan, 2003. "Some Economic Implications Of Public Labeling," Journal of Food Distribution Research, Food Distribution Research Society, vol. 34(03), November.
    12. Fabrice Etilé & Sabrina Teyssier, 2012. "Signaling Corporate Social Responsibility: Third-Party Certification vs. Brands," PSE Working Papers halshs-00736551, HAL.
    13. Lippert, Christian, 2005. "Is Certification a Promising Way to Ensure Sustainable Resource Use? An Analysis Based on the Concept of 'Self-Enforcing Contracts'," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24563, European Association of Agricultural Economists.
    14. Hussein, Mohamud & Martinez, Marian Garcia & Fearne, Andrew, 2013. "On The Efficiency of Management-Based Regulation: A Case Study of the UK Poultry Inspection Regime," 87th Annual Conference, April 8-10, 2013, Warwick University, Coventry, UK 158856, Agricultural Economics Society.
    15. Carbone, Anna & Gaito, Marco & Senni, Saverio, 2007. "Consumers’ Buying Groups in the Short Food Chains: Alternatives for Trust," 2007 1st Forum, February 15-17, 2007, Innsbruck, Austria 6594, International European Forum on Innovation and System Dynamics in Food Networks.
    16. Lippert, Christian, 2009. "Fraud and free riding in tropical forests – on the potential for certification to enforce sustainable resource use indirectly," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 58(3).

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