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Downstream labeling and upstream price competition

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Listed:
  • Bonroy, O.
  • Lemarié, S.

Abstract

The 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 then as a subsidy which assures an increase of the downstream market welfare. This analysis furthers our understanding of the economic consequences of the public labeling in cases like restaurants or GMOs.

Suggested Citation

  • Bonroy, O. & Lemarié, S., 2010. "Downstream labeling and upstream price competition," Working Papers 201001, Grenoble Applied Economics Laboratory (GAEL).
  • Handle: RePEc:gbl:wpaper:201001
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Sai Bravo & Carole Haritchabalet, 2021. "Certification of low-carbon hydrogen in the transport market," Working Papers hal-03371277, HAL.
    2. Bertini, Marco & Buehler, Stefan & Halbheer, Daniel, 2020. "Pricing and Supply Chain Transparency to Conscientious Consumers," Economics Working Paper Series 2020, University of St. Gallen, School of Economics and Political Science.
    3. Olivier Bonroy & Christos Constantatos, 2015. "On the Economics of Labels: How Their Introduction Affects the Functioning of Markets and the Welfare of All Participants," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 97(1), pages 239-259.
    4. Julika Herzberg & Oliver Lorz, 2020. "Sourcing from conflict regions: Policies to improve transparency in international supply chains," Review of International Economics, Wiley Blackwell, vol. 28(2), pages 395-407, May.
    5. Emanuele Bacchiega & Olivier Bonroy, 2015. "On the benefits of contractual inefficiency in quality-differentiated markets," Oxford Economic Papers, Oxford University Press, vol. 67(3), pages 846-863.
    6. Valeria Forlin, 2021. "Optimal Eco‐Label Standards in an Oligopolistic Setting," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(2), pages 682-701, March.
    7. repec:gbl:wpaper:2013-01 is not listed on IDEAS
    8. E. Bacchiega & O. Bonroy, 2012. "Vertical relations and number of channels in quality-differentiated markets," Working Papers wp823, Dipartimento Scienze Economiche, Universita' di Bologna.
    9. Yokessa, Maïmouna & Marette, Stéphan, 2019. "A Review of Eco-labels and their Economic Impact," International Review of Environmental and Resource Economics, now publishers, vol. 13(1-2), pages 119-163, April.
    10. Jason Walter & Yang-Ming Chang, 2017. "Green certification, heterogeneous producers, and green consumers: a welfare analysis of environmental regulations," Journal of Regulatory Economics, Springer, vol. 52(3), pages 333-361, December.
    11. Sai Bravo & Carole Haritchabalet, 2021. "Certification of low-carbon hydrogen in the transport market," Working papers of Transitions Energétiques et Environnementales (TREE) hal-03371277, HAL.
    12. Marette, Stephan, 2017. "Quality, market mechanisms and regulation in the food chain," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 5(3), February.
    13. Barry, I. & Bonroy, O. & Garella, P.G., 2015. "On taxes and subsidies with private eco-labeling," Working Papers 2015-09, Grenoble Applied Economics Laboratory (GAEL).

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    More about this item

    Keywords

    LABEL; IMPERFECT CONSUMER INFORMATION; VERTICAL PRODUCT DIFFERENTIATION; VERTICAL RELATIONS; REGULATION;
    All these keywords.

    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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