IDEAS home Printed from https://ideas.repec.org/p/ias/cpaper/06-wp431.html
   My bibliography  Save this paper

Agricultural Production Clubs: Viability and Welfare Implications

Author

Abstract

Consumers are in general less informed than producers about the quality of agricultural goods. To reduce he information gap, consumers can rely on standards (e.g., certification) that ensure quality and origin of the goods. These costly standards can be adopted by a group of producers of high-quality goods. We study the formation of such a group that we model as a club. We first investigate under what circumstances a club of a given size is desirable for producers, and for society. We then analyze the optimal size of the club when there exists a direct barrier to entry, and when there is no barrier. We find that for intermediate values of certification costs, the industry and a club of a given size of certified producers have divergent incentives. Furthermore, if barriers to entry are allowed, an optimal size of club exists, which allows some revelation of information. In the absence of barrier to entry, it is less likely that a club will emerge.

Suggested Citation

  • Corinne Langinier & Bruce A. Babcock, 2006. "Agricultural Production Clubs: Viability and Welfare Implications," Center for Agricultural and Rural Development (CARD) Publications 06-wp431, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  • Handle: RePEc:ias:cpaper:06-wp431
    as

    Download full text from publisher

    File URL: https://www.card.iastate.edu/products/publications/pdf/06wp431.pdf
    File Function: Full Text
    Download Restriction: no

    File URL: https://www.card.iastate.edu/products/publications/synopsis/?p=1023
    File Function: Online Synopsis
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. 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.
    4. Daniel Pick, 2008. "Geographical Indications and the Competitive Provision of Quality in Agricultural Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(3), pages 794-812.
    5. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August.
    6. Stéphan Marette, 2005. "The Collective-Quality Promotion in the Agribusiness Sector: An Overview," Food and Agricultural Policy Research Institute (FAPRI) Publications 05-wp406, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
    7. Bagwell, Kyle & Riordan, Michael H, 1991. "High and Declining Prices Signal Product Quality," American Economic Review, American Economic Association, pages 224-239.
    8. Biglaiser, Gary & Friedman, James W., 1994. "Middlemen as guarantors of quality," International Journal of Industrial Organization, Elsevier, vol. 12(4), pages 509-531, December.
    9. Hayes, Dermot J. & Lence, Sergio H. & Babcock, Bruce A., 2005. "Geographic Indications and Farmer-Owned Brands: Why Do the U.S. And E.U. Disagree?," Staff General Research Papers Archive 12418, Iowa State University, Department of Economics.
    10. Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 3-13.
    11. Auriol, Emmanuelle & Schilizzi, Steven G.M., 2003. "Quality Signaling through Certification. Theory and an Application to Agricultural Seed Market," IDEI Working Papers 165, Institut d'Économie Industrielle (IDEI), Toulouse.
    12. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    13. Albano, Gian Luigi & Lizzeri, Alessandro, 2001. "Strategic Certification and Provision of Quality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(1), pages 267-283, February.
    14. John M. Crespi & St)phan Marette, 2001. "How Should Food Safety Certification be Financed?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 852-861.
    15. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-329, March-Apr.
    16. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
    17. Bergès-Sennou Fabian & Bontems Philippe & Réquillart Vincent, 2004. "Economics of Private Labels: A Survey of Literature," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 2(1), pages 1-25, February.
    18. Shaked, Avner & Sutton, John, 1983. "Natural Oligopolies," Econometrica, Econometric Society, vol. 51(5), pages 1469-1483, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Koen Deconinck & Johan Swinnen, 2014. "The Political Economy of Geographical Indications," LICOS Discussion Papers 35814, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    2. Christophe Charlier & Mai-Anh Ngo, 2012. "Geographical indications outside the European regulation of PGIs, and the rule of free movement of goods: Lessons from cases judged by the Court of Justice of the European Communities," Post-Print halshs-00721784, HAL.
    3. Daniela Benavente, 2010. "Geographical Indications: The Economics of Claw-Back," IHEID Working Papers 11-2010, Economics Section, The Graduate Institute of International Studies.
    4. Galli, Francesca & Carbone, Anna & Caswell, Julie A. & Sorrentino, Alessandro, 2011. "A Multi-Criteria Approach to Assessing PDOs/PGIs: An Italian Pilot Study," International Journal on Food System Dynamics, International Center for Management, Communication, and Research, vol. 2(3).
    5. Teuber, Ramona, 2011. "Protecting Geographical Indications: Lessons learned from the Economic Literature," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 116081, European Association of Agricultural Economists.
    6. Bouamra-Mechemache, Zohra & Yu, Jianyu, 2011. "Quality Choice, Competition and Vertical Relationship in a Market of Protected Designation of Origin," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103607, Agricultural and Applied Economics Association.
    7. Alexander E. Saak, 2011. "A Model of Labeling with Horizontal Differentiation and Cost Variability," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(4), pages 1131-1150.
    8. Benavente, Daniela, 2010. "Geographical Indications: The Economics of Claw-Back," Miscellaneous Papers 119117, Agecon Search.
    9. Benavente, Daniela, 2010. "The Economics of Geographical Indications: GIs modeled as club assets," Miscellaneous Papers 119116, Agecon Search.
    10. Bontemps, Christophe & Bouamra-Mechemache, Zohra & Simioni, Michel, 2012. "Quality Labels and Firm Survival in the French Cheese Industry," TSE Working Papers 12-335, Toulouse School of Economics (TSE).
    11. Leufkens, Daniel, 2014. "Der Wert Geschützter Herkunftsangaben In Einer Industrieökonomischen Und Hedonischen Preisanalyse," 54th Annual Conference, Goettingen, Germany, September 17-19, 2014 187429, German Association of Agricultural Economists (GEWISOLA).
    12. Martin Pollrich & Lilo Wagner, 2013. "Informational Opacity and Honest Certification," Discussion Papers of DIW Berlin 1291, DIW Berlin, German Institute for Economic Research.
    13. Ngokkuen, Chuthaporn & Grote, Ulrike, 0. "Geographical Indication for Jasmine Rice: Applying a Logit Model to Predict Adoption Behavior of Thai Farm Households," Quarterly Journal of International Agriculture, Humboldt-Universität zu Berlin, vol. 51.
    14. Tauber, Ramona & Anders, Sven M. & Langinier, Corinne, 2011. "The Economics of Geographical Indications: Welfare Implications," Working Papers 103262, Structure and Performance of Agriculture and Agri-products Industry (SPAA).
    15. Daniela Benavente, 2010. "The Economics of Geographical Indications: GIs Modelled As Club Assets," IHEID Working Papers 10-2010, Economics Section, The Graduate Institute of International Studies.
    16. Christophe Charlier & Mai-Anh Ngo, 2012. "Geographical indications outside the European Regulation on PGIs, and the rule of the free movement of goods: lessons from cases judged by the Court of Justice of the European Communities," European Journal of Law and Economics, Springer, vol. 34(1), pages 17-30, August.

    More about this item

    Keywords

    Asymmetric information; certification; clubs; quality.;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ias:cpaper:06-wp431. 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: (). General contact details of provider: http://edirc.repec.org/data/caiasus.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.