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Geographical Indications and the Competitive Provision of Quality in Agricultural Markets

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Abstract

The economics of geographical indications (GIs) is assessed within a vertical product differentiation framework that is consistent with the competitive structure of the agricultural sector with free entry/exit. It is assumed that certification costs are needed for GIs to serve as (collective) credible quality certification devices, and production of high-quality product is endogenously determined. We find that GIs can support a competitive provision of quality that partly overcomes the market failure and leads to clear welfare gains, although they fall short of delivering the (constrained) first-best level of the high-quality good. The main beneficiaries of the welfare gains are consumers. Producers may also accrue some benefit if the production of high-quality products draws on scarce factors that they own.

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  • GianCarlo Moschini & Luisa Menapace & Daniel Pick, 2008. "Geographical Indications and the Competitive Provision of Quality in Agricultural Markets," Center for Agricultural and Rural Development (CARD) Publications 08-wp458, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    • Handle: RePEc:ias:cpaper:08-wp458
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    1. Zago, Angelo M. & Pick, Daniel H., 2004. "Labeling Policies in Food Markets: Private Incentives, Public Intervention, and Welfare Effects," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 29(01), pages 1-16, April.
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