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Grading, Minimum Quality Standards, and the Labeling of Genetically Modified Products

  • Lapan, Harvey E.
  • Moschini, GianCarlo

We relate the labeling of genetically modified (GM) products to the theory of grading and minimum quality standards. The model represents three stages in the supply chain, assumes a vertical product differentiation framework, allows for the accidental commingling of non-GM products, and treats regulation as a purity threshold for non-GM products. We find that a non-GM purity level that is too strict leads to the disappearance of the non-GM product, and that some quality standard benefits farmers. Indeed, the standard that is optimal from the perspective of producers is stricter than what is optimal for consumers and for societal welfare.

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File URL: http://www.econ.iastate.edu/sites/default/files/publications/papers/paper_12553_06012.pdf
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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 12553.

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Date of creation: 23 Mar 2006
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Publication status: Published in American Journal of Agricultural Economics, August 2007, vol. 89, pp. 769-783
Handle: RePEc:isu:genres:12553
Contact details of provider: Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
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  1. Bullock, D. S. & Desquilbet, M., 2002. "The economics of non-GMO segregation and identity preservation," Food Policy, Elsevier, vol. 27(1), pages 81-99, February.
  2. Harvey E. Lapan & GianCarlo Moschini, 2002. "Innovation and Trade with Endogenous Market Failure: The Case of Genetically Modified Products," Center for Agricultural and Rural Development (CARD) Publications 02-wp302, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  3. Murray Fulton & Konstantinos Giannakas, 2004. "Inserting GM Products into the Food Chain: The Market and Welfare Effects of Different Labeling and Regulatory Regimes," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(1), pages 42-60.
  4. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  5. Crespi & Marette, 2003. "Does contain vs. "Does not contain" : does it matter which GMO label is used ?," Working Papers 155594, Institut National de la Recherche Agronomique, France.
  6. Shapiro, Carl, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, MIT Press, vol. 98(4), pages 659-79, November.
  7. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
  8. Leland, Hayne E, 1979. "Quacks, Lemons, and Licensing: A Theory of Minimum Quality Standards," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1328-46, December.
  9. Stivers, Andrew, 2003. "Quality standards with exogenously distributed quality," Economics Letters, Elsevier, vol. 80(1), pages 131-136, July.
  10. Maxwell, John W., 1998. "Minimum quality standards as a barrier to innovation," Economics Letters, Elsevier, vol. 58(3), pages 355-360, March.
  11. Valletti, Tommaso M, 2000. "Minimum Quality Standards under Cournot Competition," Journal of Regulatory Economics, Springer, vol. 18(3), pages 235-45, November.
  12. Bruce Gardner, 2003. "U.S. Food Quality Standards: Fix for Market Failure or Costly Anachronism?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(3), pages 725-730.
  13. Moschini, GianCarlo & Lapan, Harvey E. & Sobolevsky, Andrei, 2000. "Roundup Ready Soybeans and Welfare Effects in the Soybean Complex," Staff General Research Papers 1799, Iowa State University, Department of Economics.
  14. José Benjamin Falck-Zepeda & Greg Traxler & Robert G. Nelson, 2000. "Surplus Distribution from the Introduction of a Biotechnology Innovation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(2), pages 360-369.
  15. Dimitri Carolyn, 2003. "Agricultural Marketing Institutions: A Response to Quality Disputes," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 1(1), pages 1-25, September.
  16. Carter, Colin A. & Gruere, Guillaume P., 2003. "International Approaches to the Labeling of Genetically Modified Foods," Choices, Agricultural and Applied Economics Association, vol. 18(2).
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