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Production Standards, Competition and Vertical Relationship

Author

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  • Bouamra-Mechemache, Zohra
  • Jianyu, Yu

Abstract

This paper investigates the collective choice of production standards by farmer and pro- cessor groups within a vertical food supply chain, taking into account their competition behaviors. In a context in which raising standards cannot translate into a direct price premium to consumers, we develop a general model to analyze the strategic motive of us- ing standards to limit supply and shift rents among farmers and processors in the vertical chain. We find that such a motive depends on farmers’ cost structure, final demand char- acteristics, and processors’ competition patterns. In particular, farmers prefer a stringent standard when the standard involves creating greater diseconomies of scale in production and when the demand for the final product is inelastic. However, processors only prefer a stringent standard in the presence of oligopsony competition.

Suggested Citation

  • Bouamra-Mechemache, Zohra & Jianyu, Yu, 2013. "Production Standards, Competition and Vertical Relationship," TSE Working Papers 13-417, Toulouse School of Economics (TSE).
  • Handle: RePEc:tse:wpaper:27403
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    References listed on IDEAS

    as
    1. Sergio H. Lence & Stéphan Marette & Dermot J. Hayes & William Foster, 2007. "Collective Marketing Arrangements for Geographically Differentiated Agricultural Products: Welfare Impacts and Policy Implications," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(4), pages 947-963.
    2. 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.
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    Cited by:

    1. 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.
    2. Anna Carbone, 2017. "Food supply chains: coordination governance and other shaping forces," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 5(1), pages 1-23, December.

    More about this item

    Keywords

    Production standards; Vertical relationship; Imperfect competition; Technology choice;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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