Grading, Minimum Quality Standards, and the Labeling of Genetically Modified Products
Posted: 23 Jul 2007
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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