Labeling Policies and Market Behavior: Quality Standard and Voluntary Label Adoption

Journal of Agricultural & Food Industrial Organization, V7-03

Posted: 10 Jan 2010

See all articles by Lucie Bottega

Lucie Bottega

affiliation not provided to SSRN

Philippe Delacote

LEF-ENGREF-INRA

Lisette Ibanez

affiliation not provided to SSRN

Date Written: Decamber 1, 2010

Abstract

This paper focus’s on the third-party certifiers’ strategy when choosing a required label quality, and the consequent market outcome. We consider two different objectives of the certifier: maximizing global demand for the labeled product (wide public policy), or maximizing global quality of the market (global quality policy). In a duopoly set up with firms bearing different costs with respect to quality provision, firms always opt for differentiation strategies: Only one adopts the label. However, the labeling firm is not necessarily the most efficient one. In the case of a wide public policy, the efficient firm will produce labeled products only if costs of labeling are sufficiently low. In the case of a global quality policy, the low cost firm will always push the high-cost firm into the labeling program.

Keywords: labeling, product quality, Bertrand duopoly

Suggested Citation

Bottega, Lucie and Delacote, Philippe and Ibanez, Lisette, Labeling Policies and Market Behavior: Quality Standard and Voluntary Label Adoption (Decamber 1, 2010). Journal of Agricultural & Food Industrial Organization, V7-03, Available at SSRN: https://ssrn.com/abstract=1533298

Lucie Bottega

affiliation not provided to SSRN

No Address Available

Philippe Delacote (Contact Author)

LEF-ENGREF-INRA ( email )

14 rue Girardet
Nancy, 54042
France

Lisette Ibanez

affiliation not provided to SSRN ( email )

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