Optimal Quality Threshold of Admission in a Two-Sided Farmers’ Market

28 Pages Posted: 6 Nov 2012

See all articles by Yuqing Zheng

Yuqing Zheng

University of Kentucky - College of Agriculture - Department of Agricultural Economics

Harry M. Kaiser

Cornell University - School of Applied Economics and Management

Date Written: November 5, 2012

Abstract

We develop a two-sided model for a farmers’ market where farmers value the number of consumers, and consumers value the number of farmers and the average product quality in the market. Consumer preference over product quality provides an incentive for the farmers’ market to exclude farmers of the lowest product quality. Using the model, we identify what factors the farmers’ market has to consider in determining the optimal quality threshold of admission, an issue that has not received any formal study. Those factors include the network effects between farmers and consumers, consumer preference over product quality and variety, and farmer quality spread. We also outline an empirical estimation strategy in order to make use of the model developed in this study.

Keywords: consumer preference, farmers’ market, network effect, quality threshold of admission, two-sided market

JEL Classification: L81, L14, Q13

Suggested Citation

Zheng, Yuqing and Kaiser, Harry M., Optimal Quality Threshold of Admission in a Two-Sided Farmers’ Market (November 5, 2012). Applied Economics, Vol. 45, No. 23, 2013 (Forthcoming), Available at SSRN: https://ssrn.com/abstract=2171249

Yuqing Zheng (Contact Author)

University of Kentucky - College of Agriculture - Department of Agricultural Economics ( email )

Lexington, KY 40546
United States

Harry M. Kaiser

Cornell University - School of Applied Economics and Management ( email )

248 Warren Hall
Ithaca, NY 14853
United States
607-255-1598 (Phone)
607-254-4335 (Fax)

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