Information Asymmetry as a Reason for Food Industry Vertical Integration

10 Pages Posted: 25 Mar 2020

Date Written: November 1996

Abstract

Three trends that have been subject to recent discussion are a movement away from undifferentiated agricultural commodities toward more specialized products, reduced reliance on open markets for raw agricultural products, and a movement toward agricultural industrialization. Recent research suggests that demographic trends may be causing the first trend, while the other two are closely related phenomena. This research suggests that information externalities, arising from uncertainty concerning the nature of food quality and problems in detecting quality, may be reasons why vertical coordination is being used to circumvent the marketplace.

Keywords: food safety, industrialization, information externalities, quality, testing, L220, L660

Suggested Citation

Hennessy, David, Information Asymmetry as a Reason for Food Industry Vertical Integration (November 1996). American Journal of Agricultural Economics, Vol. 78, Issue 4, pp. 1034-1043, 1996, Available at SSRN: https://ssrn.com/abstract=3560446 or http://dx.doi.org/10.2307/1243859

David Hennessy (Contact Author)

Iowa State University

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