Production Standards, Competition and Vertical Relationship

Zohra Mechemache and Jianyu Yu ()

No 13-417, TSE Working Papers from Toulouse School of Economics (TSE)

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.

Keywords: Production standards; Vertical relationship; Imperfect competition; Technology choice (search for similar items in EconPapers)
JEL-codes: L13 Q13 (search for similar items in EconPapers)
Date: 2013-04
New Economics Papers: this item is included in nep-agr, nep-com and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Production standards, competition and vertical relationship (2016)
Working Paper: Production standards, competition and vertical relationship (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:27403

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