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

Lucie Bottega (), Philippe Delacote and Lisette Ibanez

Journal of Agricultural & Food Industrial Organization, 2009, vol. 7, issue 2, 18

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 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (22)

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DOI: 10.2202/1542-0485.1273

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