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Production standards, competition and vertical relationship

Jianyu Yu () and Zohra Mechemache ()

European Review of Agricultural Economics, 2016, vol. 43, issue 1, 79-111

Abstract: This article investigates the collective choice of production standards by farmer and processor groups within a vertical food supply chain, taking into account their competition behaviours. We develop a general model to analyse the strategic motive of using standards to limit supply and shift rents between farmers and processors in the vertical chain. We find that a stringent standard can raise farmers' profit, but at the expense of processors. This is the case when the standard affects more variable costs than fixed cost of production, when the demand for the final product is inelastic, and when processors have a high degree of oligopoly power.

Date: 2016
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Working Paper: Production standards, competition and vertical relationship (2013)
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European Review of Agricultural Economics is currently edited by Christoph Weiss, Thomas Heckelei and Paolo Sckokai

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