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Production standards, competition and vertical relationship

Zohra Mechemache () and Yu Jianyu ()
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Yu Jianyu: Research Institute of Economics and Management - Partenaires INRAE

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Abstract: his 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)
Date: 2013-03-21
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Published in 134. EAAE Seminar : Labels on sustainability : an issue for consumers, producers, policy makers, and NGOs, European Association of Agricultural Economists (EAAE). INT., Mar 2013, Paris, France. pp.43

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Journal Article: Production standards, competition and vertical relationship (2016) Downloads
Working Paper: Production Standards, Competition and Vertical Relationship (2013) Downloads
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