Agricultural Production Clubs: Viability and Welfare Implications

Corinne Langinier and Bruce Babcock

Center for Agricultural and Rural Development (CARD) Publications from Center for Agricultural and Rural Development (CARD) at Iowa State University

Abstract: Consumers are in general less informed than producers about the quality of agricultural goods. To reduce he information gap, consumers can rely on standards (e.g., certification) that ensure quality and origin of the goods. These costly standards can be adopted by a group of producers of high-quality goods. We study the formation of such a group that we model as a club. We first investigate under what circumstances a club of a given size is desirable for producers, and for society. We then analyze the optimal size of the club when there exists a direct barrier to entry, and when there is no barrier. We find that for intermediate values of certification costs, the industry and a club of a given size of certified producers have divergent incentives. Furthermore, if barriers to entry are allowed, an optimal size of club exists, which allows some revelation of information. In the absence of barrier to entry, it is less likely that a club will emerge.

Keywords: Asymmetric information; certification; clubs; quality. (search for similar items in EconPapers)
JEL-codes: D71 D82 L11 L15 (search for similar items in EconPapers)
Date: 2006-08
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: Agricultural Production Clubs: Viability and Welfare Implications (2008)
Working Paper: Agricultural Production Clubs: Viability and Welfare Implications (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ias:cpaper:06-wp431

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