Agricultural Production Clubs: Viability and Welfare Implications

Corinne Langinier and Bruce Babcock

Staff General Research Papers Archive from Iowa State University, Department of Economics

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.

Date: 2006-08-28
New Economics Papers: this item is included in nep-agr and nep-knm
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Citations: View citations in EconPapers (2)

Published in Journal of Agricultural & Food Industrial Organization 2008, vol. 6 no. 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:isu:genres:12670

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