Information Asymmetry As a Reason for Food Industry Vertical Integration

David Hennessy

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

Abstract: Three trends that have been subject to recent discussion are a movement away from undifferentiated agricultural commodities toward more specialized products, reduced reliance on open markets for raw agricultural products, and a movement toward agricultural industrialization. Recent research suggests that demographic trends may be causing the first trend, while the other two are closely related phenomena. This research suggests that information externalities, arising from uncertainty concerning the nature of food quality and problems in detecting quality, may be reasons why vertical coordination is being used to circumvent the marketplace.

Date: 1996-11-01
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Published in American Journal of Agricultural Economics, November 1996, vol. 78, pp. 1034-1043

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