Collective reputation, social norms, and participation:

This paper analyzes a repeated games model of collective reputation with imperfect public monitoring and perfect local peer monitoring of efforts. Even when peer monitoring is local, firms may achieve higher profits under collective reputation by decreasing the cost of maintaining customers' trust. The optimal number of firms that share a common reputation is greater when (1) trades are more frequent and public information is disseminated more rapidly, (2) the deviation gain is smaller compared to the quality premium, (3) customers' information regarding firms' quality is more precise, or (4) intragroup information about firms' quality is more global. From a positive perspective, we suggest how social norms can influence the reputation of regional products. We also offer an efficiency explanation for food scares. From a normative point of view, in our model, protection of geographical indications increases and mandatory traceability decreases welfare and incentives to provide quality without taking into account direct implementation costs.collective reputation, free riding, public monitoring, peer monitoring, peer sanction,

Country of Origin Labeling with Horizontal Differentiation and Cost Variability

This paper studies whether a seller achieves higher profits by providing consumers with information that allows them to distinguish between products from different countries, and how mandatory provision of such information impacts welfare. We analyze a model of multi-product monopoly with horizontal differentiation and random country-specific input costs. We find that if the variability in the input costs is sufficiently high and the share of consumers with high valuations is in some intermediate range, the seller prefers to withhold information about product origin. Mandatory labeling of products with their country of origin may reduce or increase welfare depending on the share of consumers with high valuations. We also discuss extensions of the basic model that allow for continuous distributions of valuations and input costs, and consumer learning.Country of origin labeling, consumer learning, food policy, Agricultural and Food Policy, Industrial Organization, International Relations/Trade,

A Model of Labeling with Horizontal Differentiation and Cost Variability

We study optimal disclosure of variety by a multi-product firm with random costs. In our model there are two varieties that are horizontally differentiated and differ in overall quality, but buyers cannot distinguish between them without labels. The equilibrium prices for labeled varieties are increasing functions of the absolute value of the cost differential and do not reveal which variety is cheaper to produce. Nondisclosure is most common when there is moderate uncertainty about the relative input cost, not too much idiosyncrasy in consumer valuations, and not too much difference in quality across varieties. Although mandatory disclosure of variety benefits consumers, it decreases expected welfare when relative input cost variability is large and quality asymmetry is small. The cheaper variety tends to be oversupplied (undersupplied) when disclosure is voluntary (mandatory). Competition among multi-product firms that source inputs in the same upstream market may not lead to more disclosure.Agribusiness, Agricultural and Food Policy, Food Consumption/Nutrition/Food Safety, Industrial Organization, Marketing, information, labeling, quality disclosure, product differentiation,

Groundwater Use in Asymmetric Aquifer under Incomplete Information

This paper analyzes a game theoretic model of groundwater extraction in an asymmetric two-cell aquifer under incomplete information about the extent to which the local stock of groundwater depends on the extraction histories at nearby wells. A novel assumption is that the elevation of the bottom of the aquifer differs across, otherwise identical, cells. Asymmetry creates a strategic advantage (disadvantage) for the user in the deep (shallow) cell in “stealing” neighbor’s water. The user with a larger initial stock actually benefits from the commonality of groundwater provided that the asymmetry is not too small or too great. Assuming that the asymmetry between users is sufficiently large, better informed, non-cooperative users attain a higher joint welfare when the prior belief about the rate of transmission is sufficiently dispersed. Moreover, better hydrologic information may allow non-cooperative users to achieve maximum social welfare even in the absence of groundwater use regulations. Yet, in an asymmetric aquifer there may be both winners and losers from better public information.common property resource, asymmetry, groundwater, information, Resource /Energy Economics and Policy,

IDENTITY PRESERVATION AND FALSE NON-GMO LABELING IN THE FOOD SUPPLY CHAIN

This paper addresses two issues pertaining to the market differentiation between non-genetically modified and genetically modified food varieties. First, a cost-efficiency explanation of the discrepancy between the observed shares of identity preserved non-genetically modified variety and the total supply of the variety is provided. Second, it is shown that when products can be falsely labeled as non-genetically modified, the share of false labeling depends on the level of identity preservation. Also in this context, it is demonstrated that the share of falsely labeled supply can increase in response to harsher fines.Agribusiness,

Dynamic informative advertising of new experience goods:

Advertising, experience goods, Learning, monopoly, private information,

Dynamic Informative Advertising of New Experience Goods

This paper analyzes the optimal advertising and price policies of a monopolist who sells a new experience good over time to a population of heterogeneous forward-looking buyers. We consider informative advertising that can complement or substitute for learning-by-purchasing, and show that the advertising intensity always peaks during the early stages when the price extracts surplus from the buyers who are yet to learn their valuation for the good. We also show that even though informative advertising may temporarily raise prices and slow down the learning process, an advertising ban can reduce welfare.Monopoly, Advertising, Experience Goods, Learning, Private Information, Agribusiness, Agricultural and Food Policy, Demand and Price Analysis, Industrial Organization, Marketing,

Spatial Arrangements of Externality Generating and Receiving Activities

Many cases of externalities in agricultural production such as pesticide drift, cross-pollination, and offensive odors are attributable to the incompatibility of neighboring land uses. This paper offers an examination of when an efficient activity arrangement is compatible with free-market incentives. Also, free-market and socially efficient activity arrangements are characterized in terms of spatial concentration of the externality generating uses

PLANTING DECISIONS AND UNCERTAIN CONSUMER ACCEPTANCE OF GENETICALLY MODIFIED CROP VARIETIES

There exists much uncertainty about consumer attitudes towards genetically modified foods. If it happens that sufficient (insufficient) acres are planted under non-modified seed to meet post-harvest demand, then a price premium will not (will) emerge for the non-modified varieties. A non-linearity originates in the fact that a price premium may be supported. This non-linearity interacts with the extent of demand uncertainty to determine equilibrium varietal plantings and the probability that post-harvest varietal prices will differ. Also, as planting approaches signals will be received by growers about the nature of demand they will be planting into. We show how the non-linearity affects the order on the types of signals that risk-neutral growers will prefer to receive.Consumer/Household Economics, Crop Production/Industries,