Standards and Labels

This paper explores the effects of a standard and/or a label influencing care choice. An effort by the firm may increase the probability of offering safe/high-quality products and a label may also be chosen to provide additional information to consumers. It is shown that, except for a few cases, a safety standard maximizing welfare corrects the safety underinvestment by the firm. The safety standard also changes the label choice compared to the private choice that would be made without any regulation. In particular, the enforcement of a safety standard may lead to the absence of a label or to the emergence of a voluntary/mandatory label.information

Can Foreign Producers Benefit from Geographical Indications under the New European Regulation?

This article discusses some economic issues linked to the 2006 European regulation regarding geographical indications. Economic implications of this regulation for foreign producers are investigated. The article examines whether or not the development of a geographical indication is a profitable strategy for foreign producers. The discussion here concludes that geographical indications may allow such producers access to a high-quality segment of the market, but efficient quality management is a necessary condition for reaching such a segment.geographical indications, regulation, quality, Food Consumption/Nutrition/Food Safety, International Relations/Trade,

ADVERTISING, COLLECTIVE ACTION, AND LABELING IN THE EUROPEAN WINE MARKETS

In this paper we consider the role for collective action in advertising investments needed to compete on foreign markets and/or to enter into new markets. We model the choices facing producers in regions where both AO (high quality) and table (low quality) wines are produced. By joining forces with producers of other regions to invest in advertising, producers may penetrate into new markets. We show that it is profitable to enter into the new markets when, other things being equal, the size of the new market is relatively big, when the traditional market is relatively small, and when the size of the fixed investment in advertising is relatively small. We discuss the policy implications of the results, examining possible modifications of the AO system to facilitate collective action and improve investment levels.Marketing,

ARE ASSESSMENTS FOR GENERIC ADVERTISING OPTIMAL IF PRODUCTS ARE DIFFERENTIATED?

An analytical framework where consumers display preferences for various qualities of an agricultural commodity is used to investigate the producer welfare effects of generic advertising assessments. Depending upon the degree of product differentiation present in the final goods, some producers are shown to benefit more than others from the use of an equivalent assessment on all producers. This paper delineates those cases where producer assessments should be equal and where assessments should be different to insure an equitable benefit.Marketing,

Are Standards Always Protectionist?

We analyze the effects of a domestic standard that reduces an externality associated with the consumption of the good targeted by the standard, using a model in which foreign and domestic producers compete in the domestic good market. Producers can reduce expected damage associated with the externality by incurring a cost that varies by source of origin. Despite potential protectionism, the standard is useful in correcting the consumption externality in the domestic country. Protectionism occurs when the welfare-maximizing domestic standard is higher than the international standard maximizing welfare inclusive of foreign profits. The standard is actually anti-protectionist when foreign producers are much more efficient at addressing the externality than are domestic producers. Possible exclusion of domestic or foreign producers arises with large standards, which may alter the classification of a standard as protectionist or non-protectionist. The paper provides important implications for the estimation and use of tariff equivalents of nontariff barriers. JEL Classification Code: F13externality; nontariff barriers; protectionism; safety; standard; tariff equivalent

Globalization Issues and Consumers’ Purchase Decisions for Food Products: Evidence from a Lab Experiment

Food Consumption/Nutrition/Food Safety,

SOME ECONOMIC IMPLICATIONS OF PUBLIC LABELING

This article discusses economic issues related to public labeling. The main contributions in both the empirical and theoretical literatures are presented in order to motivate responses to the questions, when should a regulator promote public labeling, and what are the limits to and the possible market distortions from public labeling? Although the issues are complicated, there is already much economic guidance that can be given to inform the policy debate over food labeling.Agribusiness,

Appendix to: Welfare Effects of Food Labels and Bans with Alternative Willingness to Pay Measures

Agribusiness, Food Consumption/Nutrition/Food Safety,

Value Elicitation using BDM and a Discrete Choice Mechanism

We compare the Becker-DeGroot-Marschak (BDM) mechanism to a discrete choice mechanism for revealing willingness to pay (WTP) in a lab experiment. Differences in WTP disappear when considering only engaged bidders with non-zero bids. Only WTP elicited with BDM are sensitive to the variation of quantity offered to participants.experimental economics, substitution

Prevention, Limited Liability and Market Structure

Under a market setting, we analyse the impact of legal liability on prevention, taking into account the possible limited wealth of firms. We show that under strict liability, firms my choose ex ante not to be able to fully indemnify victims ex post: whatever the market structure, they may use limited liability strategically by investing in prevention in excess of what is socially optimal. The negligence rule prevents firms from over-investment. For high levels of damages, under both liability rules, firms exert an insufficient effort of prevention. A welfare analysis established that when the judgment proof problem is acute, the optimal public intervention ranges from banning the production to imposing the negligence rule.Marketing,