Incentive Compatible Pricing and Quality Adoption: The Case of the Polish Dairy Sector


We construct a model to identify determinants of the diffusion rate of standards in a food chain. We argue that adoption decisions in the food chain are determined by farmers and processors economic considerations. Factors such as pricing behavior, compliance costs and market structure, all of which influence the adoption of standards, are identified and discussed in the paper. The findings are used to test an econometric model utilizing data on Polish milk processing firms in the period between 2000 and 2002. The results indicate that input and output prices have a significant influence on the diffusion rate of standards. The dominance of large-scale holdings in the relevant procurement market significantly increases, whereas high compliance costs decrease the diffusion. Small cooperatives were found to face significant problems in procuring high quality raw materials compared to their competitors.product quality, standards, EU enlargement, industrial organization., Industrial Organization, Livestock Production/Industries,

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