Strength of Protection for Geographical Indications: Promotion Incentives and Welfare Effects
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The Department of Economic Science was founded in 1898 to teach economic theory as a truth of industrial life, and was very much concerned with applying economics to business and industry, particularly agriculture. Between 1910 and 1967 it showed the growing influence of other social studies, such as sociology, history, and political science. Today it encompasses the majors of Agricultural Business (preparing for agricultural finance and management), Business Economics, and Economics (for advanced studies in business or economics or for careers in financing, management, insurance, etc).
History
The Department of Economic Science was founded in 1898 under the Division of Industrial Science (later College of Liberal Arts and Sciences); it became co-directed by the Division of Agriculture in 1919. In 1910 it became the Department of Economics and Political Science. In 1913 it became the Department of Applied Economics and Social Science; in 1924 it became the Department of Economics, History, and Sociology; in 1931 it became the Department of Economics and Sociology. In 1967 it became the Department of Economics, and in 2007 it became co-directed by the Colleges of Agriculture and Life Sciences, Liberal Arts and Sciences, and Business.
Dates of Existence
1898–present
Historical Names
- Department of Economic Science (1898–1910)
- Department of Economics and Political Science (1910-1913)
- Department of Applied Economics and Social Science (1913–1924)
- Department of Economics, History and Sociology (1924–1931)
- Department of Economics and Sociology (1931–1967)
Related Units
- College of Agricultural and Life Sciences (parent college)
- College of Liberal Arts and Sciences (parent college)
- College of Business (parent college)
The Center for Agricultural and Rural Development (CARD) conducts innovative public policy and economic research on agricultural, environmental, and food issues. CARD uniquely combines academic excellence with engagement and anticipatory thinking to inform and benefit society.
CARD researchers develop and apply economic theory, quantitative methods, and interdisciplinary approaches to create relevant knowledge. Communication efforts target state and federal policymakers; the research community; agricultural, food, and environmental groups; individual decision-makers; and international audiences.
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Abstract
We address the question of how the strength of protection for geographical indications (GIs) affects the GI industry's promotion incentives, equilibrium market outcomes, and the distribution of welfare. Geographical indication producers engage in informative advertising by associating their true quality premium (relative to a substitute product) with a specific label emphasizing the GI's geographic origin. The extent to which the names/words of the GI label can be used and/or imitated by competing products—which depends on the strength of GI protection—determines how informative the GI promotion messages can be. Consumers’ heterogeneous preferences (vis-à-vis the GI quality premium) are modeled in a vertically differentiated framework. Both the GI industry and the substitute product industry are assumed to be competitive (with free entry). The model is calibrated and solved for alternative parameter values. Results show that producers of the GI and of the lower-quality substitute good have divergent interests: GI producers are better off with full protection, whereas the substitute good's producers prefer intermediate levels of protection (but they never prefer zero protection because they benefit indirectly if the GI producers’ incentives to promote are preserved). For consumers and aggregate welfare, the preferred level of protection depends on the model's parameters, with an intermediate level of protection being optimal in many circumstances.
Comments
This is a manuscript of an article from American Journal of Agricultural Economics 96 (2014): 1030, doi: 10.1093/ajae/aau016. Posted with permission.