Title

Reputations, Market Structure, and the Choice of Quality Assurance Systems in the Food Industry

Campus Units

Economics, Center for Agricultural and Rural Development

Document Type

Article

Publication Version

Submitted Manuscript

Publication Date

2007

Journal or Book Title

American Journal of Agricultural Economics

Volume

89

Issue

1

First Page or Article ID Number

12

Last Page

23

DOI

10.1111/j.1467-8276.2007.00959.x

Abstract

Many food traits desired by consumers are costly to provide and difficult to verify. A complicating factor is that delivered quality can only be affected stochastically by producers and imperfectly observed by consumers. Markets for these goods will emerge only if supplying firms can be trusted. We develop a repeated purchases model to explore how quality discoverability, market structure, nature of reputations, market premiums, and discount factors drive firm choice about the stringency of quality assurance systems designed to gain consumer trust. Reputation protection is key incentive for firms to invest in high-quality goods and quality assurance systems.

Comments

This working paper was published as Carriquiry, Miguel and Bruce A. Babcock, "Reputations, Market Structure, and the Choice of Quality Assurance Systems in the Food Industry," American Journal of Agricultural Economics 89 (2007): 12–23, doi:10.1111/j.1467-8276.2007.00959.x.