Reputations, Market Structure, and the Choice of Quality Assurance Systems in the Food Industry
Economics, Center for Agricultural and Rural Development
Journal or Book Title
American Journal of Agricultural Economics
First Page or Article ID Number
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.
Carriquiry, Miguel and Babcock, Bruce, "Reputations, Market Structure, and the Choice of Quality Assurance Systems in the Food Industry" (2007). Economics Publications. 524.