A Game Theoretic Approach to Organic Foods: An Analysis of Asymmetric Information and Policy
- 1 April 2000
- journal article
- research article
- Published by Cambridge University Press (CUP) in Agricultural and Resource Economics Review
- Vol. 29 (1), 1-9
- https://doi.org/10.1017/s1068280500001386
Abstract
Demand for healthy, safe, and environmentally friendly food products has been increasing. In response, producers are marketing organic and other quality-differentiated foods, sometimes claiming to have followed sound environmental and animal welfare practices. These products frequently have unobservable quality attributes. If the profit-maximizing producer is able to deceive the consumer with a false claim, then he or she will enjoy a higher price with lower production costs (compared to the full disclosure outcome). The analysis described in this paper shows that repeat-purchase relationships and third-party monitoring are required for high-quality credence goods to be available. Policy implications of this analysis for national organic food standards are discussed.Keywords
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