Reputations, Market Structure, and the Choice of Quality Assurance Systems in the Food Industry |
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Authors: | Miguel Carriquiry Bruce A. Babcock |
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Affiliation: | Miguel Carriquiry is postdoctoral research scientist, International Research Institute for Climate and Society, Earth Institute, Columbia University. Bruce Babcock is Director, Center for Agricultural and Rural Development and professor, Department of Economics, Iowa State University. |
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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. |
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Keywords: | imperfect information product quality quality assurance repeated purchases reputations supply chain value-added agriculture |
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