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Impacts of Minimum Quality Standards Imposed Through Marketing Orders or Related Producer Organizations
Author(s) -
Saitone Tina L.,
Sexton Richard J.
Publication year - 2010
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1093/ajae/aap005
Subject(s) - profit (economics) , quality (philosophy) , business , product (mathematics) , order (exchange) , welfare , industrial organization , deadweight loss , marketing , economics , microeconomics , market economy , finance , philosophy , geometry , mathematics , epistemology
We analyze the impacts of minimum quality standards (MQS) imposed by producers acting collectively through a producer organization, such as a marketing order. MQS imposed in a competitive market can never enhance social welfare because in general an MQS creates two deadweight losses—one due to inefficient enhancement of product quality and a second due to wastage of the low‐quality product. Any MQS that a competitive industry implements based upon a profit criterion causes all consumers in the market to be harmed. However, an MQS may be preferred relative to supply control as a second‐best instrument for transferring income to producers.