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The Strategic Use of Private Quality Standards in Food Supply Chains
Author(s) -
Schlippenbach Vanessa,
Teichmann Isabel
Publication year - 2012
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/aas070
Subject(s) - quality (philosophy) , business , supply chain , industrial organization , production (economics) , upstream (networking) , position (finance) , microeconomics , downstream (manufacturing) , quality standard , commerce , economics , marketing , finance , computer science , computer network , philosophy , chemistry , epistemology , chromatography
We explore the strategic role of private quality standards in food supply chains. Considering two symmetric retailers that are exclusively supplied by a finite number of producers and endogenizing the suppliers’ delivery choice, we show that there exist two asymmetric equilibria in the retailers’ quality requirements. Our results reveal that the retailers use private quality standards to improve their bargaining position in the intermediate goods market. This is associated with inefficiencies in the upstream production, which can be mitigated by enforcing a minimum quality standard.