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Grading, Minimum Quality Standards, and the Labeling of Genetically Modified Products
Author(s) -
Lapan Harvey,
Moschini GianCarlo
Publication year - 2007
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 - 10.1111/j.1467-8276.2007.01002.x
Subject(s) - grading (engineering) , product (mathematics) , quality (philosophy) , genetically modified organism , economics , supply chain , microeconomics , business , industrial organization , chemistry , mathematics , marketing , biology , ecology , philosophy , biochemistry , geometry , epistemology , gene
We relate the labeling of genetically modified (GM) products to the theory of grading and minimum quality standards. The model represents three stages in the supply chain, assumes a vertical product differentiation framework, allows for the accidental commingling of non‐GM products, and treats regulation as a purity threshold for non‐GM products. We find that a non‐GM purity level that is too strict leads to the disappearance of the non‐GM product, and that some quality standard benefits farmers. Indeed, the standard that is optimal from the perspective of producers is stricter than what is optimal for consumers and for societal welfare.