Credence Good Labeling: The Efficiency and Distributional Implications of Several Policy Approaches

Posted: 1 Oct 2007

See all articles by Brian E. Roe

Brian E. Roe

Ohio State University (OSU) - Department of Agricultural, Environmental & Development Economics

Ian Sheldon

Ohio State University (OSU) - Department of Agricultural, Environmental & Development Economics

Abstract

A model of vertical product differentiation is used to analyze the labeling of credence goods, focusing on the manner by which quality is communicated. The results indicate that firms prefer private labeling options. In addition, firms may hire private certifiers as well as paying for mandated government labels when the government's quality benchmark substantially deviates from firms' private quality choices. The average consumer prefers a mandatory, discrete label with a high-quality standard while poor consumers prefer a mandatory, discrete label with a low standard.

Suggested Citation

Roe, Brian E. and Sheldon, Ian, Credence Good Labeling: The Efficiency and Distributional Implications of Several Policy Approaches. American Journal of Agricultural Economics, Vol. 89, No. 4, pp. 1020-1033, November 2007. Available at SSRN: https://ssrn.com/abstract=1018123 or http://dx.doi.org/10.1111/j.1467-8276.2007.01024.x

Brian E. Roe (Contact Author)

Ohio State University (OSU) - Department of Agricultural, Environmental & Development Economics ( email )

2120 Fyffe Rd
Columbus, OH 43210-1067
United States
614-688-5777 (Phone)

HOME PAGE: http://https://aede.osu.edu/our-people/brian-e-roe

Ian Sheldon

Ohio State University (OSU) - Department of Agricultural, Environmental & Development Economics ( email )

234 Agricultural Administration Building
2120 Fyffe Road
Columbus, OH 43210-1067
United States
614-292-2194 (Phone)

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