Impacts of Minimum Quality Standards Imposed Through Marketing Orders or Related Producer Organizations

17 Pages Posted: 6 Apr 2020

See all articles by Tina Saitone

Tina Saitone

University of California, Davis - Department of Agricultural and Resource Economics

Richard J. Sexton

University of California, Davis - Department of Agricultural and Resource Economics

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Date Written: January 2010

Abstract

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.

Keywords: marketing orders, minimum quality standards, supply control, vertical product differentiation

Suggested Citation

Saitone, Tina and Sexton, Richard J., Impacts of Minimum Quality Standards Imposed Through Marketing Orders or Related Producer Organizations (January 2010). American Journal of Agricultural Economics, Vol. 92, Issue 1, pp. 164-180, 2010, Available at SSRN: https://ssrn.com/abstract=3569137 or http://dx.doi.org/10.1093/ajae/aap005

Tina Saitone (Contact Author)

University of California, Davis - Department of Agricultural and Resource Economics ( email )

One Shields Avenue
Davis, CA 95616
United States

Richard J. Sexton

University of California, Davis - Department of Agricultural and Resource Economics ( email )

One Shields Avenue
327 Voorhies
Davis, CA 95616
United States
530-752-2219 (Phone)

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