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Article
Grading, Minimum Quality Standards, and the Labeling of Genetically Modified Products
Economics Working Papers (2002–2016)
  • Giancarlo Moschini, Iowa State University
  • Harvey E. Lapan, Iowa State University
Document Type
Working Paper
Publication Date
3-1-2006
Working Paper Number
WP # 06012, March 2006
Abstract
In this paper we relate the economics of labeling genetically modified (GM) products to the theory of grading and minimum quality standards. The model represents three stages in the supply chain (farm production, marketing handlers, and final users) and allows explicitly for the accidental co-mingling of non-GM products at the marketing stage. Regulation takes the form of a threshold level of purity for non-GM products. The paper also presents a novel demand specification for differentiated GM and non-GM products that is particularly useful in our stochastic framework. First, we find that if the threshold purity level for non-GM products is too strict, this necessarily leads to the disappearance of non-GM product from the market. Second, we show that some quality standard is in the interest of farmers as well. Indeed, we show that the standard that is optimal from the perspective of producers is actually stricter than what is optimal for consumers and for societal welfare. We conclude with comparative statics effects that illustrate the impact of the model’s parameters on market equilibrium and on the welfare- maximizing regulatory standard.
File Format
application/pdf
Length
42 pages
Citation Information
Giancarlo Moschini and Harvey E. Lapan. "Grading, Minimum Quality Standards, and the Labeling of Genetically Modified Products" (2006)
Available at: http://works.bepress.com/giancarlo-moschini/53/