This paper focus's on the third-party certifiers' strategy when choosing a required label quality, and the consequent market outcome. We consider two different objectives of the certifier: maximizing global demand for the labeled product (wide public policy), or maximizing global quality of the market (global quality policy). In a duopoly set up with firms bearing different costs with respect to quality provision, firms always opt for differentiation strategies: only one adopts the label. However, the labeling firm is not necessarily the most efficient one. In the case of a wide public policy, the efficient firm will produce labeled products only if costs of labeling are sufficiently low. In the case of a global quality policy, the low cost firm will always push the high-cost firm into the labeling program.
Lucie Bottega, Philippe Delacote, and Lisette Ibáñez, “Labeling Policies and Market Behavior: Quality Standard and Voluntary Adoption”, Journal of Agricultural and Food Industrial Organization, vol. 7, n. 2, December 2009.
Journal of Agricultural and Food Industrial Organization, vol. 7, n. 2, December 2009