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A Game Theoretic Approach to Organic Foods: An Analysis of Asymmetric Information and Policy

Published online by Cambridge University Press:  15 September 2016

Jill J. McCluskey
Jill J. McCluskey*
Affiliation:
Department of Agricultural Economics at Washington State University
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Abstract

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Demand for healthy, safe, and environmentally friendly food products has been increasing. In response, producers are marketing organic and other quality-differentiated foods, sometimes claiming to have followed sound environmental and animal welfare practices. These products frequently have unobservable quality attributes. If the profit-maximizing producer is able to deceive the consumer with a false claim, then he or she will enjoy a higher price with lower production costs (compared to the full disclosure outcome). The analysis described in this paper shows that repeat-purchase relationships and third-party monitoring are required for high-quality credence goods to be available. Policy implications of this analysis for national organic food standards are discussed.

Type
Articles
Information
Agricultural and Resource Economics Review , Volume 29 , Issue 1 , April 2000 , pp. 1 - 9
Copyright
Copyright © 2000 Northeastern Agricultural and Resource Economics Association 

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