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Country of Origin Labeling with Horizontal Differentiation and Cost Variability

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  • Saak, Alexander E.

Abstract

This paper studies whether a seller achieves higher profits by providing consumers with information that allows them to distinguish between products from different countries, and how mandatory provision of such information impacts welfare. We analyze a model of multi-product monopoly with horizontal differentiation and random country-specific input costs. We find that if the variability in the input costs is sufficiently high and the share of consumers with high valuations is in some intermediate range, the seller prefers to withhold information about product origin. Mandatory labeling of products with their country of origin may reduce or increase welfare depending on the share of consumers with high valuations. We also discuss extensions of the basic model that allow for continuous distributions of valuations and input costs, and consumer learning.

Suggested Citation

  • Saak, Alexander E., 2010. "Country of Origin Labeling with Horizontal Differentiation and Cost Variability," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61328, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea10:61328
    DOI: 10.22004/ag.econ.61328
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    File URL: https://ageconsearch.umn.edu/record/61328/files/COOL%20AAEA%202010%20Selected%2011094.pdf
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    References listed on IDEAS

    as
    1. Sanjeev Agarwal & Michael J. Barone, 2005. "Emerging Issues for Geographical Indication Branding Strategies," Center for Agricultural and Rural Development (CARD) Publications 05-mrp9, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    2. Sanjeev Agarwal & Michael J. Barone, 2005. "Emerging Issues for Geographical Indication Branding Strategies," Midwest Agribusiness Trade Research and Information Center (MATRIC) Publications (archive only) 05-mrp9, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    3. Feuz, Dillon M. & Umberger, Wendy J. & Calkins, Chris R., 2007. "The Potential for Canadian Branded Beef Steaks in the U.S. Market: Results from an Experimental Auction," CAFRI: Current Agriculture, Food and Resource Issues, Canadian Agricultural Economics Society, issue 8, pages 1-12, December.
    Full references (including those not matched with items on IDEAS)

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