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The strategic use of private quality standards in food supply chains

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  • von Schlippenbach, Vanessa
  • Teichmann, Isabel
Abstract
We explore the strategic role of private quality standards in food supply chains. Considering two symmetric retailers that are exclusively supplied by a finite number of producers and endogenizing the suppliers' delivery choice, we show that there exist two asymmetric equilibria in the retailers' quality requirements. Our results reveal that the retailers use private quality standards to improve their bargaining position in the intermediate goods market. This is associated with inefficiencies in the upstream production, which can be mitigated by enforcing a minimum quality standard.

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  • von Schlippenbach, Vanessa & Teichmann, Isabel, 2012. "The strategic use of private quality standards in food supply chains," DICE Discussion Papers 62, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    • Handle: RePEc:zbw:dicedp:62
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    3. Ding, Huiping & Fu, Yanan & Zheng, Lucy & Yan, Zhu, 2019. "Determinants of the competitive advantage of dairy supply chains: Evidence from the Chinese dairy industry," International Journal of Production Economics, Elsevier, vol. 209(C), pages 360-373.
    4. Naegele, Helene, 2020. "Where does the Fair Trade money go? How much consumers pay extra for Fair Trade coffee and how this value is split along the value chain," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 133, pages 1-1.
    5. Russo, Carlo & Perito, Maria Angela & Di Fonzo, Antonella, 2014. "Using Private Food Safety Standards to Manage Complexity: A Moral Hazard Perspective," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 15(2), pages 1-15.
    6. Naegele, Helene, 2020. "Where does the Fair Trade money go? How much consumers pay extra for Fair Trade coffee and how this value is split along the value chain," World Development, Elsevier, vol. 133(C).
    7. Dipankar Das, 2019. "Multilayer of Suppliers Fixed Costs and Spatial Competition in the Upstream Market as a Source of Retailers Buying Power," Studies in Microeconomics, , vol. 7(2), pages 210-226, December.
    8. Vanessa von Schlippenbach & Isabel Teichmann, 2012. "The Strategic Use of Private Quality Standards in Food Supply Chains," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(5), pages 1189-1201.
    9. Jianyu Yu & Zohra Bouamra-Mechemache, 2016. "Production standards, competition and vertical relationship," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 43(1), pages 79-111.
    10. Irz, Xavier & Mazzocchi, Mario & Réquillart, Vincent & Soler, Louis-Georges, 2015. "Research in Food Economics: past trends and new challenges," Revue d'Etudes en Agriculture et Environnement, Editions NecPlus, vol. 96(01), pages 187-237, March.
    11. VENUS, Thomas J. & WESSELER, Justus H.H., 2015. "Evolution Of European Gm-Free Standards: Reasoning Of Consumers And Strategic Adoption By Companies," Review of Agricultural and Applied Economics (RAAE), Faculty of Economics and Management, Slovak Agricultural University in Nitra, vol. 18(2), pages 1-8, September.
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    13. Caprice, Stéphane & von Schlippenbach, Vanessa & Wey, Christian, 2014. "Supplier Fixed costs and Retail Market Monopolization," TSE Working Papers 14-524, Toulouse School of Economics (TSE).
    14. Venus, Thomas J. & Drabik, Dusan & Wesseler, Justus, 2018. "The role of a German multi-stakeholder standard for livestock products derived from non-GMO feed," Food Policy, Elsevier, vol. 78(C), pages 58-67.
    15. Rachael Goodhue & Leo Simon, 2016. "Agricultural contracts, adverse selection, and multiple inputs," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 4(1), pages 1-33, December.
    16. Pio Baake & Helene Naegele, 2017. "Competition between For-Profit and Industry Labels: The Case of Social Labels in the Coffee Market," Discussion Papers of DIW Berlin 1686, DIW Berlin, German Institute for Economic Research.
    17. Rouvière, Elodie, 2016. "Small is beautiful: firm size, prevention and food safety," Food Policy, Elsevier, vol. 63(C), pages 12-22.
    18. Hanbin Lee & Richard J. Sexton & Daniel A. Sumner, 2023. "National and subnational regulation of farm practices for consumer products sold within a jurisdiction: California's Proposition 12," Agricultural Economics, International Association of Agricultural Economists, vol. 54(6), pages 838-853, November.
    19. Großmann, Anne-Marie & von Gruben, Paul, 2014. "The Role of Company Standards in Supply Chains – The Case of the German Automotive Industry," Chapters from the Proceedings of the Hamburg International Conference of Logistics (HICL), in: Blecker, Thorsten & Kersten, Wolfgang & Ringle, Christian M. (ed.), Innovative Methods in Logistics and Supply Chain Management: Current Issues and Emerging Practices. Proceedings of the Hamburg International Conferenc, volume 19, pages 99-123, Hamburg University of Technology (TUHH), Institute of Business Logistics and General Management.
    20. Abate, Gashaw T. & Bernard, Tanguy & de Janvry, Alain & Sadoulet, Elisabeth & Trachtman, Carly, 2021. "Introducing quality certification in staple food markets in Sub-Saharan Africa: Four conditions for successful implementation," Food Policy, Elsevier, vol. 105(C).
    21. Russo, Carlo & Perito, Maria Angel & Di Fonzo, Antonella, 2014. "The Strategic Use of Private Food Safety Standards to Manage Complexity: a Moral Hazard Perspective," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182795, European Association of Agricultural Economists.
    22. Wesseler, Justus, 2014. "Biotechnologies and agrifood strategies: opportunities, threats and economic implications," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 3(3), pages 1-18, December.
    23. Helene Naegele, 2019. "Where Does the Fairtrade Money Go? How Much Consumers Pay Extra for Fairtrade Coffee and How This Value Is Split along the Value Chain," Discussion Papers of DIW Berlin 1783, DIW Berlin, German Institute for Economic Research.

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    More about this item

    Keywords

    private quality standards; vertical relations; buyer power; food supply chain;
    All these keywords.

    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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