ABSTRACT
This chapter discusses issues regarding product quality in food and agricultural industries. Food is often horizontally differentiated, thereby segmenting various markets, but it can also be vertically differentiated, where some food is deemed to be of higher quality. Even when food quality may be considered exogenous, farmers are sometimes able to endogenously choose product quality at a cost. When food quality is unknown to consumers, they often rely on the reputation of the firm, the region, or some combination of both. We give an overview of the empirical work that has been done on food quality and reputation in agriculture. Finally, we discuss various policies aimed at changing food quality, such as minimum quality standards, certification, third-party verification, and quotas. The benefits and costs of these policies largely depend upon the assumptions made about market power, consumer preferences, and the endogeneity of quality.
JEL classifications: L15, Q13
