Geographical Indications and the Competitive Provision of Quality in Agricultural Markets

TLDR

Geographical indications are examined within a vertical product‑differentiation model of agriculture, assuming certification costs are required for credible quality certification and that high‑quality production is endogenously determined. The analysis shows that GIs promote competitive quality provision and generate welfare gains, mainly benefiting consumers and, when scarce factors are involved, producers as well.

Abstract

Abstract The economics of geographical indications (GIs) is assessed within a vertical product differentiation framework that is consistent with the competitive structure of agriculture. It is assumed that certification costs are needed for GIs to serve as (collective) credible quality certification devices, and production of high‐quality product is endogenously determined. We find that GIs can support a competitive provision of quality and lead to clear welfare gains, although they fall short of delivering the (constrained) first best. The main beneficiaries are consumers. Producers may also accrue some benefit if production of the high‐quality products draws on scarce factors that they own.