The Regulatory Choice between a Label and a Minimum-Quality Standard, 2005

(2005) The Regulatory Choice between a Label and a Minimum-Quality Standard, 2005. Iowa State University

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Abstract

This paper revisits the issue of the regulatory choice between a mandatory label and a minimum-quality standard. When the cost of regulation is relatively low, we show that the socially optimal choice depends on the producers’ cost structure for complying with regulation and improving quality. Under a marginal cost for improving quality, the mandatory labeling is sufficient for reaching the socially optimal level of quality. Under a fixed cost for improving quality, we show that each instrument or the combination of both instruments may emerge at the equilibrium.

Item Type: Departmental Report
Keywords: Cost of regulation, Information, Standards
Subjects: Business and industry > Trade and commerce
Business and industry > Economic forecasts
ID Code: 3344
Deposited By: Margaret Barr
Deposited On: 31 Jan 2006
Last Modified: 31 Jan 2006
URI: http://publications.iowa.gov/id/eprint/3344

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