Minimum Quality Standards, Industry Self Regulation, and Economic Welfare
نویسندگان
چکیده
We analyze the impact of an endogenous minimum quality standard (MQS) imposed on an industry collectively by producers based upon a profit criterion, a situation common to agricultural industries. A MQS can enhance net welfare in these settings because it may correct for deficient production of high-quality product by the industry in the absence of a MQS. However, we show that any MQS imposed voluntarily by a profit-maximizing producer organization decreases the welfare of all consumers of the product and is also highly likely to reduce net (producer plus consumer) welfare.
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