The Relevance of Government Policy in the

Industrialized Agri-Food System

Konstantinos GiannakasDepartment of Agricultural Economics, UNL

• Changes in Consumer Preferences

• Technological Progress

• Global Competition

• Gov’t Support to Agriculture

Product Differentiation

Vertical Co-ordination

Industrialization of the Agri-Food System

Move from commodities to differentiated products &

evolution of vertical market arrangements from farms to consumers

The government can affect:

• Existence of differentiated products

• Number of differentiated products (i.e., variety)

• Degree of product differentiation (i.e., quality differences)

Government Policy and Product Differentiation

• Grades and Standards under Asymmetric Information

- Facilitate supply of high quality experience and credence goods

• Intellectual Property Rights

- Provide incentives for research and development of new products

• Public Research & Development

• Banning of New Products

Government & Existence of Differentiated Products

Variety depends on the fixed costs of brand-producing firms

• Gov’t can affect fixed costs through

- Subsidized & Public R&D

- Regulatory Requirements

• Number of grades and standards

Government & Number of Differentiated Products

• Proximity of Different Grades

• Breadth of Intellectual Property Rights Protection

Government & Degree of Product Differentiation

Since the government can affect:

• Existence and Number of differentiated products

• Degree of product differentiation

it can affect:

• Equilibrium prices, quantities and quality

• Firm profits

• Consumer welfare

Government Policy and Product Differentiation

• Optimal Regulatory Response to Agricultural Biotechnology

(Market & welfare impacts of 1st and 2nd generation GM products

under different regulatory and labeling regimes in developed and

developing countries)

• Mandatory Country-Of-Origin-Labeling

• National Organic Program

• Purity Standards in Food Labeling Laws

Food Policy Research at UNL

• Food Safety & Optimal Regulation of Credence Goods

• Impact of Different Organizations (Public Firms & Co-ops) on

Innovation & Food Quality

• Genetic Use Restriction Technologies (Terminator Genes)

• Impact of Length & Breadth of IPRs Protection on Innovation

• Impact of GMOs & IPRs Policies on Hunger

Food Policy Research at UNL