Product Differentiation and Quality in Food Markets: Industrial Organization Implications

This paper summarizes and evaluates recent research on food product quality and differentiation, both key dimensions of modern food markets. We emphasize the implications for modeling of violation of the product homogeneity and perfect information axioms of perfect competition and focus on issues that are important and/or unique to agriculture. We first review modeling approaches for studying competition in differentiated-agricultural-product markets and then address research in the areas of product quality, labeling, and certification. A unique aspect of agricultural industries is the autonomy that they often have to engage in collective action and self-regulation through producer-controlled marketing organizations. We investigate the role of these organizations in influencing and certifying product quality and in creating product differentiation.