Agricultural Marketing Channels as Competing Entities: A Reaction

1
Agricultural Marketing Channels as Competing
Entities A Reaction

• Mark Denbaly
• Economic Research Service
• Speaking only for myself and not USDA

2
Justification for Intervention

• Farmers fears of buyer power
• Fewer and Larger manufacturers and Retailers
  buying direct w/ demand for services
• Unfair competition
• Napa Valley wines from China (adulteration)
• Our oranges have no cholesterol (misinformation)
• Consumer concerns about
• Pocketbooks
• Health
• Safety

3
More Justification

• Market failure and asymmetric information
• Reducing search and transaction costs
• Too much (HDTV, nutrition) or too little
  information (mandatory pricing, contracts, etc.)
• Social objectives
• Fair trade, sustainable, free range, etc.
• Too much differentiation
• Utility may NOT be monotonic in choice
• (The Paradox of Choice, Barry Schwartz)

4
Too Little Differentiation?
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Intervention Grades and Standards

• What motivates them? Economic rational?
• Lemon problem?
• Producer driven? political/consumer driven?
• Objective safety considerations?
• Do they improve the market outcome?
• Why are we better off without the low-quality
  products if we know what we are buying?
  (consenting adults)
• If market failure, can the extent of the
  departure be pinned down, or can the optimum be
  achieved?
• Does it makes sense to open avenues for monopoly
  power by helping producers differentiate their
  products.

6
Intervention Certification and Accreditation

• Certifying private standards
• High quality justifies intervention?
• Certifying the certifiers

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Intervention Information

• Information least distortionary intervention?
• Cost/benefit evidence?
• Reveal nutrition information
• Can consumers eating behavior be improved?
• Change firm behavior?
• Reveal safety inspection information
• Can it influence consumer behavior?
• Can it alter firm behavior?

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A Few Areas of Specific Policy Research--Upstream

• Concentration effects on farm prices how it
  varies with various alternatives
• Range of Concentration effects on prices w/t
  seasonality, market size, availability of info,
  etc.
• Income effects of contacting farmers
• Spot market effects (price, volume, volatility)
  of contracts.
• Effects of restricting corporate farming,
  contracts, regulation
• Cost/benefit--welfare effects ofregulatory
  intervention

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A Few Areas of Specific Policy Research--Downstrea
m

• Should advertising food to Children be
  restricted? Is there a market failure?
• Are state-held auctions to procure infant formula
  foods competitive?
• How supermarket mergers affect consumer welfare?

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I alone am here the representative of the
people.

Napoleon Bonaparte
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Mark Denbaly is the Chief of Food Markets Branch
at Economic Research Service of the US Department
of Agriculture. Mark leads ERS policy research
on issues that affect various population
sub-groups, but emanate from evolving competitive
market dynamics or marketing and pricing
strategies of manufacturing, retailing, and
foodservice firms.