Should the government be responsible for monitoring?
What other factors contribute to the integrity of organic food products? In order to address
these and other policy questions, simple games are
analyzed to highlight some of the information issues
that are present in markets for qualitydifferentiated
food products with asymmetric information,
such as organic foods. These games are
not intended to reflect accurately the intricacies of
the markets for organic foods. Rather, they are intended
to shed light on the incentives resulting
from the asymmetric information. Although organic
foods can usually be classified as credence
goods, games are analyzed for all three classifications
of goods (search goods, experience goods,
and credence goods) for the purpose of analyzing
the effects of different types of asymmetric information.
The analysis shows that repeat-purchase
relationships and third-party monitoring are required
for high-quality credence goods to be available.
The policy implications of this analysis for
national organic food standards are also discussed.