With perfect information, there is no quality issue. Organic foods would be just like any other product. In equilibrium, consumers will buy organic foods if the marginal utility per dollar they derive from them is at least equal to that of their other purchases. Producers will enter the market until there are no more opportunities to exploit economic profits. An extensive-form game for a search good is shown in figure 1. In figure 1, the last two rows of the game tree are the payoffs to the players. The upper payoff is to the producer; the lower payoff is to the consumer. The producer’s payoff is in dollar units and can be thought of as price less cost. The consumer’s payoff is in terms of utility. I assume generally that it is more expensive to produce usMcCluskey A Game Theoretic Approach to Organic Foods 3 ing organic methods. This notation and these conventions will be followed throughout the analysis. The equilibrium concepts that will be used in this analysis are Nash equilibrium and subgame perfect Nash equilibrium. A Nash equilibrium exists if each player is employing his or her optimal strategy given all the other players’ strategies. In other words, each player chooses to play his or her best response to what everyone else is doing. A subgame perfect Nash equilibrium exists when the players’ strategy choices result in a Nash equilibrium in every subgame. A consequence of this equilibrium refinement is that all threats must be credible