Essays on collective reputation and authenticity in agri-food markets
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Authenticity in agriculture, food and resource markets has been an ongoing policy challenge to regulators and food industries, and a major concern to consumers given the complex nature of global food supply chains and the increasing spate of market fraud reports across the world. In a bid to boost their economic return, some firms may engage in illicit activities that comprise authenticity including: adulteration, substitution of substandard products, unapproved enhancements of food products, false and misleading quality claims. Such actions, often times, create negative reputation externalities for other agri-food firms in the sector, and may also result in trade conflicts and border rejections; while consumers incur transaction (search) costs in verifying product attributes due to quality uncertainty. This dissertation focuses on collective reputation and contributes to an understanding of authenticity issues in agri-food and resource markets. The analysis examines the role of industry-led quality assurance systems and evolving technologies in enhancing authenticity signals and reducing information asymmetry in the context of market fraud and collective reputation within food and resource supply chains. This dissertation consists of three papers. Paper 1 examines technological solutions to authenticity issues in the context of international trade. The paper explores the role of an emerging authenticity technology, International Barcode of Life (IBOL) in strengthening the enforcement of the Convention on International Trade in Endangered Species of wild fauna and flora (CITES). The focus of the analysis is CITES restrictions on commercial trade in the endangered species tree of Brazilian rosewood (Dalbergia nigra). The first paper provides an overview of the applications of the IBOL technology in species identification to date. A graphical partial equilibrium trade model examines three scenarios consisting of adoption of IBOL authenticity technology by a single major importing country, multilateral adoption, and adoption by the exporting country. The scenarios suggest that a threat of multilateral testing for the authenticity of imported rosewood could eliminate cross border commercial trade in the endangered species. Upstream testing and certification of authenticity in the exporting country could increase importers’ confidence and the demand for legally harvested rosewood. The results suggest that technological solutions to authenticity issues in international markets have the potential to reduce quality uncertainty and could act as a complement to regulatory enforcement under CITES. Paper 2 explores the industry-led Vintners Quality Alliance (VQA) quality assurance system for Canadian wines to examine how an industry seeks to signal authenticity assurances to protect its collective reputation. Hedonic and Probit models are estimated using data on wine attributes sourced from the Liquor Control Board of Ontario (LCBO). Hedonic models examine whether VQA certification, versus other collective and individual reputation signals (region, winery), elicits a price premium. The Probit analysis examines factors that determine a winery’s decision to seek VQA certification for a specific wine. The results suggest that while a number of attributes including VQA certification, percentage alcohol content, sweetness (sugar level), volume of wine supplied and vintage, have a significant influence on the price of wine, VQA adds a premium beyond other signals of reputation (winery and region). The magnitude of the effect of individual and collective reputation on the price of wine differs for the different types/colours of wine. The Probit model results suggest that wineries that supply large volumes of wine (more than 1000 cases) in Ontario and produce icewine and non-blended wines have a higher tendency of seeking VQA status. The results imply that VQA could be used as a shorthand for quality, while premium and reputation driven by authenticity in the wine industry could serve as an incentive for other agri-food industries to establish similar quality assurance systems. Paper 3 examines the incidence of mislabelling and substitution in fish markets using supply, demand and welfare analysis. The paper focuses on incentives for the private sector (retailers) or a third party to adopt IBOL technology to protect their reputation and for supply chain monitoring. The feasibility of IBOL technology for a typical retail store in Canada is assessed using a simple simulation analysis. The analysis suggests that the costs of switching to the IBOL system, the number of retailers already using the technology and their market shares are likely to influence a retailer’s adoption of the technology. The ease of catching cheaters along the fish supply chain through third party monitoring is expected to depend on the accuracy of the technology in detecting fraud, the sampling frequency (rate) and rate of species substitution; while enforcement of legal penalties and other costs would serve as a disincentive to cheat as these costs negatively affect expected profit. The simulation analysis suggests that presently IBOL technology appears to be feasible for a typical retail store in Canada if testing is done in an external facility, but may not be feasible if fixed and other costs associated with the IBOL system are considered. The paper suggests that reducing the size of the technology to a hand-held tool and coordination of small scale retailers are potential ways to make the technology affordable and expand its use.
DegreeDoctor of Philosophy (Ph.D.)
DepartmentBioresource Policy, Business and Economics
SupervisorHobbs, Jill E.; Gray, Richard S.
CommitteePhillips, Peter W.; Bruneau, Joel F.
Copyright DateJuly 2015