The Relevance of Government Policy in the
Industrialized Agri-Food System
Konstantinos Giannakas
Department of Agricultural Economics, UNL
Industrialization of the Agri-Food System
Move from commodities to differentiated products &
evolution of vertical market arrangements from farms to consumers
• Changes in Consumer Preferences
• Technological Progress
• Global Competition
•  Gov’t Support to Agriculture
Product
Differentiation
Vertical
Co-ordination
Government Policy and Product Differentiation
The government can affect:
• Existence of differentiated products
• Number of differentiated products (i.e., variety)
• Degree of product differentiation (i.e., quality differences)
Government & Existence of Differentiated Products
• Grades and Standards under Asymmetric Information
- Facilitate supply of high quality experience and credence goods
• Intellectual Property Rights
- Provide incentives for research and development of new products
• Public Research & Development
• Banning of New Products
Government & Number of Differentiated Products
Variety depends on the fixed costs of brand-producing firms
• Gov’t can affect fixed costs through
- Subsidized & Public R&D
- Regulatory Requirements
• Number of grades and standards
Government & Degree of Product Differentiation
• Proximity of Different Grades
• Breadth of Intellectual Property Rights Protection
Government Policy and Product Differentiation
Since the government can affect:
• Existence and Number of differentiated products
• Degree of product differentiation
it can affect:
• Equilibrium prices, quantities and quality
• Firm profits
• Consumer welfare
Food Policy Research at UNL
• Optimal Regulatory Response to Agricultural Biotechnology
(Market & welfare impacts of 1st and 2nd generation GM products
under different regulatory and labeling regimes in developed and
developing countries)
• Mandatory Country-Of-Origin-Labeling
• National Organic Program
• Purity Standards in Food Labeling Laws
Food Policy Research at UNL
• Food Safety & Optimal Regulation of Credence Goods
• Impact of Different Organizations (Public Firms & Co-ops) on
Innovation & Food Quality
• Genetic Use Restriction Technologies (Terminator Genes)
• Impact of Length & Breadth of IPRs Protection on Innovation
• Impact of GMOs & IPRs Policies on Hunger