Minimum Quality Standards and brand development in agrifood chains

This paper develops an originalframework to better understand the interaction betweenthe development of brands and the quality of rawmaterials. We consider different levels of consumer trustfor a brand and we examine the incentive for firms toimprove the quality of a processed product by requiringthat upstream suppliers adopt a private standard. Incontrast to previous literature, the incentive for firms todevelop a more stringent private standard may increasewith the level of the regulated minimum qualitystandard. Moreover, the creation of a private standardcan reduce the risk of consumer dissatisfaction whileincreasing the marketed quantity. Unexpected positiveeffects of a reinforcement of the minimum qualitystandard may arise, in the sense that both market accessfor upstream producers and consumer surplus areimproved and final price may decrease with respect tosimply complying with the regulation.