Volume 16, Issue 2 -

In Hotelling’s linear town model characteristics are implicitly assumed to be related in such a way that preferences for them can be mapped into a one-dimensional town. This results in perfectly correlated willingness to pay levels. Many differentiated products, however, embody characteristics that are functionally at least somewhat unrelated to other characteristics. This paper makes the implicit assumption of perfectly correlated preferences in the original Hotelling model explicit, and examine the implications of this assumption for the economics of competition. We develop a simple theoretical model to show that shape of the demand curve for differentiated products depends on distribution of consumers’ preferences, which is determined by the nature of the relationship between the corresponding characteristics. Misrepresentation of correlated preferences in differentiated product models impacts demand elasticity and can result in unreliable outcomes. This issue is particularly important in agricultural and food markets where many factors such as expectations about weather and information on social media can impact consumer ranking of one product versus another in ways that are not fully observable or measurable by the researcher.

This paper analyzes whether or not a standard reducing risks and influencing firms' entry is protectionist and can be interpreted as an illegitimate non-tariff measure (NTM). Domestic and foreign firms compete in selling products in the domestic market, in the presence of possible damages and endogenous sunk costs for reducing the risks of having these damages. A policymaker chooses a standard that is imposed on all firms, but may also impede their ability to enter the domestic market. Welfare can be improved with a legitimate NTM, particularly under relatively high levels of sunk costs and damages, justifying a reduction in the number of firms allowing a higher effort for curbing the expected damage. Protectionism related to an illegitimate NTM occurs when the standard maximizing domestic or foreign welfare is higher than the international standard, maximizing the world (or global) welfare inclusive of all profits and surpluses across countries. The characterization of protectionism is influenced by the domestic or foreign origin of firms, and by the nature of the expected damage incurred at either the production level or the consumption level. Configurations with expected damages related to consumption tend to exhibit more cases of protectionism compared to configurations with expected damages related to production.

This paper examines the impact of a food contamination scare in the dairy sector on dairy exports. We investigate this question in the context of the 2013 Whey Protein Concentrate contamination incident in New Zealand. We assess the impact of this incident on dairy exports using synthetic control methods. A synthetic counterfactual scenario where the incident did not occur is developed using weighted information from other countries unaffected by the scare. We find that there was an initial negative shock to the exports of products that were thought to have been contaminated, but that there were no significant sustained impacts on other dairy products. The affected products made up only a small proportion of New Zealand dairy exports, with the vast majority of dairy exports being unaffected. Infant formula exports appear to have recovered more than a year after the scare. However, whey product exports (the contaminated product) remain lower than they otherwise would have been.

This paper examines the relationship between food-related trademark activity, approximating for branding and marketing efforts, and food exports for the 48 contiguous states of the US over the period 1999–2015. We find a strong and positive relationship between these two variables. Further robustness checks, including an instrumental variables approach, provide evidence that marketing and branding activities contribute to food exports. With respect to food export policy our results point to providing incentives to the private sector (cooperatives, farmers, firms) to pursue marketing and branding efforts.

Food safety enjoys sustained attention among the scientific community, policymakers, and the general public due to health impacts. However, pursuing appropriate regulations for pervasive food contaminants is a challenging policy issue, particularly for naturally-occurring food toxins such as aflatoxins and other mycotoxins. This paper explores consumer preferences for quality aflatoxin-free peanuts, and how food safety concerns may impact willingness to pay more for safer foods. Incorporating ‘risky’ foods into random utility-maximization framework, we analyze contingent valuation survey data on Ghana. Model and survey results show consumers in Ghana approve of food aflatoxin regulations, and are prepared to pay price premiums as incentives to ensure supply of quality peanuts. Findings reveal that consumers prioritize food safety above prices in market decisions. People prefer introduction of aflatoxin regulations that would guarantee good health; useful information for policy makers in Ghana, Africa, and rest of the developing world.

This study investigates linear and nonlinear causality between the daily Chicago Board of Trade corn futures price series and each of seven regional cash series from Iowa, Illinois, Indiana, Ohio, Minnesota, Nebraska, and Kansas for January 2006–March 2011. Empirical results suggest bidirectional linear causality between cash and futures prices under a bivariate vector autoregressive model in differences (Bi-VAR-Diff) which consists of the futures and one of the seven cash series that are not cointegrated, and unidirectional linear causality from futures to cash prices under an octavariate vector error correction model (Octa-VECM) which consists of the futures and all of the seven cash series that are cointegrated. With linear relationships among prices removed using the Bi-VAR-Diff or Octa-VECM filtering, nonlinear causality is tested through a bivariate vector autoregressive model in levels (Bi-VAR-Lev) on residuals associated with the futures and a cash series from the linear models, and is found to be unidirectional from the futures market to Illinois, Indiana, and Ohio in general. Finally, a GARCH-BEKK specification is added to a Bi-VAR-Diff or the Octa-VECM to obtain residuals for the nonlinear causality test using a Bi-VAR-Lev, and the futures market leadership against Illinois, Indiana, and Ohio is still identified.