Markets Segmented by Regional-Origin Labelling with Quality Control

Abstract

Abstract It is the objective of this paper to provide a methodological framework for the analysis of regional-marketing programs which include regional-origin labelling as well as quality assurance and control. Such programs are increasingly introduced in Europe and other parts of the world as a means against quality uncertainty in globalized markets. An equilibrium–displacement model is developed for a segmented market with differential qualities that can be utilized for a broad variety of marketing programs. It is applied to one selected European case, i.e. "Gepruefte Qualitaet – Bayern". It is shown that the price impacts on high-quality and low-quality segments depend crucially on substitutive relationships between the markets and the advertising elasticities. Welfare implications for producers in a program depend strongly on advertising elasticities, too, but also on the costs of participation including quality control and on the co-financing mechanism between government and producers.