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Sustainability 2017, 9(4), 545; doi:10.3390/su9040545

Organic vs. Non-Organic Food Products: Credence and Price Competition

1
,
2,3,* and 3,4
1
School of Management, Hangzhou Dianzi University, Hangzhou 310018, China
2
College of Economics and Management, Nanjing Agricultural University, Nanjing 210095, China
3
Laboratoire d’informatique, biologie intégrative et systèmes complexes (IBISC), EA 4526, Université d’Evry Val d’Essonne, 91020 Evry Cedex, France
4
Management Engineering Research Center, Xinhua University, Chengdu 610039, China
*
Author to whom correspondence should be addressed.
Academic Editors: Riccardo Accorsi and Riccardo Manzini
Received: 10 February 2017 / Revised: 25 March 2017 / Accepted: 28 March 2017 / Published: 4 April 2017
(This article belongs to the Special Issue Sustainability in Food Supply Chain and Food Industry)
View Full-Text   |   Download PDF [388 KB, uploaded 6 April 2017]   |  

Abstract

We analyze the organic and non-organic production choices of two firms by considering customers’ trust in organic food products. In the context of customers’ possible willingness to pay a premium price and their mistrust in organic food products, two firms first make choices on offering organic and non-organic food products. If offering organic products, a firm can further invest in the credence system to increase customers’ trust in their organic products. At the final stage, two firms determine prices. We provide serval insights. First, we characterize the market conditions in which only one firm, both firms or neither firm will choose to offer organic food products. We find that the higher the production costs or credence investment costs for organic food products are, the more likely firms are to choose to produce non-organic food products. Second, if it is expensive enough to invest in organic credence, offering organic food products may still be uncompetitive, even if organic production cost appears to have no disadvantage compared to non-organic food products. Third, we highlight how the prices of organic food products in equilibrium are affected by market parameters. We show that when only one firm offers organic food products, this firm tends to offer a relatively low price if organic credence investment is expensive. Fourth, we highlight how one firm’s credence investment decision in equilibrium can be affected by the product type choice of the other firm. We find that the investment in organic credence is lower when both firms offer organic food products compared with the case when only one firm offers organic food products. View Full-Text
Keywords: organic food products; sustainability; credence; competition organic food products; sustainability; credence; competition
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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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Wang, Y.; Zhu, Z.; Chu, F. Organic vs. Non-Organic Food Products: Credence and Price Competition. Sustainability 2017, 9, 545.

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