Delegation of quality control in value chains
This paper studies the decision of a firm that sells an experience good to delegate quality control to an independent monitor. In an infinitely repeated game consumers’ trust provides incentives to (1) acquire information about whether the good is defective and (2) withhold the good from sale if it...
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| Formato: | Artículo preliminar |
| Lenguaje: | Inglés |
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International Food Policy Research Institute
2016
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| Acceso en línea: | https://hdl.handle.net/10568/147431 |
| _version_ | 1855522024252768256 |
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| author | Saak, Alexander E. |
| author_browse | Saak, Alexander E. |
| author_facet | Saak, Alexander E. |
| author_sort | Saak, Alexander E. |
| collection | Repository of Agricultural Research Outputs (CGSpace) |
| description | This paper studies the decision of a firm that sells an experience good to delegate quality control to an independent monitor. In an infinitely repeated game consumers’ trust provides incentives to (1) acquire information about whether the good is defective and (2) withhold the good from sale if it is defective. If third-party reports are observable to consumers, delegation of monitoring lessens the first and dispenses with the second moral hazard concern but also creates agency costs due to either limited liability or lack of commitment. In equilibrium the firm controls quality without an independent monitor only if trades are sufficiently frequent and consumer information about quality is sufficiently precise. This result holds under different assumptions about feasible contracts, collusion, verifiability of reports, joint inspections, and the number of firms that hire the third-party monitor. If third-party reports are not publicly observed, delegation can be optimal only if two or more firms hire the third-party monitor because then both moral hazard concerns are present under delegation. |
| format | Artículo preliminar |
| id | CGSpace147431 |
| institution | CGIAR Consortium |
| language | Inglés |
| publishDate | 2016 |
| publishDateRange | 2016 |
| publishDateSort | 2016 |
| publisher | International Food Policy Research Institute |
| publisherStr | International Food Policy Research Institute |
| record_format | dspace |
| spelling | CGSpace1474312025-11-06T05:53:49Z Delegation of quality control in value chains Saak, Alexander E. trust value chains quality control moral hazard monitoring food safety monitoring techniques This paper studies the decision of a firm that sells an experience good to delegate quality control to an independent monitor. In an infinitely repeated game consumers’ trust provides incentives to (1) acquire information about whether the good is defective and (2) withhold the good from sale if it is defective. If third-party reports are observable to consumers, delegation of monitoring lessens the first and dispenses with the second moral hazard concern but also creates agency costs due to either limited liability or lack of commitment. In equilibrium the firm controls quality without an independent monitor only if trades are sufficiently frequent and consumer information about quality is sufficiently precise. This result holds under different assumptions about feasible contracts, collusion, verifiability of reports, joint inspections, and the number of firms that hire the third-party monitor. If third-party reports are not publicly observed, delegation can be optimal only if two or more firms hire the third-party monitor because then both moral hazard concerns are present under delegation. 2016-04-21 2024-06-21T09:22:51Z 2024-06-21T09:22:51Z Working Paper https://hdl.handle.net/10568/147431 en https://hdl.handle.net/10568/160217 https://hdl.handle.net/10568/150214 https://hdl.handle.net/10568/154015 https://hdl.handle.net/10568/33955 Open Access application/pdf International Food Policy Research Institute Saak, Alexander E. 2016. Delegation of quality control in value chains. IFPRI Discussion Paper 1526. Washington, DC: International Food Policy Research Institute (IFPRI). https://hdl.handle.net/10568/147431 |
| spellingShingle | trust value chains quality control moral hazard monitoring food safety monitoring techniques Saak, Alexander E. Delegation of quality control in value chains |
| title | Delegation of quality control in value chains |
| title_full | Delegation of quality control in value chains |
| title_fullStr | Delegation of quality control in value chains |
| title_full_unstemmed | Delegation of quality control in value chains |
| title_short | Delegation of quality control in value chains |
| title_sort | delegation of quality control in value chains |
| topic | trust value chains quality control moral hazard monitoring food safety monitoring techniques |
| url | https://hdl.handle.net/10568/147431 |
| work_keys_str_mv | AT saakalexandere delegationofqualitycontrolinvaluechains |