Informal input suppliers, quality choice and welfare

This paper proposes a theoretical model in which a formal upstream firm competes against informal input suppliers, which constitute an alternative, albeit lower-quality input source for formal downstream firms. The existence of an alternative source increases competition in the industry, which tends to be welfare-increasing. However, it may also distort the incentives of the formal upstream firm to invest in quality upgrading. Assuming quantity competition downstream, we analyze how these incentives change and whether the negative welfare effect of a reduced investment by the upstream firm may more than offset the positive welfare effect of increased competition brought about by informal input suppliers. We find that there are parameter values such that this is the case, and welfare decreases if informal input suppliers are present. We analyze the robustness of this result to alternative modeling assumptions, such as price competition downstream and the use of two-part tariffs by the formal upstream firm.

Future Food Sustainability Can Be Traced Back into Local People’s Socio-Cultural Roots in Uttarakhand Himalaya, India

Sustainable food system ensures adequate and safe food supply in an eco-friendly manner. We assessed food sustainability perception and practices of local community through structured interviews in sub-alpine settlements of Uttarakhand Himalaya. Major perceived challenges towards food sustainability were identified using Rank-Based Quotient analysis. Association with various socio-demographic factors (e.g., age, gender, education, socio-economy, and socio-culture) was tested. An overall neutral perception (mean score 2.9) and moderately sustainable practices (mean score 3.1) were observed. Respondents with higher socio-cultural score showed more sustainable food sourcing practices and more positive social and economic sustainability perception, as well as higher participatory willingness. Female respondents were more dependent on sustainable food sources than the males. Education level influenced food quality choice. People identified higher food production cost as major economic constraint; while small landholdings and labor migration were main social challenges. Land and water management issues and climate uncertainty were the major environmental constraints. Socio-cultural exposure played significant role in ranking these sustainability constraints. We encourage direct involvement of socio-culturally active people and conducting extensive outreach programs for future sustainable local food system in vulnerable Himalayan valleys.

Too Much of a Good Thing: Quality-Differentiated Demand and Monopoly Bias

Previous teaching notes focused on the logic and mechanics of a quality-differentiated linear demand structure. This note takes up the question of potential bias in how markets respond to quality-related aspects of consumer choice. Earlier examples demonstrated instances where monopoly interests might conflict with those of consumers in matters of quality choice. This article points to a more general propensity toward excessively high levels of quality under a monopoly market structure. JEL Classifications: D4, D41, D42