Certification Mechanisms for Credence Attributes of Foods: Does it Matter Who Provides Diagnosis?

Abstract

Credence goods markets are subject to failure because consumers are unable to punish fraudulent experts who diagnose and supply treatment, and they lack the technical expertise with which to verify the quality of treatment actually offered. The focus of research in agricultural economics has been almost entirely on how labeling and certification of food products that contain credence attributes resolve the lemons problem. This ignores the crucial role that firms, nongovernmental organizations, or government regulatory agencies, acting either independently or jointly as experts, play in the process of diagnosis and treatment in credence goods markets. This is important if experts fail to act in good faith through their diagnosis and treatment.