Lecture 23 - FOOD LABELING -An Economic Justification Can...

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FOOD LABELING --------- An Economic Justification Can distinguish between GM and non- GM product as a form of Price Discrimination . Price Discrimination: charging different prices for very similar products
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Simple (3rd degree) Price Discrimination Based on different elasticities of demand among groups of consumers Charge a higher price in the market with less elastic demand (absolute value)
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Inefficient if the discrimination is based on in incomplete  Inefficient if the discrimination is based on in incomplete  information---- information---- For example, imagine only one firm sold frozen beans in  For example, imagine only one firm sold frozen beans in  three forms, branded, store label, and generic.  Particular  three forms, branded, store label, and generic.  Particular  cooks want only the best, and are willing to pay more for it,  cooks want only the best, and are willing to pay more for it,  so they purchase only the top end branded product (‘Green  so they purchase only the top end branded product (‘Green  Giant’).  However, unbeknownst to them, the firm sells the  Giant’).  However, unbeknownst to them, the firm sells the  identical beans to a supermarket as a lower priced store  identical beans to a supermarket as a lower priced store  brand (‘Top Crest’).   brand (‘Top Crest’).   The generic product consists of older, tougher beans that 
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Lecture 23 - FOOD LABELING -An Economic Justification Can...

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