Date of this Version
Cornhusker Economics, October 21, 2020
Private politics, usually led by nongovernmental organizations (NGOs) and social activists, focuses on changing the behavior of private economic agents through social pressure rather than through government action (although government action is also possible) (Baron, 2003). The food sector has been experiencing increased social pressure from social activist organizations to achieve diverse goals, ranging from improving food safety and food fortification to increasing transparency in food markets. A primary reason for the increase in organized activism in the food sector is the proliferation of the provision of credence attributes which are attributes unobservable through search or experience (consumption and use). The majority of these credence attributes are related to a product’s production process (e.g., raised without antibiotics, GMO free, gluten free, fair trade) and their provision is not mandated by the government but instead firms choose to ‘self-regulate’ and voluntarily provide them to appeal to consumers who value them. The voluntary provision and the lack of well-defined standards for many of these attributes (e.g., claims that the product is 100% natural, ethically produced or produced in a socially responsible manner) create an opportunity for the emergence of fraudulent behavior which often takes the form of firms making false or misleading claims about its product’s quality.