The impact of animal welfare regulations on firms' product offerings: Humane or organic product?
研究了动物福利法规如何影响农业企业的产品选择、定价和利润，发现消费者意识提高促使企业提供有机产品，而补贴可引导企业转向更优产品以提升社会福利。
Abstract Increased public concerns about animal welfare have spurred new regulations to improve animals' treatment and living conditions. We study how these regulations affect firms' product offerings, prices, and profits. We consider two competing animal agriculture supply chains, each consisting of a supplier and a buyer. New regulations require firms to choose between offering humane or organic products, which are differentiated by animals' living conditions. We find that consumers' growing awareness of animal welfare encourages firms to offer organic products, which require the highest standards for animals' living conditions. We also show that tightening humane product standards and loosening organic product standards encourage firms to offer organic products—but with distinct pricing implications. The former leads to higher retail prices whereas the latter may lower retail prices. Depending on costs and consumers' awareness of animal welfare, a humane product may be priced higher or lower than an organic product. Furthermore, we provide conditions under which a regulator should offer a unit‐cost or an investment cost subsidy to improve social welfare. We show that subsidies can encourage firms to change from offering humane to organic products, or vice versa, to enhance total social welfare.