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Economics Research Institute Study Paper




Utah State University Department of Economics

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The structure and organization of industries evolves over time in response to changes in the price and availability of inputs, changes in the demand for outputs and output attributes, and changes in technology. The growing demand for traceability and assurance is a change in the demand for credence attributes. Firms that are able to organize to provide traceability and assurance at low cost will, ceteris paribus, have an advantage. In recent years, many segments of the food and agribusiness industry have become more concentrated through horizontal or vertical integration within firms or within associations of firms (cooperatives). This paper explores changes to the relative competitiveness of vertically integrated firms and horizontally and vertically aligned cooperative associations in response to demand for traceability and assurance with respect to food safety, product quality, and credence attributes. The Chilean salmon aquaculture industry is used as a contextual example.