The Welfare Implications of Minimum Quality Standards

Previous analysis of the social welfare implications of minimum quality standards has yielded no decisive results. In this paper the specific nature of consumer and producer responses to quality standards is incorporated into the analysis. Both consumer and producer gains are shown to be impossible when consumers can perceive quality before purchase, even if low quality produce is diverted to secondary markets. Standards unambiguously reduce net social benefits. The paper explores the possibility that minimum quality standards are a form of rent‐seeking behavior.