Protected Designation of Origin Revisited

Abstract

This paper explores the impacts of Protected Designation of Origin (PDO) certification on the costs and profits of firms as well as consumers’ and total welfare. The paper argues that PDO labels are different from other common labeling schemes, as they involve technological and capacity constraints that influence their economic efficiency. Using a theoretical model of endogenous quality choice, which incorporates vertical differentiation with the costs constraints linked to the PDO label, we explore the way producers can signal their quality either by certifying their product through PDO or by investing in a collective private common label. Results show that even if PDOs are efficient from a producer perspective, a society might be better off with less stringent techniques of quality signaling, relying on private collective certification.