Grades or labels? Beef prices and quality

Abstract

Purpose The difference between quality grades and quality labels is that the latter are awarded on the basis of production processes, whilst the former are conferred on the strength of the actual production results. In the course of a de-ideologisation of society, it might be assumed that the price differences between quality grades would grow larger and larger, while those between quality labels would tend to shrink. The purpose of this paper is to develop and test this hypothesis. Design/methodology/approach Regressions for the calf market on the one hand and for 4,180 cattle-market data sets on the other are run with Stata. Findings The results largely confirm the rising importance of grades between 2000 and 2014. In the period under consideration, a price spread occurs between the individual grades of the Swiss grading system, whilst the surcharge for organic products shrinks. No price discrimination is identified a priori for conventional labels. Practical implications The focus of both chain management and policy makers should be put on effective grading systems rather than on labelling production methods. Originality/value This is the first econometrical comparison of the price effect of both grades and labels.