The welfare effects of the public provision of information: labelling typical products in the European Union

We consider the welfare impact of the EU regulation allowing producers of agricultural commodities with specific characteristics to differentiate their products. With a model of vertical differentiation we calculate the effects on equilibrium and welfare levels. The introduction of the regulation and the emergence of two distinct differentiated but competitive markets leaves consumers and high-quality producers better-off, while low-quality producers are worse-off. With high costs and low quality difference, the total welfare impact of the regulation can be negative. When high-quality producers can exercise market power, the regulation could be more easily accepted by producers.