Guaranteed Tender Beef: Opportunities and Challenges for a Differentiated Agricultural Product
September 2004 [04-WP 371]
Participants in the beef supply chain have, at best, imperfect information about some quality attributes of the product (e.g., live animals, carcasses, or cuts) they are buying, handling, and/or processing and selling to their downstream customers. In many cases, the quality of the final product, destination, and/or appropriate handling or processing of the input is contingent on these unobservable quality attributes. Assessing the quality of an input is particularly important for firms that want to move into niche markets by differentiating their products with some attribute that consumers can only assess imperfectly prior to consumption (e.g., beef tenderness or breed). The success or failure of these ventures is often dependent on whether the selling firm is seen as dependable and trustworthy by its customers. This paper provides a summary and analysis of the literature on beef tenderness assessment and its use for classifying beef according to quality in order to cash in on the premiums consumers are willing to pay for guaranteed tender beef. Opportunities afforded by product quality differentiation are explored, and insights on the challenges of designing a classification system are provided. These challenges have led to the proposal of different thresholds by different authors. However, before any economically meaningful optimal threshold is proposed, two questions need to be clearly answered: What is the objective pursued by the system? and What are the relative consequences of rejecting a product that would have been considered tender by consumers versus certifying a product that will be considered noncompliant.
Keywords: beef tenderness, guaranteed tender beef, imperfect testing, niche marketing, product differentiation, quality uncertainty, value-added agriculture.
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