A simple model of voluntary vs mandatory labeling of GMOs

We consider the welfare impact of the mandatory and voluntary labeling policies to inform consumers on GMOs content in foods. With a model of vertical di¤erentiation in competitive markets, we evaluate the e¤ects on price equilibrium and welfare levels. The model provides a potential explanation of observed di¤erences in preferences across countries and a¤ected groups. We ...nd that the mandatory labeling scheme would be optimal in those countries with more GMO-averse consumers and GMO-free produc- ers. Voluntary labeling would instead optimally be chosen in those countries where producers are using GMOs and consumers are more concerned about the cost savings resulting in this technology adoption. We derive the socially-optimal scheme and show how it depends on the parameters of the problem, notably consumer preferences and costs of the di¤erent schemes.