Determinants of retailers' decisions to use public or private grades and standards: Evidence from the fresh produce market of São Paulo, Brazil

This paper models retailers' choices between public and private grades and standards (G&S) and their means of administering them. It focuses on the firm-specific factors influencing the decision. Increasing use of private G&S worldwide, particularly by large, powerful retail chains has implications for competition, participation, and the effectiveness and efficiency of public policy regarding G&S. Drawing from a study of fresh produce markets in São Paulo, Brazil, the paper shows that the importance of the product in the firm's activities or sales, market power, scale of operations, and investment in brand capital and reputation are key firm-specific factors encouraging the use of private G&S regimes over public. Important contextual determinants are the strategic objective of the standard, the institutional environment, and the characteristics of the product and market. A range of formal and informal, private and public methods for administering G&S was found. The paper discusses policy implications of the results, focusing on issues of substitutability and complementarity between public and private G&S regimes.