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Grade Labeling And The Demand Curve: Theoretical Implications And Empirical Evidence

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Grade Labeling And The Demand Curve: Theoretical Implications And Empirical Evidence

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Content This dissertation has been 64—2596
microfilmed exactly as received
PARKHURST, Kenneth JLangroise, 1925-
GRADE LABELING AND THE DEMAND CURVE:
THEORETICAL IMPLICATIONS AND EMPIRICAL
EVIDENCE.
University of Southern California, Ph.D., 1963
Economics, general
University Microfilms, Inc., Ann Arbor, Michigan
Copyright by
KEBNETH LANGROISE PARKHURST
1964
GRADE LABELING AND THE DEMAND CURVE: THEORETICAL
IMPLICATIONS AND EMPIRICAL EVIDENCE
by
Kenneth Langroise Parkhurst
A Dissertation Presented to the
FACULTY OF THE GRADUATE SCHOOL
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
DOCTOR OF PHILOSOPHY
(Economics)
June 1963
UNIVERSITY O F S O U TH ER N CALIFORNIA
GRADUATE SC H O O L
U N IV ER SITY PARK
LOS A N G ELES 7 , C A LIFO R N IA
This dissertation, written by
.....Kenneth Langroiae Pavkhnrat.......
under the direction of h Dissertation Com
mittee, and approved by all its members, has
been presented to and accepted by the Graduate
School, in partial fulfillment of requirements
for the degree of
D O C T O R OF P H I L O S O P H Y
Dean
D ate..
DISSERTATION COMMITTEE
'kairman
TABLE OF CONTENTS
CHAPTER PAGE
I. INTRODUCTION.................... 1
The Problem............. 2
Importance of the Problem ......... 4
Reason for the Study......... 5
Survey of the Literature ........... 6
Definitions of Terms ............... 8
Methodology Employed . . . ......... 15
Outline of the Dissertation .... 21
II. HISTORY OF LABELING........... 23
Early History of L a b e l s.... 24
Antiquity.................. 26
Middle A g e s ................ 27
Labels in the Middle Ages . . . 28
Definition of trade marks . . . 30
Uses of the mark in the Middle
Ages.................... 30
Foreign merchant marks ......... 33
The swan m a r k ........... 33
Business Practices during the
Middle A g e s ............. 34
Middle Age manufacturing .... 35
Grant of monopoly ‘....... 35
Monopoly in practice ........... 36
iii
CHAPTER PAGE
Good w i l l ...................... 36
Advertising.................... 37
Summary: Middle Ages............. 38
Recent History of Trade Marks and
Grade Labeling.................... 39
Trade M a r k s ...................... 39
Trade mark l a w s ............... 40
Consumer acceptance ........... 40
Grading versus brands ......... 41
Administrative problems .... 42
Sponsor........................ 42
Brands as a g u i d e ............. 43
Recent Grade Labeling Background . 43
Standards for grading ......... 44
Coverage for standards ......... 44
Canners' g r a d e s ................ 45
Consumer interest ............. 45
Tugwell bill.................... 46
Continued interest despite
obstacles.................... 46
Department of Agriculture
program...................... 47
OPA controversy................ 4JB
Conclusion........................ 48
CHAPTER PAGE
III. THE BACKGROUND OF THE RECENT STRUGGLE
FOR GRADING PROGRAMS............... 50
The Background: Federal Food and
Drug Acts . 51
The Need for Supplemental
Legislation.................... 53
• >
Congressional Action ............. 53
Tugwell Bill.................... 54
Congressional hearings ......... 54
Congressional rejection of grade
labeling requirement ..... 55
More recent legislative action . 55
The Background: Wartime Grade
Labeling Controversy ............. 57
The Problem before Congress . . . 57
Inflation...................... 58
OPA n e e d s ...................... 58
The Testimony before Congress . . 59
Objections to Grade Labeling . . . 60
First objection . ........... 60
Second objection............... 61
Third objection............... 62
Evaluation of Objections......... 63
First objection criticized . . . 64
V
CHAPTER PAGE
Second objection criticized . . 64
Third objection criticized . . . 64
The Case for Grade Labeling . . . 65
Dollars-and-cents regulation . . 66
Dollars-and-cents pricing . . . 69
The OPA' s view.................. 72
Why Grade Labeling Was Not Adopted 74
Grade labeling movement .... 75
Forces favoring mandatory
labeling............... 79
Public response to grading . . . 80
IV. BACKGROUND: NONPRICE COMPETITION . . . 82
Nonprice Competition . . . ......... 82
The Degree of Competition through
Quality Differences ........... 84
Slight product differentiation . 84
Oligopolistic practice ......... 84
Product Differentiation ......... . 85
Professor Abbott's Thesis .... 87
Abbott's assumptions ........... 89
Implications of Abbott1s Thesis . 91
Implications for Grade Labeling . 92
Temporary National Economic
Committee Report .................. 93
vi
CHAPTER PAGE
Summary............................. 97
V. THEORY BEHIND GRADE LABELING AND
COMPETITION........................ 99
The Demand Curve and Product
Differentiation .................. 101
Universal Grade Labeling and
Competition Under Controlled
Conditions........................ 106
Monopolistic Competition ........... 115
Three Kinds of Product
Differentiation ............... 116
VI. EMPIRICAL EVIDENCE .................... 119
Survey Results of El Paso and
Silver C i t y ...................... 120
Research Steps .................... 120
The problem.................... 120
The objectives ........... 121
Representative locations .... 121
Preparation of forms ........... 122
Sampling method ................ 124
Form processing................ 125
Evaluations.................... 126
The El Paso Survey.................. 126
Quality-Price Relationships . . . 127
CHAPTER
VII.
VIII.
vii
PAGE
Grade Recognition ............... 129
Brand Loyalty ................... 130
Premiums for Higher Quality . . . 130
The Silver City Survey ............. 132
Comparison of Questionnaire Data . 133
Graded products results .... 133
Branded goods results ........ 135
Conclusion .......................... 136
SURVEY RESULTS IN OTHER SECTIONS . . . 142
Studies in Specific Areas ........ 144
St. Louis Study ................. 145
Indiana Study ................... 147
Columbus, Ohio, Study ........... 149
Studies with Supplemental
Information............... 150
Support for Changes ............. 150
New York study ................. 150
Grading compliance ............. 152
Swedish system ................. 153
Need for consumer education . . 154
CONSUMER SURVEY DATA CONCLUSIONS . . . 156
Survey Limitations ........ .... 156
Problem of Wording Questions . . • 157
The Inquiry Narrowed ............. 158
viii
CHAPTER PAGE
Price Consciousness ....... 159
Check on Current Literature . . . 161
Student Participation ........... 161
Over-All Survey Results ........... 163
Quality and P r i c e ............... 163
Quality identification ......... 163
Local survey results........... 164
Problem of quality recognition . 165
The Problem of Grades and Brands . . 166
Summary and Conclusion............. 167
Summary.......................... 167
Conclusion........................ 168
IX. CANADIAN GRADING PROGRAMS........... 170
Grade Labeling in Canada........... 170
Grade Labeling Development .... 171
Fruits and vegetables ......... 171
Eggs............................ 172
Poultry and meat............... 172
Other products................. 173
Administration of Regulations . . 173
Procedure...................... 173
Grading cost............... 174
Commodities That Can Be Graded . . . 175
j
CHAPTER
ix
PAGE
Reasons for Divergent Canadian and
American Policies ............... 176
The Effects of Grade Labeling . . . 177
The Effects of Grade Labeling on
Brands, Quality, and the Demand
C u r v e ........................ .. 178
Effects on b r a n d s ......... 178
Effects on quality......... 179
Effects on the demand curve . . 180
Evaluation...................... 181
X. QUALITY IN THE SWEDISH CONSUMER MARKET 182
Background: Swedish Consumer
Organizations .................... 183
The Consumer Council ............. 184
Institute for Consumer Information 186
State Council and State Institute
for Building Research..... 188
Price and Cartel O f f i c e ..... 188
Institute for Informative
Labeling: V D N .............. 189
Labeling is not compulsory . . . 191
Other Institutions........... 192
State Institute for Public
Health..................... 192
X
CHAPTER PAGE
Swedish Institute for Food
Preservation Research .... 192
Swedish Institute for Textile
. . Research.................. 192
Research Institute of the
Swedish Shoe Industry .... 193
State Materials Testing
Institute............... 193
The Swedish Society for
Industrial Design ........... 193
Economic Research Institute . . 193
Labeling and Quality Marking of
Merchandise............... 194
Labeling of Contents......... 195
Informative Labeling ............. 196
Grade Labeling............... 197
Organization for Labeling .... 199
Effects of Informative and Grade
Labeling...................... 203
The Effects of the Programs on
the Demand Curve........... 204
Summary and Conclusion ............. 206
Summary...................... 207
Conclusion.................... 208
xi
CHAPTER PAGE
XI. SUMMARY AND CONCLUSIONS............. 210
Summary............................. 210
History and Background of Labeling 211
History........................ 211
Background...................... 212
Theory of Demand Behind Nonprice
Competition, Product
Differentiation, and Grading . . 213
Nonprice character of markets . 213
Objective versus subjective . . 213
Effects of product differentia
tion on the demand curve . . . 214
Current Survey Findings ......... 214
Primary sources ................ 214
Secondary sources ............. 215
Methodological steps used . . . 215
The Experiences of Canada and
Sweden in Labeling Programs . . 217
Canadian experience ........... 217
Swedish experience ............. 219
Conclusions........................ 221
Primary and Secondary Source Data 222
Conclusion of primary and
secondary source data .... 223
CHAPTER PAGE
Canadian Experience...........* . 223
Effect of the Canadian system
on b r a n d s ................ 224
Effect of the Canadian system
on quality............... .. . 224
Effect of the Canadian system
on p r i c e s ................ 225
Conclusion of the Canadian
system.................... 226
Swedish Multiple Grading System . 226
Multiple grading and the demand
c u r v e .................... 227
General Conclusion .................. 228
BIBLIOGRAPHY ...................................... 230
CHAPTER I
INTRODUCTION
The subject of protecting the consumer is one
which probably never will be exhausted. The develop
ment of quality standards has been taking place in
almost every line of endeavor since commerce and trade
began. For many years the phrase caveat emptor« or
let the buyer beware, was the standard under which
most commerce was carried an. All types of fraud,
deception, lying, and cheating were considered by many
as smart business. An accompanying principle was
let the public be damned in public relations of the
businessman to his customer.'1 '
As civilization advanced, however, certain of
these principles began to lose their former adherents
and there grew up in the Mguild world" a pride of
workmanship, denoted in most instances, by the attach
ing of the name of the craftsman to his product.
Whether or not this "pride of workmanship" is suffi
ciently strong today to compensate for the increasing
United States Congress, House of Representa
tives, Committee on Interstate and Foreign Commerce,
Brand Names and Newsprint, Hearings before Subcommittee
Pursuant to House Resolution 98, 78th Congress, 1st
Session, Volumes I and II, May 10-June 30, 1943
(Washington: Government Printing Office, 1943), p. 38.
remoteness of the consumers from the producers is a
question which has a bearing upon the problem of brand
names or their possible substitute, grade labeling.
I. THE PROBLEM
The problem dealt with in this paper may be
illustrated by the following question: the broader
question of how the public can best be protected and
guided in the purchase of consumer goods under "modern
competitive" conditions, which is a by-product ques
tion associated with and related to the "age-old"
controversy between the market-controlled economy and
the governmental-controlled economy. This disserta
tion actually deals with the narrower question: will
a more extensive use of grade labeling bring about a
greater degree of competition in our economic system?
In what manner the consumer can be better
protected or guided is not a new question in the
history of economic doctrines. In referring to Adam
Smith's laws of the market, for example, Robert
Heilbroner pointed out Smith's concern for the con
sumer as follows:
Specifically they show us how the drive of
individual self-interest in an environment of
similarly motivated individuals will result in
competition; and they further demonstrate how
competition will result in the provision of those
goods that society wants, in the quantities that
society desires, and at the price society is pre
pared to pay.2
Although there was much confusion in the rela
tionship of consumption to production in the classical
economics (for example, John Stuart Mill's presents-
JJ
tion), there was little doubt that the consumer was
£ m
• 4
to benefit from competition in Adam Smith's system.
The evidence of legal protection for the
consumers by the government can be found in the court;
records written during the Middle Ages. Consumer
protection is, therefore, not a recent problem.
Extensive use of grade labeling to protect and guide
the consumer, on the other hand, is a relatively
recent technique. It is an outgrowth of a movement
to improve standards through legislation.
One of the broad purposes of this study is to
look into the quality aspects of our "competitive"
system and search for a technique that might stimulate
greater price consciousness in some types of economic
2
R. L. Heilbroner, The Worldly Philosophers
(New York: Simon and Schuster, 1953), p. 46.
3
L. H. Haney, History of Economic Thought
(New York: The MacMillan Company,"1949), p. 456.
4Ibid., p. 909.
goods. This study, however, will be focused primarily
on one aspect of quality measurement, that of grade
labeling.
There has been, to the author's knowledge, no
formal, scholarly presentation of the thesis that
grade labeling tends to flatten the demand curve.
There has been, in addition, no formal support for
the thesis that grade labels and trade marks have the
opposite effect on the demand curve.
II. IMPORTANCE OF THE PROBLEM
In a recent book Milton Friedman spelled out
the changes he thought were needed to get the United
States' economy back under the direction of Adam
5
Smith's invisible hand. The doctrines he advocated
are virtually the antitheses of the ones that have
dominated the United States' monetary and fiscal
policy for the last three decades. Even though a
complete change to laissez faire may not be advisable,
a movement toward a larger degree of competition
might be possible and feasible by developing and
expanding techniques and programs that are now in
g
M. Friedman, Capitalism and Freedom (Chicago:
University of Chicago Press, 1962).
' 5
existence.
Assuming that a movement toward increased
competition in our economy were thought to be desir
able, it would behoove economists to look into such
a movement in order to develop a procedure that would
not be placing excess burdens on our present economic
institutions or upon the economy as a whole.
If the thesis that grade labeling tends to
bring about a greater degree of competition can be
supported, and a more extensive program found to be
feasible, then the public policy implications are
many. Encouragement of grade labeling programs would,
for instance, no longer be viewed as primarily a
regulatory technique, but perhaps a useful action to
bring about a more competitive market.
III. REASON FOR THE STUDY
The study of problems related to grade label
ing has been of personal interest to the writer for
intermittent periods covering roughly a decade.
Graduate study in Sweden was directed primarily to
quality-control problems and the writing of articles
in the area of consumer economics for the Swedish
g
technical magazine Kooperatoren.
The Master's thesis in economics, written
during graduate study at the George Washington Uni
versity, dealt with the problems connected with the
grade labeling controversy that developed during the
Second World War period.
It was natural, then, that the problems of
grade labeling on a more comprehensive basis should
be the central subject of this paper. The theoretical
implications and empirical evidence behind the rela
tionship of grade labeling to the demand curve,
covered in this study, can only be the beginning of
research in this area. It is hoped that future
research will be devoted to the areas that could not,
for reasons of space and limitation of available
empirical data, be included in this dissertation.
IV. SURVEY OF THE LITERATURE
Most of the source material dealing with the
subject of grade labeling was published prior to
g
K. L. Parkhurst, "Producenter och Konsum-
entskydd i USA," Kooperatoren. V (March 15, 1953),
88-90; K. L. Parkhurst, "Konsumentorganisationer for
Varuupplysning i USA," Kooperatoren. XII (June 30,
1953), 229-232.
World War II or during the war period. Recent United
States literature on this subject is scarce. Perhaps
the greatest single source available on the problems
of grade labeling was scattered throughout the lengthy
testimony in the hearings before the Subcommittee on
Interstate and Foreign Commerce of the House of
Representatives, 78th Congress. But even here the
material was unorganized and conflicting. All the
material pertaining to the Swedish quality-control
program needed to be translated, and most of the
material on Canada's grading system was scattered in
numerous pamphlets. There is a need for a recently
organized presentation of material on the subject of
grade labeling.
As already has been stated, there has been no
formal, scholarly presentation of the thesis that
grade labeling tends to flatten the demand curve with
its possible implication for public policy. Brand
names, on the other hand, have had some treatment in
recent literature, especially those dealing with the
problems of product differentiation and monopolistic
competition. Although some scholars may have assumed
that brand names and trade marks would have an oppo
site effect on the slope of the demand curve, there
has been, to date, no formal support for such a thesis.
In the light of the lack of formal presenta- .
tion of the effects of grade labeling on the demand
curve there seems to be a definite need for a scholarly
presentation and an original contribution in the area*,
utilizing several research techniques in order to make
a substantial contribution to economic knowledge.
V. DEFINITIONS OF TERMS
At this point it might be asked what the dif
ference is between standardizing, grading, and just
plain labeling.
Standards are defined by E. Buckingham:
That which is set up as a unit of reference
as correct and perfect, and hence as a basis of
comparison; a criterion established by custom,
public opinion, or general consent; a model.7
Mr. Fox, the legal counsel for the National
Retail Dry Goods Association, defined the term before
a congressional hearing, in effect, as follows.
Standards are specifications set up for the
production of merchandise. They have to do with the
type and quality of the raw material or the semi
finished material utilized in processing the
7
E. Buckingham, "Company and National Standards
in Interchangeable Parts Manufacture," National
Standards in Modern Economy. D. Reck, editor CNew
York: Harper and Brothers, 1956), p. 90.
merchandise, then in the method of producing the
quality of material that is used, and in the handling
and treatment in order to acquire a certain type of
finished product. They are exact. They are scien
tific.8
Grading is an opinion as to what the various
standards might be expected to do. In other words,
if standards are set up and it is believed that
certain standards will give greater satisfaction
than others, whether that satisfaction has to do
with wearing quality or taste (as in the case of
food), the grading is an attempt to give some indica
tion of what performance may be expected.
Grading, according to C. F. Phillips and D. J.
Duncan, is simply "the actual sorting of a supply of
a given commodity according to the established
Q
standards."
Labeling merely is carrying to the consumer
the information which he should have with respect
United States Congress, House of Representa
tives, Committee on Interstate and Foreign Commerce,
op. cit., p. 310.
Q
C, F. Phillips and D. J. Duncan, Marketing.
Principles and Methods (Homewood, Illinois:
Richard D. Irwin, Incorporated, 1960), p. 27.
10
to the product he is purchasing, together with
instructions with respect to the care of that mer
chandise which might be helpful in prolonging its
life or usefulness.
The three are theoretically entirely separate
propositions, although in practice they may complement
each other. But what is simplification?
Simplification, according to G. B. Hotchkiss,
Professor of Marketing, is the "process of eliminating
an excessive variety of sizes, shapes, colors, designs,
and so forth, in a line of products."10 Simplifica
tion is similar but not the same as standardization—
it cuts down the variety of products to be standar
dized.
Branded or trade marked merchandise was defined
by the President of the National Association of Hosiery
Manufacturers as merchandise distributed directly or
indirectly to retail outlets under the registered
trade mark of the manufacturer.11 However, this
Ibid., p. 201; G. S. McMillan, Secretary,
Association of National Advertisers, citing G, B.
Hotchkiss, Movement for Standardization and Grading
of Consumer Goods (New York: Association of National
Advertisers, 1941).
11Ibid., pp. 155, 217, passim.
11
definition may be broadened to include the private
trade mark of wholesalers apgL large retail chain
stores.
Kenneth Dameron, a marketing expert, in his
article on labeling terminolody, clearly defined the
following terms:
Grade-labeling is the practice of marketing
merchandise or the packages containing such
merchandise with a designation such as A, B, C
or First, Second, or Third, indicating that the
article so marked falls within one of a series
of quality classes defined by specifications or
standards set up by government iagencies, trade
groups and/or consumer organizations and usually
accepted by the interested parties with reference
to the various properties and characteristics
which have been agreed upon as elements essential
to a proper appraisal of its desirability.
Informative labeling is the practice of
imprinting upon an article, the container in
which it is sold, or on tags attached to the
article, information about the characteristics
of the article that affect its quality, its
attractiveness to consumers, or its usefulness
to them. This information may be in the form
of descriptions of the article or of certain
features of it, or directions for its care and
use. It may even, occasionally, be presented
in pictures, or in the form of samples of the
package. Branding or trade-marking is not
Usually regarded as a form of informative label.
Descriptive labeling is the practice of
attaching to or imprinting upon an article, or
upon packages containing units of it, written
material and/or illustrations indicating the
presence and extent of some or all of those
properties and characteristics of the article
which are or purport to be commonly regarded
as measures or evidences of its quality and
I
i
i
12
usefulness to the consumer. Quite often this
label carries terms descriptive of each of the
significant characteristics of the product that
are susceptible to objective measurement.12
In all cases, except where otherwise stated,
the broad definitions enumerated above will be used.
In discussing standards it should be borne in mind
that there are in existence many standards under which
we live— standards of taste, conduct, weights and
measures, time, and coinage. In addition, there are
concrete standards in areas such as acoustics, elec
tricity, heat, and so forth. Language itself is
standardized. There are dimensional standards having
to do with size, which are widely used in industry.
There are standards of safety and standards of prac
tice, many of which occupy dominant positions in
industrial and commercial work. Many industries have
standards of practice incorporated in fair trade
practice rules set up either under the Federal Trade
Commission Act or unofficially.
The problem becomes more difficult, however,
when we get into standards of identity, standards of
quality, standards of composition, and standards of
12
Kenneth Dameron, "Labeling Terminology,"
Journal of Business. XVIII (July, 1945), 159-160,
13
performance. Standards of identity to those in the
food industry mean standards of identity, quality,
and fill specifying the basic composition of the
product, the optional ingredients Which are permis
sible, and the amount of fill of the container. There
probably are more consumer standards for agricultural
products than for any other commodity field. Yet,
standards of identity to other businessmen, or to a
13
consumer, may mean something quite different. To a
textile manufacturer it may mean thread count, the
amount of silk or rayon, and so forth.
Setting up standards for consumer products, if
honestly done, is not an easy task. In general it
involves getting the industry together; finding out
what consumers want to know, that is, what the stand
ards should cover; evolving the testing machinery;
setting up actual standards; policing, which usually
involves periodic tests; and making arrangements for
periodic revision.'*'4
How is a grade labeling system set up? Grade
labeling is based on the establishment of quality
13
United States Congress, House of Representa
tives, Committee on Interstate and Foreign Commerce,
op. cit.. p. 199.
14Ibid.. p. 200.
14
grades to be represented on the label by a single
symbol. The first step of grade labeling, under the
present voluntary government grading plan, is to
select the various characteristics of the product
r
which are considered important and then to assign to
each of these characteristics a certain point value
15
for ease of calculation.
To illustrate, we can use canned peaches.
Excellent scoring for canned peaches, we shall say,
is one hundred points, made up as follows: for uni
formity of color, twenty points; for absence of
defects, fifteen; for maturity, say forty, for
tenderness, ten; and for flavor, fifteen. All of
these add up to one hundred points.
A government grader selects samples out of the
lot for the determination of the grade. He cuts
certain cans selected at random and then scores the
can on the basis of the above-mentioned items. If
the color is not exactly right he might give it
eighteen instead of twenty points; if there are some
defects, instead of grading it fifteen he might make
it twelve or something else; and so on for maturity,
tenderness, and flavor. Finally, at the end of his
15Ibid., pp. 400-401.
15
score or tally sheet he totals the points assigned
to the can and conies up with something less than one
hundred— unless the can is absolutely perfect.
Then an arbitrary marking system is assigned
to determine the grade. Ninety to one hundred might
be marked A, seventy-five to ninety might be B, and
sixty to seventy-five might be grade C, while less
than sixty would be substandard. Then the grade so
determined would be placed on the label.
An informative or descriptive label, on the
other hand, might contain the following information:
the name of the product, the key ingredients, the net
contents, the name and address of the manufacturer or
the distributor, a statement describing the product,
and a statement on how to use it. The first four
items are required by law for processed foods, but
the last two items are within the discretion of the
labeler.1®
VI. METHODOLOGY EMPLOYED
In order to plan a research project it is
necessary to anticipate all of the steps which must
be undertaken if the project is to be completed
16Ibid.. p. 399
successfully.
It is necessary first to formulate the problem.
Empirical evidence then is gathered by means of a
consumer survey, in order that the consumers' views
toward the effectiveness of grade labeling in market
purchase may be approximated. The problem might be
stated, for this purpose, as follows: are there indi
cations that consumers react to grade labeled products
in such a way as to make them conscious of the price
variations of competing goods within a given grade or
quality level?
Once the problem has been formulated the
researcher should specify the objectives of the
research project which may be undertaken. A decision
then should be made as to what information is needed
to attain this objective, and to determine whether
such information already is available* It was found
that surveys during and prior to World War II threw
little light upon the objectives of obtaining the
attitude and thinking of the consumer public toward
grade labeling. It was necessary to find more recent
and more representative views in current literature
which could be supplemented by surveys in two areas:
a representative town, Silver City, New Mexico; and
a representative city, El Paso, Texas.
17
These two locations are representative in the
sense that they include housewives who purchase food
products in retail outlets of a representative type
usually found in locations of a similar size, i.e.,
chain supermarkets, independent supermarkets, and
grocery stores (some of which belong to a cooperative
wholesale society), and so forth. This means that
these housewives have access to a representative line
of food products and are subject to similar grading
and branding stimuli which might be found in similarly
situated locations throughout the United States.
The current literature supplied a number of
consumer surveys dealing with consumer thinking in
the area of grade labeling conducted in various cities
in the United States. The main benefit of these
surveys was to give substance to some of the findings
of the surveys conducted for this dissertation in the
Southwest, and to give geographic support to such
results. A careful check was made of the method by
which the data were obtained in each survey found in
the literature, and for internal consistency, in order
to determine whether they had been collected and
reported with care and precision.
Preparation of data collection forms is linked
to the listing of information required to achieve the
18
project objective. The listing is the starting point
in designing these forms.
Special attention must be paid to designing
the questionnaire since it will influence the data
obtained. Certain kinds of questions lend themselves
more to interviewer bias than others. The way in
which questions are worded has a great effect on the
reliability of the answers given by respondents. In
interviewing housewives, for example, the question
naire must use words which all respondents will under
stand— words which have the same meaning to all con
cerned. Also, questions should not be used that the
respondents cannot or will not answer.
The question of what terms to use, i.e., those*
which could be used in the, questionnaire of a survey
J
to communicate ideas most effectively, is only one
of the many problems that might possibly plague a
research project. Each of the research steps is a
source of error, and it is the responsibility of the
researcher to minimize these errors in such a way
that, for a given financial and time investment, he
obtains the best of possible over-all results.
Questions can be worded to give some idea of
the strength of the respondents' answers. It often
is necessary to get a quantitative expression of
19
relative importance of, for example, brand or grading;
or the magnitude of the desire for a higher quality
product over a lower one in terms of the premium the
consumer is willing to pay for the higher quality item.
In order to ask consumers questions on grading
effectively, it was recognized that the scope of
inquiry would have to be narrowed to the goods that
were universally, or almost so, labeled by grades on
the retail level. This meant that meaningful ques
tions had to be designed to inquire about food pur
chases , principally eggs and meat.
The first task in sampling is to define
carefully just what group of people should be sampled.
In this dissertation the concern was the consumer—
the person doing the food purchasing.
Another aspect of sample design has to do with
the selection of the sample. Of the various proba
bility techniques, random sampling from a telephone
directory was chosen in the following systematic
procedure: taking the two top names on the odd
numbered pages and the two bottom names from the
even numbered pages. In cases of no reply, a non
consumer, or a language barrier, every third name
was used up or down the page, even and odd numbered
pages, respectively.
20
Economic considerations were strong in the
choice of this sampling method. The fact that some
consumers would not have telephones was considered,
but it was felt that any distortion in the random
selection of consumers would be very slight since
all but a very small percentage did have telephones
and therefore most of the consumers would be included
in the telephone directory.
Another sampling problem is the size of the
sample. In the light of the problem at hand, the
budget available, and the type of questions to be
asked, one hundred samples were selected in both
Silver City and El Paso. It was a question of
weighing cost against usefulness: "A sample of 100
is as good for a universe of 100,000,000 as it is
for a universe of 10,000.
After the telephone call had been made, there
remained the difficult task of processing the com—
pleted forms in a manner which would enable the
project objectives to be attained. First the forms
were edited to make sure "that the resulting data
17
E„ C. Bursk, Text and Case in Marketing
(Englewood Cliffs, New Jersey; Prentice-Hall,
Incorporated, 1962), p. 153.
i
t
i
j
21
18
are consistent and 'logical' within each form."
Then the data were tabulated for analysis. Per
centages and averages were computed and compared.
Some correlation was shown between the results of
the Silver City and the El Paso studies, and attempts
were made to justify differences.
Conclusions were reached in line with survey
results found in the current literature. In these
conclusions it was pointed out that these two surveys
had the limitations of all such surveys in that they
assumed that what people say is what they do. It was,
at most, discovered what people think they think or do.
VII. OUTLINE OF THE DISSERTATION
The problem is: will a more extensive use of
grade labeling bring about a greater degree of com
petition in our economic system?
Inquiry into this problem required a passing
look at the history of labeling and a look at the
broader scope of more recent experience with standards,
brands, and grading in this country, covered in
Chapters II and III. A theoretical analysis of the
18H. W. Boyd and R. Westfall, Marketing
Research (Homewood, Illinois: R. D. Irwin,
Incorporated, 1956), p. 163.
22
effects of grade labeling on the demand curve in
Chapter V, supported by current literature on trade
marks and their relation to product differentiation
and monopolistic competition in Chapter IV, give
further insight into this problem. Then, since
World War II and previous period consumer surveys
threw little light upon the attitude and thinking
of the consumer public in general, more recent and
more representative views had to be obtained from
current surveys of the consumers' views toward the
effectiveness of grade labeling in their purchases
in the market, covered in Chapters VI, VII, and
VIII. And, for a more comprehensive look at
extensive systems of labeling in practice today,
exploration was needed of the organization and
procedures of those found in Canada and Sweden,
covered in Chapters IX and X. The summary and
conclusions may be found in Chapter XI.
CHAPTER II
HISTORY OF LABELING
Two main classes of marks have commonly been
used in the marketing of products, testified G. B.
Hotchkiss, Professor of Marketing at New York Uni
versity (1943), before the Subcommittee of the Com
mittee on Interstate and Foreign Commerce, United
States House of Representatives.^ One class consisted
of marks placed on the goods by the maker or sponsor
to indicate ownership or origin. The other consisted
of marks placed on the goods by the national or local
government to indicate their judgment of its quality,
value, or quantity. The former class probably is as
old as civilization and generally is known as trade
marks or brands. In nearly all ages men who took
pride in their products desired to put their signatures
or trade marks upon them. No doubt the marks were of
some value to the original purchasers, although when
trade was conducted by direct contact between maker
United States Congress, House of Representa
tives, Committee on Interstate and Foreign Commerce,
Brand Names and Newsprint. Hearings before Subcommittee
Pursuant to House Resolution 98, 78th Congress, 1st
Session, Volumes I and II, May 10-June 30, 1943
(Washington: Government Printing Office, 1943),
pp. 39 ff.
24
and consumer there was less need for them than in the
complex marketing methods of recent times.
I. EARLY HISTORY OF LABELS
The producer1s brand name, or the marks placed
on goods by the maker or sponsor to indicate ownership
or origin, began extensively with the rise of middle
men and was looked upon as a means of protecting both
the consumer and the producer from fraud. This func
tion was primarily negative during the Middle Ages.
The quantity and price of most products were regulated
by authority— either crown officials or municipalities
of guilds. There was very little incentive for anyone
to provide more than the minimum quality and quantity
which the standards prescribed. On the contrary,
there was a temptation to economize and adulterate;
sometimes the craftsmen were practically compelled to
do this in order to stay in business. This happened
when, because of the rising costs of materials, the
fixed selling price was insufficient to cover the
cost of production. There were times when almost all
the bakers of a city were found guilty of selling
short weight or adulterated bread. Since each baker
was required to put his mark on every loaf of bread,
25
2
the offenders readily could be caught and punished.
In a good many other fields, likewise, the
producer's mark was useful mainly in tracing inferior
goods to the source, and then the mark became a
3
liability rather than an asset. Nevertheless, in
spite of all the restrictions and the pressure towards
uniformity and mediocrity, it did happen that some
brand names acquired asset value. The purchasers
came to recognize them as indicating products they
could depend upon for satisfactory service. Long
before advertising became available as a means of
familiarizing the public with brands or trade marks
and of informing them of the satisfactory qualities
they might expect in the goods, certain marks had
become famous.
Where, then, shall the roots of our modern
labels and trade marks be found? The answer shall
be found in the great mass of records of the organ
izations or merchants and craftsmen themselves,
supplemented by archaeological research.
2Ibid., p. 39.
3
F. I. Schechter, The Historical Foundations
of the Law Relating to Trade-Marks (New York:
Columbia University Press, 1925), p. 6.
Antiquity
The excavations in Asia Minor and in Egypt
have revealed bricks bearing names which are supposed
to be those of the manufacturer, accompanied in many
instances by devices. Roman bricks, similarly marked,
frequently have been found. These inscriptions are
of various kinds. In the days of republican brevity
the date alone usually appears; sometimes the initials
4
of the consul or the name of the maker.
During the period of the empire more elaborate
inscriptions occurred: the names of the owners of the
estates where the kilns were located, those of the
owners or lessees of the factories, and those of the
freemen or slaves in charge of the work. In many
cases the inscription was accompanied by a picture or
a figure. It has been assumed that, in addition to
performing the function of a trade mark, these names
and devices indicated a governmental or official
regulation.5
Marks upon goods were in very general use
among the Romans. Wherever relics of Roman life
4
E. S. Rogers, Good Will Trade-Marks and Unfair
Trading (Chicago: A. W. Shaw Company, 1914), p. 34.
5Ibid.. pp. 34-35.
27
exist, from Syria to Britain, the names of workmen,
manufacturers, and traders; pictorial marks; marks
of local origin; and chronograms may be found. It
is not an exaggeration to say that trade marks played
almost the same part in ancient Roman commercial life
g
as they do today.
The Greeks marked their works of art with the
name of the sculptor. Greek pottery from the earlier
times has borne inscriptions, usually the name of the
maker, and on decorated pieces the name of the deco-
7
rator usually appeared.
Middle Ages
Market regulations were based primarily on
custom. The position of the church in medieval
English society was such that her doctrines were a
strong influence on the cultural development. There
fore, trade was conceived to he subordinate to the
higher ends of human development. "Justice was the
central concept and its attainment was the guiding
objective which was supposed to prevail in each
Q
market transaction."
6Ibid., p. 35. 7Ibid.
8
E. E. Gallahue, Some Factors in the Develop
ment of Market Standards (Washington: The Catholic
University of America Press, 1942), p. 13. |
j
The just price occupied much of the official
thought of the time. Price regulation was the func
tion of the town authorities. In carrying out their
functions they were influenced by the prevailing
customs and thoughts of the time which, in turn,
were influenced by the church.
Market regulations with roots in such a back
ground had a direct influence upon the mode in which
trade was conducted. The peasant, the craftsman,
and the merchant were supposed to offer for sale
only those products which met a customary standard.
Not all manufactured goods were of the same quality;
a
differences generally were recognized for many items.
Labels in the Middle Ages. "In medieval archi
tecture, the word 'label* referred to portions of
images and statues on their mountings, upon which
texts and mottoes were inscribed."10 In law, and
here the definition comes closer to modern usage, the
word originally meant a narrow strip of paper attached
to a document in order to supplement it. Today the
word refers to strips or small pieces of paper, sheet
metal, cloth, or other material attached to merchandise
9Ibid., p. 14.
29
and packages to give the description of the item or
to supply a trade mark or quality rating.11
The first glance at the medieval economic
structure and the methods of production will furnish
us with a very simple reason for the absence of any
evidence of trade mark litigation in the early records
of the king's courts. Medieval trade was conducted
largely through guilds or "mistenes," and an integral
part of the whole scheme of organization into guilds
or "mistenes" was the prevention of litigation"among
guildsmen in any tribunal save the court held by the
guild officials or guild members themselves and the
punishment of all efforts to seek redress "at law"
for wrongs perpetrated by a guildsman against his
12
fellow guildsmen without the consent of the guilds.
"Despite an Act of Parliament in 1504 prohibit
ing non-litigation ordinances, they continued steadily
to be enacted and enforced for over a century there
after."13
11S. C. Hollander, History of Labels (New
York: Allen Hollander, 1956), p. 11.
12
United States Congress, House of Representa
tives, Committee on Interstate and Foreign Commerce,
op. cit., p. 18
13Ibid., p. 19.
30
Definition of trade marks. A trade mark fre
quently is defined by the courts as a mark, sign, or
symbol, the primary and proper function of which is,
as the courts say, "to identify origin or ownership
of the goods to which it is affixed.1,14 This defini
tion of the function of the trade mark has been in
use with almost unvarying uniformity throughout the
formative period of trade mark law up to the present
day.15
Uses of the mark in the Middle Ages. The
judicial conception of the alternative functions of
a trade mark— the designation of origin or ownership
of goods— rested upon the uses to which marks were
put in the Middle Ages. Strictly speaking, marks
designating ownership were not trade marks at all,
but were merely proprietary marks which might or might
not incidentally have served to designate the origin
or source of the goods to which they were affixed.
However, the courts of the twentieth century appear
to be no more careful in observing the distinction
between technical trade marks and proprietary marks
than were their predecessors of the nineteenth century
14Ibid. 15Ibid.
31
or lexicographers of the eighteenth and seventeenth
I fi
centuries, to whom we refer later.
As stated above, until the fifteenth century
the craftsman and merchant were often one and the
same person. As craftsman he might be compelled, by
statute law or guild regulation, to affix a mark to
his goods. As merchant he would desire to affix a
mark to the bale or wrapping of the same goods in
order to identify them for the illiterate warehouse
clerk and also for the Admiralty Court to which they
might be brought after capture on the high seas or
17
wreck on the English coast.
That individual merchants' marks commonly were
used in medieval England is evident, not only from
the actual traces of these marks that still survive
18
but also from literary references of the period.
Antiquarian researches in the towns and vil
lages ;Of England as well as Scotland corroborate the
literary evidences of the extensive use of merchants'
marks in the Middle Ages. These marks not only were
used commercially to designate the proprietor of the
goods to which they were affixed, but also acquired
16Ibid., pp. 20-21. 17Ibid.. p. 21.
18Ibid.
32
19
a distinct social significance. It would appear
that very early in the history of medieval commerce
merchants, as soon as they had arrived at any degree
of prominence or substance, were anxious to perpetuate
the marks which they had used to designate their
* 20
products.
An additional source of information concerning
medieval merchants' marks has been discovered in
monumental brasses that were set up in churches by
the guild or company to which the merchant may have
belonged, or by the church of which he had been a
benefactor, or by his surviving family. Merchants'
marks usually consisted of crude lineal figures, such
as the owner's monogram or often the reversed figure
four, thought by antiquarians to be a variation of
the crucifix or a modification of the Agnus Dei, under
the protection of which the merchant hoped for the
21
success of his venture.
These marks would appear sometimes to have been
hereditary, and in some cases the various branches of
a family retained the same mark, but with slight
variations.22
19Ibid.. pp. 22-23. 20Ibid., p. 23.
21Ibid. 22Ibid.
33
Foreign merchant marks. Just as the marks of
English merchants were kept in foreign registries,
so those of foreign merchants sometimes were entered
in English trade records. For instance, in the Book
of Entries of the Corporation of Great Yarmouth were
many foreign marks, principally of the merchants of
Brabant, which were regularly certified by foreign
notaries.23
The swan mark. One of the oldest proprietary
marks, which still serves its original function, is
the swan mark. In the theory of English law, the
swan is regarded as
. . . bird royal in which no subject can have
property when at large in a public river or
creek, except by grant from the crown. In
according this privilege the crown grants a
swan mark.24
A silver swan was the principal device on the
badge of Henry IV, and Henry V, likewise, before his
accession to the throne,used the silver swan. By a
statute of 1483 it was ordered that no person except
the king's sons should have a swan mark, unless he
possessed a freehold of the clear yearly value of
23Ibid.. p. 27.
2^Schechter, 0£. cit., p. 35.
34
25
five marks.
The swan mark itself, called by Sir Edward
Coke "cigninota," was cut in the skin of the beak of
the swan with a sharp knife or other instrument.
The king's swanherd was bound to keep a book of swan
marks, and no new marks were permitted to interfere
with the old ones. Owners of swans and their swan-
herds were registered in the king's swanherd's book.
The marking of the cygnets generally was performed
in the presence of all the swanherds on the stream
in question and on a particular day or days of which
al1 had notice. Cygnets received the marks found on
the parent birds, but if the swan bore no mark the
whole were seized for the king and marked accordingly.
No swanherd was permitted to affix a mark except in
O C
the presence of the king's swanherd or his deputy."
Business Practices during
the Middle*Ages
Before illustrating what may be termed the
liability nature of the craftsmen’s marks of the
Middle Ages, in contradistinction to the asset nature
of the modern trade mark, it will be necessary to
25Ibid. 26Ibid.
35
consider briefly the machinery of production and the
economic theories under which this machinery operated
during the Middle Ages.
Middle Age manufacturing. The phases of
medieval economic history that bear directly on our
27
subject are threefold. In the first place, until
the fifteenth century or even later "so large a part
of the manufacturing work of the country was arranged
on the guild system, that the term may be fairly used
28
to describe the whole organization of industry."
Even when industry became the subject of national
rather than local regulation, the guilds and companies
were greatly relied upon by the crown and parliament
to supervise manufacturing processes and trade.
Grant of monopoly. Secondly, a grant of
monopoly "forms a regular and almost universal feature
29
in gild charters," and the enforcement of the
monopoly was accompanied by the preservation of high
standards of production. "Work must be good and
legal . . . , an infraction of the regulations must be
27Ibid., pp. 39-40. 28Ibid.. p. 40
29Ibid.
36
reported that the gild may not secure a bad reputa-
30
tion." The supervision of industry by the guilds
as well as the observation by the consuming public
of the material and methods of production employed
were rendered easy by the physical condition involved;
31
"wants were comparatively few and unchanging.”
Monopoly in practice. Thirdly, the guilds
sought to exercise and actually acquire a fairly rigid
monopoly of trade in their area, and they strove by
every means at their disposal to prevent "foreigners—
as the merchants coming from a town five miles away
32
might be described— " from competing with their
guild. But within the guild itself— at any rate,
according to the theory of their legislation— there
33
was no such thing as competition, solely cooperation.
Good will. To what extent the guilds and their
successors, the companies, sought to repress the
establishment of an individual good will, in contrast
to a collective good will, was evidenced by their
reluctance to permit one member to use a mark or
30Ibid. 31Ibid.
32Ibid. , p. 41. 33Ibid., pp. 41-42.
37
sign of greater prominence than another, or to exploit
the guild seal, which was always placed upon goods
conforming to the standards of the guild, "in con
junction with his own."®4 This was true even in the
1600's, when the influence of the guilds and companies
and their control over their members had long been on
the decline.35
Advertising. Most of the regulations made by
the craft in relation to makers' marks seemed to have
been passed with the intention of obstructing any
form of self-advertisement. Even though the craft as
a body was against its members themselves advertising,
the members individually were in favor of advertis
ing .36
With the aforegoing anti-competitive and
regulatory features of the gild system in mind
the medieval craftsman stamped his wares. Every
craft, of course, either had its own ordinances
concerning such marks or administered statutory
or municipal regulations of a similar nature.
All of these regulations, whatever their source,
34Ibid., p. 44.
35
Jessie V. Coles, Standards and Labels for
Consumer * s Goods (New York; Ronald Press Company,
1949), p . 67.
36
Schechter, op. cit. , p0 46.
38
made the use of the production mark compulsory.
Their expressed purpose was to facilitate the
tracing of "false" or defective wares and the
punishment of the offending craftsman* The
compulsory production mark likewise assisted
the gild authorities in preventing those outside
the gild from selling their products within the
area of the gild monopoly. But what the whole
theory of the legislation pertaining to pro
duction marks did not permit was, as we have
already seen in the case of the pewterers, the
exploitation of these marks to the direct indi
vidual advantage or for the personal advertise
ment of those who used them. In the course of
time in certain trades these police marks or
liability marks gradually became, as we shall
see, asset marks,— that is to say, they became
valuable symbols of individual good-will. This
was so in the case of goods of durability and
transportability for long distances, especially
in the clothing and cutlery trades. But even
in the case of these trades their trade-marks
began as solely regulatory indicia or police
marks of origin and only later developed as
symbols of good-will.37
Summary: Middle Ages
The characteristics of the typical craftsman's
mark of the Middle Ages may be summarized as follows:
(1) that it was compulsory, not optional; (2) that
its purpose was the preservation of guild standards
of production and the enforcement of guild or other
local monopolies rather than the impressing on the
mind of the purchaser of the excellence of the product
in question and thereby the creation of a psychological
37Ibid., p. 47.
39
need for that product; and (3) that, consequently,
while the modern trade mark is distinctly an asset
to its owner, the medieval craftsman's mark was essen
tially a liability.38
II. RECENT HISTORY OF TRADE MARKS
AND GRADE LABELING
Trade marks were well established long before
grade labels became a practical reality. The first
grading came after the turn of the twentieth century
in the United States.
Trade Marks
In the United States, just as in England, trade
marks did not begin to acquire importance as assets of
value in the commerce of the nation, in contradistinc
tion to local trade, until the second half of the
1800's. The origin of the movement for trade mark
protection in America would appear to have had some
connection with the sailcloth or duck industry in
Massachusetts. As early as 1788 the General Court of
Massachusetts offered a bounty of "eight shillings
for every piece of Top Sail Duck and other stouter
38Ibid., p. 78.
40
39
sail cloth manufactured within this Commonwealth,"
and this subsidy, along with governmental standards
of workmanship, was renewed several times.
Trade mark laws. The slowness with which the
law has given adequate protection to trade marks and
the lack of general legislative recognition of the
"beneficial effects of such protection are indicated
by the fact that in England no parliamentary considera
tion of a broad and general nature was given to the
matter until 1862."49
It was not until 1875 that the ignorance or
indifference of parliament in the matter of registra
tion was finally overcome and that the first British
trade mark registration statute was enacted. In 1870
the first United States statute providing for the
registration of marks was passed, and "this statute
being held unconstitutional, a similar one was re
enacted with the objectional features eliminated in
1876."41
Consumer acceptance. Why certain trade marks
gained consumer preference and thus asset value over
39Ibid., p. 130.
4IIbid., p„ 140.
40Ibid.. p. 139.
others is difficult to say. Even at the time it is
doubtful whether the real reasons could have been
discovered, except the general reason that they
satisfied the wants of the user. Nevertheless, the
differential value which certain brand names acquired
was not because the producers said their goods were
different or better, and it was despite any statement
of a regulatory official that they were not different
and not better than those of their competitors. It
was primarily due to consumer acceptance that these
trade marks became valuable.
Grading versus brands. Both the official
marks and the brand names were available to the public
for a long time. Both are still to be found on some
kinds of durable antiques, such as silverware. But
despite the historic desire of governments to maintain
official regulation of grades and their desperate
efforts to administer them, the mechanism fell apart
in the earlier periods. The official seals of the
quality regulators disappeared, and likewise, but
more slowly, almost all the guild marks disappeared.
Only the individual trade marks survived as guides
to the purchasers until the last half century.
42
According to Professor Hotchkiss, consumers,
in search for someone to trust, have found in the
past that it is safer to rely on the sponsor of the
42
products than on any official regulator. Consumers
themselves, he felt, are individuals and have unstand
ardized wants. It is no easy matter to set up a
standard that will represent the wants of even a
majority. There is, of course, the difficulty of
administration.
, Administrative problems. The group of inspec
tors is bound to include men of varying amounts of
ability, honesty, and severity of judgment. The
London grocers, in the late sixteenth century,
petitioned that each inspector be required to put
his name on his seal so that it could be determined
which one was responsible for judging the spice to
be good, better, or best.
Sponsor. Both in medieval times and later
the sponsor, in many fields, was not the maker but
the merchant. At the time when most production was
carried on by the small-scale domestic system,
42
United States Congress, House of Representa
tives, Committee on Interstate and Foreign Commerce,
op. cit., p. 40.
43
merchant-sponsors became necessary. The merchant
bought finished products from many small makers and
sold them under his own mark in anticipation of
*
satisfied consumers returning for further purchases.
By carefully protecting the integrity of his label,
he built the prestige of his work into a valuable
asset.
Brands as a guide. The importance of the brand
name as a guide to United States consumers varies in
the different classes of goods. There are some
products that are invariably bought by trade mark;
others that are almost never bought by brand. Although
graduations are found between these extremes, there
has been a trend towards purchasing by trade marks.
Recent Grade Labeling
Background
In the twenties, with the rise of the general
feeling of dissatisfaction with the character and
amount of information provided concerning consumers'
products, an interest in the labeling of consumers'
products according to grades began in the United
States. Grade labeling, it seemed to many people,
was a desirable and feasible method by which more
44
adequate information could be given for many prod
ucts.^**
Standards for grading. The United States
Department of Agriculture, during World War I, began
to set up standards for grading agricultural goods.
The producers actually supplied the impetus for the
establishment for these standards after the passage
of the United States Warehouse Act of 1916. The
Secretary of the Department of Agriculture was author
ized to establish and encourage standards for agri
cultural products by which their value and quality
might be determined or judged. The standards,
however, were established for use by distributors
44
and growers rather than for the consumers' use.
Coverage for standards. Standards were
recommended for potatoes in 1917, and for milled
rice, strawberries, Bermuda onions, and apples in
1918. By 1922 standards for grading peaches,
tomatoes, lettuce, celery, cauliflower, peanuts,
asparagus, cabbage, sweet potatoes, and northern-
grown onions had been established. More important
43Coles, 0£. cit., p. 324.
44Ibid.
were the standards for shell eggs and beef carcasses
established in 1923 and 1926, respectively. Later,
in 1928, standards were recommended for additional
fresh fruits and vegetables, for several canned fruits
and vegetables, and for dressed turkeys and live
poultry. Standards for many other products followed
45
at a later date.
Canners1 grades. "Canners1 associations in
different parts of the country set up and publicized
among their members their standards for grades of
46
canned fruits and vegetables.” These associations
were largely responsible for the passage of the
McNary-Mapes Amendment to the Food and Drug Act in
1930. "This law made mandatory the establishment of
a 'standard of quality' and the labeling of canned
fruits and vegetables which fell below this stand
ard.”47
Consumer interest. A number of government
officials became interested in grade labeling and
they were joined by other interested persons during
the depression of the early thirties in asking that
45Ibid.
47Ibid.
46Ibid., p. 325.
46
a system of grading similar to that used by processors,
distributors, and manufacturers be adapted to consumer
requirements. The Consumers' Council in the Agri
cultural Adjustment Administration (AAA) and the
Consumers' Advisory Board of the National Recovery
Administration (NRA) tried to secure provisions for
labeling of consumers' products in some of the NRA
codes of fair competition and in the marketing agree
ments of the AAA. Unfortunately, the opposition to
the grade labeling of consumers' goods had developed
48
by this time and they were not successful.
Tugwell bill, tirade labeling also claimed
attention in 1933 when the Tugwell bill was introduced
in Congress to establish a new food and drug law.
Even though this actual bill was not passed, it
49
created a large amount of interest in grade labeling.
Continued interest despite obstacles. Despite
these various rejections of grade labeling, there
remained continued interest in the subject. The
Department of Agriculture set up standards for grading
additional foods. There was a slow acceleration of
48ibid 49Ibid
47
the quality of government-labeled products appearing
on the market. Some butter, meat, and other foods
graded by government inspectors were grade labeled.
"Some states passed laws making grade labeling manda-
50
tory for a few products."
Department of Agriculture program. A voluntary
program of continuous inspection and grading for
canned fruits and vegetables, inaugurated in 1940 by
the Agricultural Marketing Service of the United
States Department of Agriculture, gave an added
impetus to government inspection and labeling. A
little later sixteen large food distributors were
alleged "to have threatened to boycott food brokers
who handled canned foods packed and grade labeled
51
under continuous government inspection." Neverthe
less, many chain stores and consumer cooperatives
began to grade label canned fruits and vegetables
after the program was pioneered by the Great Atlantic
152
and Pacific Tea Company in 1934.
50Ibid., p. 326.
52Ibid.
51Ibid.
48
OPA controversy. The Office of Price Admin
istration (OPA) brought about another controversy by
announcing that the 1943 pack of canned fruits and
vegetables must be grade labeled. Some of the goods
were, in accordance with OPA regulations, already
being grade labeled. But the canned food order
. . . aroused the opposition, which again mar
shalled its forces and succeeded in getting
Congress to prohibit O.P.A. requiring the grade
labeling of any goods, including those for which
it was already required and in u s e . 53
In the next chapter this grade labeling con
troversy will be elaborated on, and additional
information will be supplied as to the standards
set up by the various food and drug acts in order to
give a more complete background for understanding
the problem.
Conclusion
Despite the poor showing of grade labels in
the early periods of its history, the twentieth
century shows an ever increasing interest in and use
of grading. Many of the administrative difficulties
have been modified to the extent that ,grade labeling
has increased its usefulness to the consumer in a
number of products. It has not replaced brand names,
53Ibid
49
nor will it probably do so. But in some fields,
especially in the food areas, grade labeling may
well expand as consumer education and information
become more widespread.
The multiplicity of brand names confronting
the consumer today calls for a supplemental guide to
quality that trade marks seem less and less able to
supply. Contemporary consumer behavior tends toward
brand "loyalty" in many cases because testing all
the possible branded products is not entirely within
the scope of the consumer's finances nor within the
timetable devoted to purchases. Therefore, the con
sumers tend to stick to a product that they have been
fairly satisfied with in the past. They do not know
whether it stands up quality-wise with competing
products because this information is often out of
the range of their knowledge and their experience.
Grade labeling may be most helpful in these instances.
CHAPTER III
THE BACKGROUND OF THE RECENT STRUGGLE
FOR GRADING PROGRAMS
Grading did not have a successful past. The
progress it has made since the turn of the twentieth
century has also been marked with numerous defeats.
To understand the problems associated with the devel
opment of grade labeling programs, one must analyze
two main areas in grading1s recent past: the Federal
Food and Drug Acts and the grade labeling controversy
during World War II. These two areas disclose, among
other things, the political obstacles that obstructed
a free expansion of grade labeling in the economy.
The first section of this chapter will focus
its analysis on food standards and labels because
food products have a longer history of regulation
than, say, nylon stockings, an example which will be
used only in a limited way to illustrate the diffi
culties of standards and grade labels in practice.
Standardization is a far more comprehensive
subject than simple grade labeling, but the .two cannot
always be separated. A grading program implies at
least two standards. It is therefore natural that
attempts to set up a grading program would be first
incorporated in legislative programs aimed towards
51
improving standards, i.e., the Federal Food and Drug
Acts.
The grade labeling controversy is essentially
a verbal fight between those people or groups favoring
brands and those favoring grade labeling. That there
need not be any real conflict can be seen in the
Canadian experience outlined in Chapter IX. The
material covered in this section, nevertheless,
illustrates the views and the actions of the pressure
group against grade labeling.
I. THE BACKGROUND: FEDERAL FOOD
AND DRUG ACTS
It is necessary to refer to the original
Federal Food and Drug Act of 1906 for closer examina
tion of thO development of standards and labels.* As
enacted, this act contained no provision authorizing
standards for foods and it was defective in that and
other respects. This act was administered at first
United States Congress, House of Representa
tives, Committee on Interstate and Foreign Commerce,
Brand Names and Newsprint. Hearings before Subcommittee
Pursuant to House Resolution 98, 78th Congress, 1st
Session, Volumes I and II, May 10-June 30, 1943
(Washington: Government Printing Office, 1943),
pp. 412 ff.
52
by the Department of Agriculture. The department
repeatedly recommended its amendment to authorize
basic standards of identity for food, which are the
first standards in the order of sequence and importance.
Congress, however, did not actively consider such an
amendment. Therefore, the department could only pub
lish advisory standards of identity for foods. Then
the food industry stepped into this legislative
o
situation, with better success.
In 1923 the dairy industry secured an amendment
to the original Federal Food and Drug Act which estab
lished a standard of identity for butter that is still
in effect, and in 1930 the canners themselves secured
another amendment of this act which authorized stand
ards of quality for canned food. The latter was known
as the McNary-Mapes Amendment, and it broadly author
ized the Secretary of Agriculture to establish a
reasonable— close to a minimum— standard of quality,
condition, and/or fill of container for each class of
canned food. It further required that a canned food
which falls below a standard to disclose that fact on
its label as prescribed by the Secretary of Agriculture.
2
Ibid., p. 412, statement in effect by Grocery
Manufacturers of America's General Counsel, C. W.
Dunn.
53
The Need for Supplemental
Legislation
In the course of time it became increasingly
evident that a piecemeal amendment of the 1906 act
was not sufficient from the viewpoint of the public
interest, and that a broad revision of this act was
required to correct its many defects and to bring it
abreast of the modern needs of an extended national
law on this subject.5 Consequently, in 1933 the
Department of Agriculture suggested a broad revision
and submitted recommendations for it to Congress.
In doing so the department acted through its Food
and Drug Administration, which was in immediate
administrative charge of the original 1906 act.
Prior to this action, the department had held a
series of conferences with the industries affected
by the contemplated revision of this act to discuss
the revision.
Congressional Action
On July 12, 1933, Senator Copeland presented
to Congress the first in the series of five bills
introduced by him to enact a new Federal Food, Drug,
and Cosmetics Act. The last of these bills was
enacted about five years later. The first bill was
54
drafted by the department, through the Food and Drug
Administration, and the four succeeding bills were
each a revision of it.
Tugwell Bill. The original bill, known as the
Tugwell Bill, contained provisions which required the
grade labeling of food. It authorized the Secretary
of Agriculture to establish multiple standards of
quality for any food. It required that the label of
a food shall state its quality. The Food and Drug
Administration's representatives frankly admitted
that these provisions were intended to compel the
grade labeling of food on an A, B, and C basis, which
they strongly advocated.
Congressional hearings. The Senate Committee
on Commerce held three extensive hearings on the
subject of these bills, and the House Committee on
Interstate and Foreign Commerce held one extensive
hearing on it. At these hearings the requirement for
grade labeling of goods was a major issue, and was
thoroughly discussed pro and con.
The Department of Agriculture argued for this
requirement and the consumer organizations, following
3Ibid., p. 413.
55
its lead, supported such a requirement. The food
industry, on the other hand, strongly opposed it.
Congressional rejection of grade labeling
requirement. The Senate Committee immediately
eliminated the grade labeling requirement. The House
Committee later, and for a time, restored it, but
both branches of Congress finally joined in wholly
rejecting it.
More recent legislative action. As enacted,
the Federal Food, Drug, and Cosmetic Act of 1938
authorizes the Secretary of Agriculture to establish
a reasonable standard of quality for any food when
ever, in his judgment, such action will promote
honesty and fair dealing in the interest of consumers,
and it requires a food below this standard to state
that fact on its label, as officially prescribed.
Therefore, and from the standpoint of standard of
quality for food, what Congress did was to write into
this act the McNary-Mapes Amendment of the 1906 act,
broadened to reach all food items.
It should be noted here that in 1940 the
President transferred the administration of the 1938
act from the Secretary of Agriculture to the Federal
Security Administrator, and that the latter had
56
established minimum standards of quality for numerous
4
foods under it. They included canned peaches, pears,
apricots, cherries, tomatoes, and canned fruit cock
tail.
The act of 1938 contains other important pro
visions for food standards. It authorizes the
establishment of basic standards of identity for any
food and requires compliance therewith, and it further
authorizes standards of container-fill for any food
and requires the processor of a food below such a
standard to state that fact on the label, as offi
cially prescribed. Moreover, this act strictly
outlaws any unwholesome or injurious food. It also
requires a broad informative label for each food
which, for example, must disclose its ingredients.
The answers to the question in what way the
public can best be protected and guided in the pur
chasing of consumer goods may be grouped generally
into two schools of thought. One school claims that
informative (descriptive) and brand (trade mark)
types of labeling are the best and are most adequately
suited to the purpose while, on the other hand, the :
second school believes that grade labeling is the
4
Ibid., p. 414.
57
answer. The former is advocated primarily by the
business interest and the latter gains its support
principally from the government policy-makers.
II. THE BACKGROUND: WARTIME GRADE
LABELING CONTROVERSY
Grade labeling and brand labeling are thought
to be in conflict with one another. The author, on
the contrary, believes that the two tend to supplement
each other. This position can best be verified by
the Canadian experience in this area. Nevertheless,
the controversy between grades and brands developed,
and it hit its high point during the Second World War
period.
A better understanding of the issues involved
in the controversy will supply a more comprehensive
view of the obstacles in the way of an adoption of
any compulsory grade labeling program.
The Problem before Congress
The problem before Congress during World War
II was one related to the establishment and maintenance
of maximum prices as a wartime measure. It was recog
nized that inflation takes place not only through
increases in prices of goods but also through depre
ciation of quality. It was, then, a question of
58
quality and prices.
Inflation. Hidden inflation often is difficult
to detect. It is always difficult to measure, and
therefore difficult to control. The problem of what
to do about it was very vexing to the officials of the
wartime Office of Price Administration. As quality
went down and prices went up, the OPA was criticized
by buyers for not maintaining better control of both.
On the other side, they were under constant pressure
from sellers to increase prices.
OPA needs. In some of its price orders the
OPA turned to specifications and grades as means of
identifying and describing quality of goods. In some
orders minimum specifications were set up at several
levels, thus establishing grades. Such specifications
and grades were said to be very essential in estab-
lishing dollars-and-cents ceiling prices.
Officials of OPA found that not only were
standards essential in establishing ceiling prices
but that these prices could not be adequately enforced
unless consumers knew the quality they received at
g
Jessie V. Coles, Standards and Labels for
Consumers' Goods (New York: Ronald Press Company,
1949), p. 349.
59
the established prices. There was, therefore, a need
for labels showing quality, and Congress decided to
investigate this need.
The Testimony before Congress
The greater part of the testimony before a
wartime Subcommittee on Interstate and Foreign Com
merce condemns the use of compulsory grade labeling
during wartime or peacetime. The remarks of the
m
members of the Congressional Subcommittee investi
gating brand names and labeling indicated that the
congressmen, as a group, did not favor grade labeling
unless the officials of the Office of Price Admin
istration could substantially show that such a proposal
was necessary as a control of inflation touring the
war period. The burden of proof was placed on the
agency's policy-making executives, thus putting these
officials on the defensive.
The House of Representatives of the 78th
Congress, however, wrote, with only ten minutes of
debate and without the printed record of these Sub
committee hearings, an amendment into the Office of
Price Administration's appropriation bill which
prohibited the use of any part of that appropriation
for the payment of salaries to anyone in this agency
60
who promulgated or had anything to do with the pro-
g
mulgation of labeling or standardization orders.
The hearings, nevertheless, provided a written case
for the action that Congress took so quickly and
decisively.
Ob.iections to Grade Labeling
What are the fundamental objections to a grade
labeling requirement from the standpoint of public
policy? C. W. Dunn, General Counsel for the Grocery
Manufacturers of America, named three of the most
7
important which pertain to the processed food field.
First objection. The first fundamental
objection voiced against a grade labeling require
ment is that in action, from a labeling standpoint,
it places government ceilings on the quality of
processed foods, whereas otherwise the food manu
facturing industry has complete freedom to improve
the quality of such goods.
A practical illustration of that situation
would be to take two manufacturers of a certain
g
United States Congress, House of Representa
tives, Committee on Interstate and Foreign Commerce,
op. cit., p. 754.
7Ibid.. pp. 414 ff.
61
product, who sell it in competition with each other.
There are minimum standards of quality for this item,
fixed by the government. Each manufacturer makes it
in compliance with the high standard set for it, and
then each product equally bears a grade A label.
It is important to note, however, that there
is a very important difference in quality between the
two products, for the manufacturer of one is more
progressive and competent. He searches the market
for better raw materials. He operates a better fac
tory and better quality control. He employs a better
organization, and he maintains a better scientific
staff. He also uses a better formula and process,
and has developed a better container. As a result
of all this he makes a better product than his com
petitor, for example, in flavor and keeping qualities,
8
which are subject to measure. However, he must sell
this product on the same grade A basis as his com
petitor.
Second objection. The second fundamental
objection voiced against a grade labeling requirement
for any industry is that, generally speaking, it
®Ibid., pp. 212, 383, 398-399, et passim.
62
involves a revolutionary change in the marketing of
products and it operates to break down the marketing
foundation on which the present-day manufacturing
g
industry has been built. This is true since this
requirement is actually designed and potentially
directed to place the retail sale of such food on
the labeling basis of a government instead of its
trade mark.
Third objection. The third fundamental objec
tion voiced against a grade labeling requirement for
processed food, in particular, is that it is a
potential instrument for monopoly in food distribu
tion (and monopoly in other fields).^
Powerful chain store systems today control a
large part of the retail grocery business inasmuch
as they are engaged in that business. In the devel
opment of their distribution business these chain
stores have also entered the food manufacturing
business, because and to the extent that they sell
their own private trade marked goods. They have
built up a large aggregate sale of these products,
^Ibid., pp. 186, 236, 304, et passim.
10Ibid., p. 279.
63
with some products being grade labeled. They compete
with the independent food manufacturers in selling
such goods, and the independents now find themselves
in the difficult marketing situation where they must,
to a great extent, depend upon dealers who are their
strong and aggressive competitors for the distribution
of their products.
In short, to the extent that these chain stores
succeed in gainiing the preferential consumer purchase
of their own private trade marked goods (with grade
labels) instead of the national brand goods made by
the independent producers, they also, and for that
reason, will control the food manufacturing industry.'*''*'
Evaluation of Objections
It may appear that these objections were not
strongly reasoned, and this is true. They were,
however, quite representative of the objections
presented by the interest groups objecting to grade
labeling programs at the time of the hearings. The
strongest objection should have been directed toward
the problem of setting up standards, but interestingly
enough this was not brought out by C. W. Dunn in the
hearings.
Ibid., pp. 280, 417, et passim.
64
First ob.iection criticized, A government
ceiling on the quality of foods would not necessarily
be the case if the grades were adjusted periodically.
Grade A eggs, for example, became grade AA due to
such an adjustment. This situation would also be
unlikely if brands were allowed to operate within
the grade categories.
Second ob.iection criticized. Certainly the
Canadian experience, as pointed out in Chapter IX,
has disproved the view that grade labeling would
require a revolutionary change in the marketing of
products. If the change is to come about, then it
will be in spite of the presence of a grading system.
Third ob.iection criticized. Mr. Dunn's
criticism is partially right, but for the wrong
reason. Monopolization could conceivably appear
under complete standardization within grades by
facilitating price fixing and price control. Under
most circumstances (with brands in existence) grade
labeling would conceivably tend to increase the
degree of competition.
There was general failure to take cognizance
of the fact that there are two sides to every problem.
It was noted by Professor Coles, of the University
65
of California, "that the majority of the members of
Congress apparently prefer to listen to the pleadings
12
of businessmen rather than to those of consumers."
Since the only person permitted to speak for
consumers was Representative Holifield of California,
the strongest and perhaps the only real case for
grade labeling in the Congressional hearings was the
13
one presented by the Office of Price Administration.
The Case for Grade Labeling
"The purveyor of bad goods, if the consumer is
ignorant, has as good an opportunity as the seller of
14
better quality merchandise,” wrote J. K. Galbraith
of Harvard University (with coauthor H. S„ Dennison)
in a call for more extensive publicity on grades,
qualities, and standards of consumer goods.
Dr. Galbraith, later to become one of the
leading advocates of grade labeling during the Second
World War period, believed that it is ignorance in
this field which gives countenance to a part of the
12
Coles, op. cit. . p. 353.
13Ibid., p. 351.
14
H. S. Dennison and J. K. Galbraith, Modern
Competition and Business Policy (New York: Oxford
University Press, 1938), p. 98.
66
wasteful sales competition, large-scale advertising
expenditure, and extravagant claims and counterclaims
which go to make up the costly structure of modern
selling. For, if the consumer is unaware of the true
qualities of the goods he is buying, then he is fair
game for all who have a chance of taking advantage of
him.
Dollars-and-cents regulation. Galbraith's
position as a policy-maker in the Office of Price
Administration gave him ample opportunity to apply
his views on grade labeling. The case for grade
labeling in the Congressional hearings was strongest
in the planned wartime application of it to price
control. Of the three types of instruments open to
the Office of Price Administration, the dollars-and-
cents regulation was considered more convenient from
the point of view of the man who is interpreting it
and operating under it. It is also a much tighter
regulation, and it makes it possible to contemplate
the maintenance of relatively stable prices as some
thing which can actually be achieved, whereas the
inflationary pressures would be much greater and
15
price control more out of hand.
15
United States Congress, House of Representa
tives, Committee on Interstate and Foreign Commerce,
op. cit., pp. 559, 702-705.
67
In order to cite dollars-and-cents prices on
an article it is obviously necessary to define the
article upon which the price is being placed. If
you are going to maintain stable prices under this
type of regulation, quality must be maintained and
the possibility of quality deterioration must be
avoided.
From the business point of view there was an
imperative need for incorporating standards into
price regulations. The same play of competitive
forces which kept quality standards high under peace
time conditions tended to be reversed under wartime
conditions of scarcity of goods and shortage of
manpower. Instead of keeping prices down and quality
1 6
up, it raised prices and lowered quality.
This was especially true in the field of con
sumer goods. In peacetime the competition to win
consumers' acceptance worked to hold up quality
standards on consumer products. In wartime, however,
the consumer often had to accept anything that he
could get at the store. That meant that whenever
some producers began to reduce quality, others were
competitively handicapped unless they did likewise.
16Ibid.. p. 702
68
Too often general quality deterioration was the result
of such a situation. That was why wartime price
control had to set standards in the interest of
business. Its task was to translate wartime regula
tions into the peacetime price and quality standards
whenever and wherever war conditions demanded such
17
action.
The charge very often was made that placing
standards in price regulations would, result in a
deadly uniformity of goods. This fear was ground-
18
less. The standards used in price regulation were
based as closely as possible upon the standards that
19
had already been found in business life. They
reflected, thus, the variety of goods being produced.
Where this could not be done empirically, for example
where existing varieties did not lend themselves to
classification, regulations in which prices were tied
to standards could be issued, and were not placed
under such standards.
It is important to note that Office of Price
Administration standards were merely minimum stand
ards. Any producer was free to surpass these
17Ibid., pp. 702-703. 18Ibid.. p. 703.
19Ibid.
69
standards. If he could demonstrate measurably higher
quality, consideration of the appropriateness of
adding a new class bearing a higher price would always
have been made possible. In any case, the producer
remained free to benefit from the improvement of his
product by increasing the volume of his sales.
It might have been felt by some that the pro
ducer would have no incentive to doi this, and that
in a seller's market he could sell as much as he
could produce without going above the minimum stand
ards. This point of view, if valid at all, gave
final proof of the need for minimum standards. If
there were no minimum standards a great many producers
would have been able to lower quality still further,
and still have sold all they produced. Price control
just could not have remained standing under such
20
reduction in quality.
Dollars-and-cents pricing. A definite case
for dollars-and-cents pricing on the basis of pre
scribed quality standards existed if the War Pro
duction Board (during World War II), or some other
government agency, issued a simplification or stand
ardization order. Commodities manufactured pursuant
20Ibid.
to such orders lent themselves to dollars-and-cents
pricing. In addition, there were usually new goods
for which the Office of Price Administration had a
definite duty to provide prices.
Dollars-and-cents prices tied to standards
set by other government agencies had been established
for example, in the case of a new formula soup and
in a number of .other examples. The number of dollars
and-cents price regulations, tied into standards,
which the Office of Price Administration would issue
in the future (after late 1943), would largely have
depended upon the scope and the extent of the plan of
standardization and simplification of essential
(wartime) civilian goods, which were then under
21
other government agencies' jurisdiction.
The question of grade labeling did not arise
until it was practicable to tie in prices, in some
way, to quality standards. When uniform dollars-and-
cents prices are fixed in terms of standards, some
method must be used to inform the consumer of the
correct ceiling price of the article he purchases.
In order to know the correct ceiling price of the
article under this situation, the public must know
21Ibid., p. 704.
71
the quality for which the price is fixed.
Grade labeling is one of the methods used to
give this information to the public. It is not a
new method, for it has been used in peacetime for
some goods on a universal basis and on an individual
or voluntary basis for many others. The Office of
Price Administration had used grade labeling in a
number of consumer goods regulations, but in others
it had used other methods. For instance, in canned
fruits and vegetables, grade labeling was required:
only if the packer packed more than one grade under
one brand.^
At that time there had been much fear expressed
that the use of standards and grade labeling would
compel established trade marks to be discarded or
would impair their value. This fear stood on no
23
foundation of fact or experience. The Office of
Price Administration had issued no price regulation,
and contemplated none, which in any way required that
22
Coles, 0£. cit. , pp. 355-356.
23
United States Congress, House of Representa
tives, Committee on Interstate and Foreign Commerce,
op. cit., p. 42; "adoption and enforcement of quality
grades would not do away with the need for trade
marks
72
24
brand names be discontinued.
There was no basis for the fear that the value
of brand names would be lessened as a result of the
use of standards or of grade labeling requirements.
Evidence on this point, which was substantial, all
went to prove the contrary. In Canada, for example,
grade labeling of a large number of food products had
been required for many years before the war, but trade
marks prospered there as here in the United States.
Producers and distributors of goods which were already
required by federal law to be grade labeled before the
First World War did not find that their trade marks
had lost their value. Many groups of entrepreneurs
who had voluntarily adopted grade labeling had testi
fied that it enhanced the good will value of their
25
trade marks.
The OPA1s view. The Office of Price Admin
istration 's view towards brands or trade marked goods
was shown by the testimony of B. F. Haley, Director
of the Textile, Leather, and Apparel Division, in
26
1943. He said, in effect, that the branded
24Ibid., p. 704
26Xbid., p. 623
25Ibid., p. 705.
producers, in a few cases, might find it difficult
to live under the Office of Price Administration's
regulations without changing their business practices
in some way, shape, or form. These branded producers
might have very high administrative and selling
expenses, and would probably find difficulty in
operating under the regulations without reducing the
total volume of those administrative and overhead
selling costs. The latter, in the opinion of the
Office of Price Administration, constituted a very
small proportion of the total output.
Generally speaking, for a given grade of
stockings, for example, the branded producer has had,
in the past, a slightly higher price than the unbranded
producer; but many unbranded producers of the same
type and quality of hosiery have had in the past
(before 1943) higher ceiling prices than branded
producers. It was not a situation in which there was
a clear-cut general differential existing in the
market before price control came into being. That
was one of the difficulties.
Another one of the difficulties was that if a
differential was given in favor of branded producers,
based upon that fact alone (the fact that this hosiery
was branded and that hosiery was not branded), there
74
would be a serious difficulty of definition, and
therefore of enforcement, because there were a good
many producers of hosiery who were putting out branded
and unbranded goods from the same factory. In some
cases, the identical hosiery would go out to one
purchaser with a brand on it and to another purchaser
without a brand.
If a differential were given in favor of
branded hosiery there would be reason to believe
that it would be to the disadvantage of the public,
since there was a great possibility that all of this
hosiery from one factory would thereafter go out
under the trade mark and none of it would go out
27
without the trade mark.
Why Grade Labeling Was
Not Adopted
Why was grade labeling not adopted as a price
control policy during the Second World War period?
Grade labeling as a method in price control policy
was not adopted because of an overpowering force
within a complex interplay of conflicting objectives
and interest-group pressures. Some light might be
focused on these complex interactions by a study of
27
Ibid., p. 624.
75
the forces favoring and the forces opposing mandatory
grade labeling.
Grade labeling movement. The Second World War
movement for standards and grades probably began
early in the depression of the thirties. A proposal
for official grades, which accompanied the adoption
of the National Reconstruction Act codes in the mid
thirties, set a concrete foundation for the movement.
This proposal, since then and up to the midforties,
has been one of the main planks in the consumer move
ment. During the latter part of this period it was
a central subject of the hearings on the problems of
the consumer before the Temporary National Economic
Committee, and formed a central theme of the Com-
28
mittee's Monograph Number 24.
The NRA’s argument for the adoption and
enforcement of official standards in many fields of
consumer goods seems to be most concisely presented,
as follows. Industry, many years ago, recognized the
value of standardization in engineering and manu
facturing. Almost every item of material was bought
by industry on the basis of purchase specifications
28
S. P. Kaidanovsky, "Consumer Standards,"
T.N.E.C. Monograph Number 24 (Washington: Government
Printing Office, 1941).
76
formulated by its purchasing and engineering sections.
The movement toward standardization of consumer pur
chases represented an "attempt to bring to the
ultimate consumer the advantages of scientific
29
purchasing long enjoyed by industry."
The average consumer seemed readily persuaded
to accept the desirability of standards and grades
for consumer goods on the grounds of their successful
use in business purchases. The weakness of this
argument lies in the fact that the marketing methods
of the two areas— consumer and producer goods— have
many differences. The channels of trade, the buying
motives, the conditions of purchase, and the use of
many consumer goods present obstacles that are not
encountered by the buyer of raw materials and tools
30
or bulk supplies for large institutions. Many
marketing experts believe either that the methods of
marketing industrial goods cannot readily be adapted
to the marketing of consumer goods or that, at best,
they can be successfully applied in only a few
oq
Ibid., p. 355.
30
G. B. Hotchkiss, Movement for Standardiza
tion and Grading of Consumer Goods (New York:
Association of National Advertisers, 1941), p. 8.
. .77
fields.31
The National Bureau of Standards, established
at the beginning of the twentieth century, had set
up commercial standards for many kinds of consumer
goods including carpets, whiteware, electric lamps,
paint and varnish, paper, soap, and so forth, but
after long research and testing it had not, by the
early forties, been able to offer acceptable stand
ards for silk dress fabrics and silk stockings. It
may generally be stated that the efforts of the bureau
have been more successful in industrial goods. In
consumer goods they have shown least progress in
luxury fields, where consumers' wants are least
standardized and most subject to emotional preferences
or tastes.32
Many of the supplies bought by various depart
ments of the federal government on the basis of
specifications provided by the National Bureau of
Standards are of the same general character as those
bought by other large agencies and even individual
consumers. For the former, the advantages are made
31Ibid., p. 32. 32Ibid., p. 9.
78
33
available through the bureau's plan. For the
latter, they are available to a limited extent by
the labeling plan by which a manufacturer certifies
that his article complies with the specifications
of the bureau. The use of this plan is not wide
spread, and there seems to be little demand for it.
The Temporary National Economic Committee's
Monograph54 indicates the reason for the small
demand of the labeling plan. The passage states,
in effect, that the application of the Certification
Plan to Federal Specifications or Commercial Standards
is limited to large contract buying which, in many
instances, is not a typical ultimate consumer. The
nature of the needs of the government, as represented
by federal specifications, and those of the ultimate
consumer are not the same. The bureau, it would seem,
takes a neutral stand in the movement.
33
Coles, 0£. cit., p. 317; the Policy Committee
of the American Standards Association defined the
true functions of the National Bureau of Standards
in connection with standardization as ". . < > those
of basic research, furnishing of facts, measurement,
and technical assistance in the development of ade
quate testing methods."
34
Kaidanovsky, 0£. cit., p. 91.
79
Forces favoring mandatory labeling. What
were the basic forces favoring mandatory grading?
According to G. B. Hotchkiss, most of the advocates
of grade labeling in the war period fell within one
or more classifications. Government officials,
chiefly in the Department of Agriculture, in the
Office of Price Administration, and the men with no
business experience, primarily economists and lawyers,
generally speaking, advocated grade labeling. Teach
ers of home economics, consumer economists, and a
sprinkling of teachers of other branches of social
science favored grade labeling. Women's clubs,
notably the American Home Economics Association and
the American Association of University Women; pro
fessional consumer advisors, including such organiza
tions as Consumers' Research and Consumers' Union;
and a number of writers of consumer books strongly
advocated grade labeling. Also mentioned were large-
35
scale distributors with private brands.
The motives of these groups could not be
easily labeled. Even within the same group, motives
differed widely. As a whole, however, they were
agencies through which powerful human forces could
35
Hotchkiss, o£. cit., p. 26.
80
operate. They were countered, on the other hand, by
the even stronger forces of the combined business
interests involved, primarily the National Canners'
Association, the Association of National Advertisers,
and similar associations.
Public response to grading. Just how much
had been gained by sellers or by consumers through
the wartime grade labeling experience could not be
answered on the basis of facts available. Polls of
public opinion in the early forties made by the
Advertising Research Foundation, under the direction
of G. Gallup, showed that about 55 per cent of the
general public was interested in grade labeling.
This, however, was an opinion test; it did not show
to what extent their interest was manifested in
buying action.3®
Wartime and prewar (World War II) surveys of
consumers who were buying grade labeled goods would
probably show a high percentage favoring the method,
but it is doubtful that they threw light upon the
attitude of consumers generally. There shall be an
attempt, however, to throw a clearer light on these
36Ibid., p. 18.
81
attitudes through more recent surveys in the chapters
to follow.
What may not be realized (or realized too
clearly) by the business interests is that grade
labeling may be indirectly a force for a greater
degree of competition, and therefore a movement for
a freer choice for consumers in the market. This
idea also is developed in the following chapters of
this dissertation.
The idea that grade labeling can effectively
be used in practice may be shown in the Canadian
experience, and that a quality label can be used in
a comprehensive quality control program by the
Swedish experience. Such experiences are shown in
the following chapters of this dissertation.
CHAPTER IV
BACKGROUND: NONPRICE COMPETITION
Nonprice competition tends to be an accepted
practice in the business world and it is well recog
nized today by most economists. Nonprice competition
expresses itself through a wide variety of ways, but
the two main elements of this type of competition are
selling effort and quality improvement. Much of the
following analysis will concentrate on the factors of
selling effort and quality improvement, but the variety
of ways in which nonprice competition expresses itself
will be illustrated in the last section of this
chapter.
I. NONPRICE COMPETITION
Quality improvement and selling effort are the
two main elements of competition other than price
competition. According to Professor Fritz Machlup of
Johns Hopkins University, the area between the prac
tice of nonprice competition and the restriction of
price competition may conceivably show the following
relationships:
(1) Non-price competition is practiced more
vigorously because of existing restrictions of
price competition and is, thus, the way in which
the forces of competition, checked on one front,
83
assert themselves on another. (2) Non-price
competition is practiced more vigorously in
order to avoid price competition and plays,
thus, a part in the elimination or restriction
of price competition. (3) Non-price competition
would have been practiced in the same forms and *
to the same extent even if price competition
had not been restricted. (4) Non-price competi
tion is mitigated or restricted along with price
competition by the same or parallel devices.1
The degree of competition, according to
Machlup, was increased in the .first possibility under
conditions in which nonprice competitive practices
were resorted to after price competition had been
restricted. The degree of competition, on the other
hand, was reduced in the second of the above rela
tionships, when nonprice competition was a means of
abstaining from price competition. Machlup concluded
that the first two relationships are characteristic
of what he called "polypoly" position— a condition in
which a firm is not generally concerned with the
reactions of his many rivals. In a trade or industry
polypolistic in character "non-price competition is
likely to strengthen the forces of competition and
to afford them another outlet if price competition
2
is institutionally restricted."
Fritz Machlup, The Economics of Seller1s
Competition (Baltimore: The Johns Hopkins Press,
1952), p. 164.
2Ibid.
84
The Degree of Competition
through Quality Differences
"Flexibility in quality will ordinarily not
3
compensate for inflexibility of price." If price
fixing, price control, or price maintenance do not
enter the picture or can be effectively regulated,
a tendency towards standardization through grade
labeling might conceivably lep.d to an increased
degree of price competition.
Slight product differentiation. It is unlikely
that some degree of differentiation would be eliminated
from most products and services. Therefore, the
benefits in increased sales and innovations to con
sumers could v^ry well be present under conditions
leading to a greater degree of standardization,
especially in the case of grade labeling.
Oligopolistic practice. Oligopolists often
use other means to accomplish their ends than encroach
ment upon each other's shares of the market by price
reduction. Product differentiation, one of the char
acteristics of monopolistic competition, may be the
safest way to attain roughly the same results.
5Ibid.. p. 166.
85
Product differentiation, in the Chamberlinian form,
occurs under conditions of advertising, variation in
design, and quality of product.
II. PRODUCT DIFFERENTIATION
"The primary purpose of advertising is to shift
to the right the demand curve faced by the single
4
seller and make it less elastic." Variation in design
and quality of certain products are often used with
advertisements to differentiate one seller's product
from another. Product variation often, but not always,
operates in the best interest of consumers.
Undoubtedly the most important of the ways in
which nonprice competition expresses itself is that
of the actual quality or content of the products
involved.
Although differences between competing products
may represent a real utility advantage to the consumer,
there is also a definite tendency to create the
appearance of difference where no real intrinsic dif
ference in physical usefulness exists. Therefore,
one of the most serious objections to many types of
4
R. H. Leftwich, The Price System and Resource
Allocation (New York: Holt, Rinehart and Winston,
1960)'," "p. "259.
nonprice competition is the way in which they com
plicate the purchaser's selection problems. Price
is a universally understood measure in the sense that
the significance of a price difference is easily
understood by any purchaser or potential purchaser.
The appraisal of differences in quality or content,
on the other hand, is much more difficult for the
ordinary consumer. The result of a complexity of
eye-catching devices giving no real quality improve
ment or increased utility may be a loss of competitive
efficiency. It is not likely that elaborate packaging
is of as much value to the consumer as low prices or
improved quality.
There is another side of the question of product
differentiation. £. H. Chamberlin took the position,
twenty-five years after he introduced the concept of
monopolistic competition, that if people desire product
differentiation they should have the opportunity to
have it.
. . . since what people want— an elaborate system
of consumers' preferences— is the starting point
in welfare economics, their wants for a hetero
geneous product would seem to be as fundamental
as anything could be.5
^E. H. Chamberlin, "Product Variety," Selected
Readings in Economics. C. L. Harris, editor (Englewood
Cliffsj New Jersey: Prentice-Hall, Incorporated, 1958),
p. 110.
87
Professor Abbott * s Thesis
In 1953, five years prior to Chamberlin's
writings on the subject, Lawrence Abbott voiced the
6
same view in his book Quality and Competition.
In any kind of economic system a market of
differentiated products can cater more precisely
to individual wants and supply a greater sum
total of satisfactions than a market devoted to
a single homogeneous product. Unless production
of more than one variety involves increase in
costs so great that they more than offset the
higher satisfactions, a single standardized
product without close substitutes cannot maximize
welfare.
What Abbott wrote is undoubtedly true, but one
comes to the age-old question: how does one measure
the satisfactions? Granted that some variety is
desired by most consumers, but to what amount and
of what type?
Abbott's presentation is a rigorous one. It
is not necessary, however, to take the opposite
extreme of pure and perfect competition in order to
criticize Abbott's position.
If we view the problem in terms of a spectrum,
in which pure and perfect competition appear at one
extreme and pure monopoly at the other, one can see
g
Lawrence Abbott, Quality and Competition
(New York: Columbia University Press, 1955).
7Ibid., p. 78.
88
the question in terms of degree of monopoly or
competition. Granting that there is some virtue in
an element of monopoly, is it necessary to carry
this point to the extreme? The point to be made is
that it may still be more advantageous for the con
sumer to get some product variety closer to the pure
and perfect end of the spectrum than near the extremes
of monopoly. Competition then could be a direction
that could supply increased real advantages at the
price of less product variety.
What are some of the advantages? One would
be the highest quality at the lowest cost conditioned,
of course, by variety of competing products and their
degree of product differentiation. Is this what con
sumers want? The surveys analyzed in the following
chapters imply that consumers want high quality, but
the trouble seems to be that of recognizing quality
in a product. To say that people want product variety
is only one side of the coin that consumers might
spend.
Undoubtedly, Abbott's thesis in the above-
mentioned book developed from an article written
prior to his book. In this article Abbott differ
entiated among three types of quality: vertical (the
superior of any two qualities is considered preferable
89
by virtually all buyers and/or the product entails
greater cost), horizontal (while cost differences are
incidental, different people will rank dissimilar
qualities in different orders), and innovational (the
introduction of a novel quality which is judged
superior by most or all buyers). The latter two, the
author stated, are nonraeasurable; so he deals only
O
with the vertical type of quality in his model.
Abbott's assumptions. Among his numerous
assumptions, Abbott abstracted from the real world
conditions such as semi-ignorance, gullibility, and
the bewildering complexity of choice when quality
variability is multidimensional and information about
quality and product performance is not readily avail-
9
able. The present author feels that these assumptions
tend to remove the model too much from reality to give
a true picture of vertical quality.
Under these conditions vertical quality com
petition, claimed Abbott, performs essentially the
same function that price competition performs— whenever
O
L. Abbott, "Vertical Equilibrium under Pure
Quality Competition," American Economic Review.
M jIII (December, 1953), 828-829.
9Ibid., p. 844.
90
product is deficient relative to price it causes
producers to revive their offers, making them more
attractive. Thus, like price competition, it induces
behavior which results in the elimination of excessive
profits.^- ®
According to Abbott's model, which assumes a
fixed price oligopoly: when one firm (lowers) or
raises the quality (vertical), the other firms follow
to protect their market shares. The problem here is
twofold: (1) Abbott assumes that consumers have
perfect knowledge (of quality changes), and (2) he
neglects the horizontal type of quality form. If
these assumptions are dropped, then quality does not
work like price competition in bringing about the
highest quality for the lowest price. If one firm
produces a higher quality product than the others in
this oligopoly many consumers may not recognize its
virtues due, for example, to the misleading advertise
ments or the use of eye-catching devices of little
utility by the others. The problems of complexity
of selection would then tend to make a horizontal
quality emphasis out of a purchase that would essen
tially be of vertical form. These unrealistic
10Ibid.
91
assumptions (along with others) tend to make the
Abbott model lose reality.
Implications of Abbott * s Thesis
The theme of this dissertation might give the
impression of contradicting the Abbottian thesis,
but in truth it only modifies it. It is not the pur
pose of this dissertation to eliminate the concept
of product differentiation, but to apply the price
system with its modifying influence to keep, for the
consumer's benefit, monopoly within restraints.
Abbott's model is useful in showing how pure quality
competition is no more realistic than pure price
competition. But it is a useful way of thinking, just
the same. Its implications are not, as Abbott sees
it, for support of a greater degree of monopoly, but
as one might view Joan Robinson's imperfect competi
tion: a more homogeneous product1' 1 ' (though not per
fectly so) or slight product differentiation with no
barriers to entry as may be found in the Chamberlinian
12
"tangency" case.
^Joan Robinson, The Economics of Imperfect
Competition (London: MacMillan and Company, 1933),
pp. 320-321.
^E. H. Chamberlin, The Theory of Monopolistic
Competition (Cambridge: Harvard University Press,
1933), p p . 251-252.
92
The Chamberlinian "tangency" (of the average
revenue and short run average cost curves) case would
mean large numbers of firms in the industry but no
above-normal profits and thus excessive profits in
this industry would not concern the government nor
the consumers. Some product variety would still be
present with slight product differentiation, and the
consumers would benefit here, also.
Implications for Grade Labeling
Grade labeling would tend to break down or
modify the advantages gained through brand names
supported by advertising and make entry into the
industry, with effective grade labeling programs,
much easier.
Grade labeling might be useful as an aid in
antitrust cases in which monopoly or monopolistic
practices have been adjudged. In some types of
industry, a court order replacing present brand name
for grade labeled products with or without a new
trade mark might be a sufficient penalty and at the
same time bring about a greater degree of competition
in that industry.
A word of caution might be in order, however.
Product standardization might also facilitate price
93
fixing which, in turn, might lead to a greater degree
of monopoly under such conditions. Product standardi
zation per se does not always lead to increased com-
13
petitive forces,
III. TEMPORARY NATIONAL ECONOMIC
COMMITTEE REPORT
Of all the nonprice elements entering into the
ordinary transaction, the actual physical quality or
content of goods seems to be the most universally
significant. In addition, "it is probably the out
standing single factor conditioning the interpretation
of price statistics."'*'4
Quality itself is not a simple concept. For
any single commodity it involves a large number of
15
variables. The TNEC report gives the example of
the automobile. Any appraisal of quality must include
13
Machlup, ojj. cit., p. 166.
14
United States Congress, Senate, Temporary
National Economic Committee, Price Behavior and
Business Policy. Monogram Number 1 Printed Pursuant
to Public Resolution 113, 76th Congress, 3rd Session
(Washington: Government Printing Office, 1940),
p. 63,
15Ibid., p. 64
94
gasoline consumption, durability, probable frequency
and cost of the necessary repairs, comfort, appearance,
riding qualities, ease of manipulation, safety,
"brilliance" of performance, and so on almost indefi
nitely. Each one of these may be subdivided further:
. . . thus economy of operation is a function of
the speed at which the car is to be driven, as
well as of the roads over which it will be used.
. . . some of these characteristics, e.g.,
gasoline consumption, may be expressible in
quantitative terms. Others, such as appearance,
defy such measurement.
All of these elements modify the significance
of price quotations. Economy of operation, for
example, is a factor of quality competition which may
be "approximately measurable." The average current
consumption for six cubic foot electrical refrigerators
was, for instance, reduced 21 per cent from 1931 to
17
1938.
Quality changes are not usually thought of in
relation to such relatively standard items as steel,
but even here they may be of importance. There has
been, for example, a definite improvement in the
quality of ordinary structural steel in the last third
of a century.1®
16Ibid.
18Ibid., p. 66.
95
"Many other criteria of quality are subject to
19
some concrete measurement or specification." Among
them may be fiber content or construction of cloths,
the fabric and some aspects of the workmanship of
apparel, the quality of certain foods for which grades
have been established, the leather used in footwear,
the metal content of silverware, and so forth. All
of these factors are, to some degree, physically
determinable. It would, however, be impossible to
compile a complete list.
There are, on the other hand, a wide variety
of less tangible elements entering into the concept
of quality which cannot lend themselves to any form
of measurable specification. Nevertheless, these
intangible factors are very often of greatest com
petitive importance; they largely determine the buyer
acceptance of a product and should be considered in
any interpretation of price behavior. In the example
of apparel, the buyer is more interested in the
elusive element of style than in physical specifica
tions of workmanship or cloth. Likewise in the pur
chase of food, the subjective element of taste or
flavor may largely determine the amount of acceptance
19Ibid., p. 67
20
of the food product.
Some of these factors of style, appearance,
or comfort may, however, be objectively measured.
It may be, for example, that most consumers prefer
the flavor of canned foods meeting the grade A
requirements of the Bureau of Agricultural Economics
to those which would be classified as grade C„
Attractive style is often associated with superior
21
workmanship. A high quality grade is not, however,
a necessary guarantee of desirable flavor. "In
general, the preference or whim of consumers cannot
22
be confined without rigid, definable categories."
Obviously the competitive characteristics of
quality would then range from precisely measurable
ones, such as operating economy, durability, and
tensile strength, to such relatively subjective fac
tors as taste, style, exclusiveness, or comfort.
If the measurable characteristics were recog
nizable to the consumers by means of a simplified
quality recognition system, then the potential pur
chaser would be in a better position to concentrate
on those subjective factors. This would allow ample
20Ibid. 21Ibid.
22Ibid., pp. 67-68.
territory for expansion of some form of grading or
informative labeling while leaving the more subjective
areas to the reglm of whim or preference, possibly
influenced by advertised brand names.
IV. SUMMARY
Nonprice competition expresses itself through
a wide variety of ways, but the two main elements of
this type of competition are selling effort and
quality improvement.
Nonprice competition is sometimes practiced
because of existing price restrictions and in order,
in other cases, to avoid price competition.
Flexibility in quality may not usually com
pensate for inflexibility in price, and therefore
price competition should be stimulated whenever
possible and feasible.
The primary purpose of advertising is to make
the demand curve faced by a single seller to shift
to the right and make it less elastic.
Lawrence Abbott's quality-competition model
tends to be unrealistic due to his abstractions from
the real world conditions such as semi-ignorance,
gullibility, and a bewildering complexity of choice.
The concept of grade labeling tends to account for
such conditions.
There are a number of tangible and there are
a wide variety of intangible elements entering into
the concept of quality. The latter cannot lend
themselves to any form of measurable specifications.
If the measurable characteristics were recog
nizable to the consumer by means of a simplified
quality recognition system, then the potential pur
chaser would be in a better position to concentrate
on those subjective factors.
CHAPTER V
THEORY BEHIND GRADE LABELING AND COMPETITION
Only a few important changes have been made
in the theory of consumption since A. Marshall pub
lished his Principles of Economics in 1890. The
elasticity of demand, for example, originated with
Marshall. He wrote of it:
The elasticity (or responsiveness) of demand
in a market is great or small according as the
amount demanded increases much or little for a
given fall in price, and diminishes much or
little for a given rise in price.1
Cross elasticity of demand, on the other hand,
measures the extent to which various commodities
are related to each other in a range from perfectly
2
elastic to perfectly inelastic. The perfectly
elastic (horizontal) demand schedule for two products
an indifference curve in the form of a straight line
at a forty-five degree angle (that would indicate a
constant marginal rate of substitution of one to one)
and the perfect cross-elasticity of demand, are
limiting cases and are possible only when one good
*A. Marshall, Principles of Economics (Eighth
edition; New York: The MacMillan Company, 1920),
p. 102 *
o
Cross-elasticity of demand is not found in
Marshall's Principles of Economics.
100
is a perfect substitute for the other. Such might
be the case were the consumer indifferent to the
blandishments of advertisers and bought cornflakes
as cornflakes: one brand would be a perfect substitute
for another brand and the consumer would, of course,
buy whichever was cheaper.^ Such might also be the
situation in the case of two distinct classes of
physical objects produced under perfect competition
with numerous sellers and the product within each
class being considered homogeneous.
If we assume that grade A eggs and grade B
eggs represent, for purposes of illustration, the
two commodities in these separate classes, we find
that for every price of grade B which might prevail
a consumer would probably have a different demand
for the grade A product. At whatever price of each
grade the market yields, therefore, each seller will
be confronted by a perfectly horizontal demand schedule
4
because he is such a small part of the whole. How
ever, as Professor Allen has pointed out, the cases
J 7
A. L. Meyers, Elements of Modern Economics
(Englewood Cliffs, New Jersey: Prentice-Hall,
Incorporated, 1941), pp. 54-55.
4
R. T. Norris, The Theory of Consumer's Demand
(New Haven: Yale University Press, 1952), p. 82.
101
in which the elasticity of demand could be considered
g
perfect are not only limiting, but impossible. If
one product is considered a perfect substitute for
another in the mind of a buyer, then the two are not
different products, but simply different lots of an
identical commodity. The fact that the products are
not differentiated in the consumer's mind merely
means that he feels he is buying the same product
from whomever sells it the cheapest.
I. THE DEMAND CURVE AND PRODUCT
DIFFERENTIATION
Robert Triffin uses a cross-elasticity of
demand approach to eliminate the problem of grouping
products within industries or product categories
g
associated with conventional analysis. Realizing
the inadequacy of a classification in which many
products have interdependence but are separated into
entirely different industries, Triffin devised the
coefficient of interdependence to show the relative
g
Meyers, loc. cot., citing R. G. D. Allen.
g
Robert Triffin, Monopolistic Competition
and General Equilibrium Theory (Cambridge: Harvard
University Press, 1940), pp. 113-114.
102
changes in prices (W) and quantities (V) of two
products (i and j) in a market to determine their
degree of interdependence.
Professor Triffin1s concept of a coefficient
of interdependence is as follows: Wj times the change
Vi, over Vi times the change of Wj; expressing the
relative change in the quantities Vi of factor i
that the firm considered will be able to buy at an
unchanged price Wi, when there is a change in the
price of Wj of factor j.
If the coefficient is equal to zero, expressing
perfect interdependence between the factors considered,
it would be labeled isolated buying. If the change
in Vi remains zero, whatever changes took place in
all other prices but Wi, the case would be called
pure monopsony. In this case, factor j pays a higher
price, while factor i is not affected at all. The
cases where the coefficient takes a finite value would
be called by Triffin a heteropsony: factor j paying-
a higher price, while factor i cannot buy anything.
Finally, the value of the coefficient reaching minus
infinity: for any increase in Wj, the firm is unable
to get any amount of Vi at the price it used to pay
before the change in Wj. In other words, factor j
pays a higher price, so that factor i can buy so much.
This may be termed a homeopsony. Triffin uses two
subdivisions in the latter two categories: circular
and atomistic. The former refers to the repercussions
back on factor j for its rise in price, while the
latter is concerned with actions of factors but not
with price policies. Heteropsony would be similar to
product differentiation in traditional terminology:
in small numbers (or circular heteropsony), and in
large numbers (or atomistic heteropsony). An atomistic
homeopsony would be, on the other hand, purchasing
goods or services under conditions of Chamberlinian
pure competition, while a pure monopsony would be a
pure monopolistic position for the buyer. These rela
tionships show the competitive nature of the different
situations, but do not really tell us anything.
Chamberlin, on the other hand, shows product differ
entiation, for example, in one instance, in the light
of the competitive situation for patents and trade
marks.
"A general class of product is differentiated,"
wrote Chamberlin, "if any significant basis exists for
distinguishing the goods (or services) of one seller
7
from those of another." The basis may be "real or
7
Eo H. Chamberlin, The Theory of Monopolistic
Competition (Cambridge: Harvard University Press,
1933), p. 56.
fancied," just as long as it is of any significance
to buyers, and leads to a preference for one variety
of the product over another. Differentiation may be
founded upon certain characteristics of the product
itself, explained Chamberlin, such as patented fea
tures, trade marks, package or container differences,
or just in quality, color, design, or style. It may
also exist, he believed, in relation to conditions
at the time of sale; for example, in the case of a
small independent grocery store which supplies delivery
for the purchased goods as compared with the self-
service store that does not supply this extra service.
In addition, the convenience of the store's location,
its appearance, reputation, efficiency, politeness,
and similar intangible characteristics have an influ
ence in bringing about what we call product differ
entiation. It is evident, therefore, that virtually
all products are differentiated to some extent and
that this differentiation, covering a large scope of
economic activity, is of great importance.
What has economic theory to offer in explanation
of the economic forces over this field of activity?
*'W
A good or service, fairly individual in character as
those legally patented or copyrighted, is very often
considered as a monopoly. In the case where a good
105
or service is difficult to distinguish from the other
goods or services in its general class, the combina
tion of these similar goods or services would con
stitute an essentially competitive industry, according
to Chamberlin. He wrote that a theory of monopoly
attempts the explanation of the former and a theory
Q
of competition, the latter.
Although patents are usually classed as monop
olies, continued Chamberlin, trade marks, however, are
generally believed to show a "lesser degree of indi
viduality to a product," and thus are quite compatible
with competition; in some cases they are even con
sidered a requisite of competition. In this connection,
the value of patented products is described in terms
of total profit maximization within the market which
the monopolist controls. The values of trade marked
products, on the other hand, are explained in terms
of a supply-demand equilibrium over a much wider scope
of economic activity. All? value problems are grouped
according to their predominant character under one
theoretical category or the other, thus ignoring the
counteracting effect of the less dominant element.
Chamberlin presents the case for a theory which covers
8Ibid., p. 57.
106
both elements concurrently by inquiring: does any
basis really exist for distinguishing between trade
Q
marks and patents? After presenting the various
and somewhat contradictory views of a number of
prominent economists, he concluded:
To neglect the monopoly element in trade-marks
or the competitive elements in patents by calling
the first competitive and the second monopolistic,
is to push to the opposite extremes and to repre
sent as wholly different two things which are, in
fact essentially alike.iO
We might ask if a similar comparison can be
made between grades and brands.
II. UNIVERSAL GRADE LABELING AND COMPETITION
UNDER CONTROLLED CONDITIONS
Grade labeled products can generally be viewed
as essentially competitive in nature in the sense
that not only is there a rivalry among the various
grades of one product, but also between graded and
nongraded products. To overlook the monopolistic
element in grades would, as in the case of trade marks,
be rather unrealistic. For, as some business inter
ests have charged, the application of mandatory grade
labeling to the present system of merchandising would
9Ibid., pp. 57-58. 10Ibid., p. 61
107
be a potential instrument for monopoly in food dis
tribution to be used by chain store systems.1' 1 '
Are there any bases, however, for comparing
trade marks and grade labels? A trade mark makes a
product unique in certain respects— this is its
monopolistic aspect. A grade label attempts, by
means of distinguishing some quality characteristics,
to make grade A labeled goods, for example, unique
in some respects; this might be considered the
monopolistic element in grades or a multigraded
product. Grade labeled products in relation to other
products, however, have a tendency to flatten the
demand curve and reduce product differentiation.
Since the assumed effect of grade labeling require
ment is that of a more predominantly competitive
element, many businessmen oppose grade labeling
because it might tend to make their products less
individualistic and would prevent these businessmen
from having the same control over the market. In
the case of trade marks, Chamberlin claimed they do
leave room for other commodities almost but not quite
12
like them; this is their competitive element.
^The case for trade marks in Chapter III.
12
Chamberlin, o£. cit., p. 62.
108
Generally speaking, the competitive element in trade
marked goods, however, is probably not as strong as
the competitive element in grade labeled commodities.
In order to give some substantiation to the
above statement, which was to the effect that graded
products probably tended to be more competitive than
trade marked ones, it is necessary first to outline,
generally, the scope of each of these types of labeled
products. Sidney Margolius wrote that the United
States Department of Agriculture had set up voluntary
quality designations for some foods and a few nonfood
goods; these designations (grades A, B, and C; except
in eggs: AA, A, B, and C, and in meat: prime, choice,
good, and so forth) are found primarily in such
products as meat, butter, eggs, canned fruit and
13
canned vegetables. (Of these products, only in
eggs has there been a substantial empirical study
made of graded products.) Trade marks, on the other
hand, have a much wider scope and may be found labeled
on most all types of finished consumer goods. The
trade marks are generally advertised. It would seem
logical to assume that advertisement, generally
13
Sidney Margolius, The Consumer1s Guide to
Better Buying (Third edition, revised; New York:
New American Library, 1953), p* 16.
109
speaking, tends to make these products individualistic
14
in relation to other products.
The demand for graded products, on the other
hand, would probably tend to be relatively elastic.
In the case of eggs, a comparatively elastic demand
was found for grade AA eggs in an empirical study in
15
New York supermarkets. In stores having a higher
proportion of high income customers, however, the
demand for AA eggs was less elastic than in stores
with a lower proportion of high income customers*
According to a study mad^ by Pennsylvania State
16 *
College, average income consumers were more likely
to substitute something else for eggs, if egg prices
rose relative to the price of substitutes. P. S.
Willis, President of the Grocery Manufacturers of
America, in a letter to Economic Director Byrnes
and Price Administrator Brown, wrote, in part:
^Chamberlin, oj). cit. , p. 56.
15
R. F. Saunders, Egg Merchandising Studies
in Supermarkets. Part II (Ithaca, New York: Cornell
University Press, September, 1953), p. 30.
16
R. L. Baker and A. P. Stemberger, Economics
of Location in Grading and Cartoning Eggs (State
College: Pennsylvania State College Press, October,
1953), p. 3.
110
A most important thing to remember is that
grade-labeling would cause a competitive situa
tion where the best manufacturers would be
forced to pack.down to a grade in order to stay
in business. The food industry is the most
highly competitive in the world. Because this
is so, the pressure on all packers is to con
stantly improve their products so as to meet
and beat competition.
T. H. Mueller, President of Julius Kayser and Company,
testified that the wartime grade labeling requirement
on hosiery made it ’ impracticable" to stay in business
because as a brand manufacturer they could not compete
18
with nonbranded goods.
It was previously noted that there are both
monopolistic and competitive elements in grade label
ing. It may then be asked what would be the probable
effect of a universal (mandatory) grade labeling
requirement on our competitive system? The thesis
of this dissertation contends that the over-all effect
would tend to flatten the demand curve and reduce
product differentiation. To what extent might this
*^P. S. Willis, Journal of Commerce (New York:
[n.n.J, April, 1943), p. 12.
18
United States Congress, House of Representa
tives, Committee on Interstate and Foreign Commerce,
Brand Names and Newsprint. Hearings before Subcommittee
Pursuant to House Resolution 98, 78th Congress, 1st
Session, Volumes I and II, May 10-June 30, 1943
(Washington: Government Printing Office, 1943),
pp. 163-164.
Ill
competitive element be the dominant one under con
ditions of widespread grade labeling?
The universality of a grade labeling require
ment would undoubtedly, a priori. induce a larger
number of consumers to purchase products on the basis
of grades. Therefore, all the brands of the same
grade marking (within a given product category) might
tend to be perfect substitutes for one another (having
«
a perfectly elastic demand curve). Not all products,
however, could be bought on a grade basis or could be
effectively graded. Brands would, therefore, continue
to influence consumer purchases, but to a lesser
extent than found in our present system. Generally,
the cross-elasticity of demand for brands would prob
ably be increased somewhat, owing to the expansion of
purchases bought on the basis of grade marked product
labels.
It is indeed difficult to speculate whether
a large or small majority of the consumers, confronted
with grade labeling on a universal scope, would pur
chase commodities on a grade basis. The consuming
public undoubtedly realizes, however, the limitations
of grading as a measure of intangible qualities, such
as style, design, and so on. There would be consumer
reliance on both grade and brand labels as comple
112
mentary aids in purchases of some products; the grade
label supporting *the measurable characteristics of
the product, while the brand label appealing to the
more intangible aspects of consumer choice making.
The complementarity of these two labels might
conceivably have the effect of neutralizing each
other, with the possible result of making little or
no changes in the competitive status quo for those
products so affected. It seems more likely, however,
that a small increase in the cross-elasticities would
take place, resulting in a reduced differentiation
within grades. To this extent there probably would
be enough (possibly more than enough) product differ
entiation to maintain a firm's position through
advertising.
An additional reason for believing that the
general rise in elasticities would be small rather
than large is that the cross-elasticities of demand
among the various grade levels (i.e., between A and
B, B and C) might tend to be low, to the extent that
« * > i •
the measurable characteristics of each grade level
would be of significance to the consumer. The degree
of individuality associated, for example, with grade
A labeled products in their relations to grade labeled
products marked B, would depend, partly, on the
possible accuracy in the use of the objective criterion
(measurable quality characteristics) upon which the
grading is based. The possible accuracy in the appli
cation of a given grading criterion would vary from
product to product; there would be little or no
criterion for the grading of aspirin, since the
consumer would probably view all aspirin as being of
an identical quality without the aid of trade marks.
Eggs, on the other hand, have measurable air cells
that, although not readily recognizable by consumers,
can be detected by candling; one of the United States
Department of Agriculture's standards for an AA
quality egg, for instance, is one-eighth of an inch
or less in depth (practically regular) for the air
19
cell, but eggs also vary somewhat as to individual
taste y i.e., shell color, and so forth. There is,
in addition, the desire of some people to purchase
only the best; perhaps a subjective desire to have
only grade A brands. On the other hand, there are
those people who pride themselves in buying the
cheapest commodities; a parallel case is the subjective
19
United States Department of Agriculture,
Production and Marketing Administration, United States
Standards for Quality of Individual Shell Eggs. Chart
Number 741495 (Washington:. Government Printing Office,
February, 1948).
desire to have a grade C (or grade D) labeled good.
The combined subjective and objective desires are
unlikely to be large in relation to entire consumer
demand for products. The vertical relationship,
therefore, between grade levels stressing individuality
for each grade labeled good would probably not be
strong enough to counter the general move towards a
greater elasticity of demand for all commodities
owing to the over-all effect of grading in its uni
versal application. In conclusion, we might assume
that the adoption of universal grade labeling would
generally have a tendency to increase the cross
elasticities of demand, flatten the demand curve,
and bring about a greater degree of competition among
products.
In his chapter summary Chamberlin wrote that
wherever products are differentiated the theory of
• 20 '
monopoly seems1adequately to describe their prices.
Competition, however, is not eliminated from the
explanation that it is wholly taken into account by
the realization that substitutes affect the elasticity
of demand for each monopolist's product.
20 •* ’
Chamberlin, oj). cit., p. 68.
115
III. MONOPOLISTIC COMPETITION
How does monopolistic competition fit into the
picture? Chamberlin stated that monopolistic com
petition is a different thing from either pure monop
oly or pure competition. Monopolistic competition
not only covers monopoly, "as ordinarily conceived
and defined," but takes it as a starting point. The
theory of monopoly, although used as a starting point,
was believed by Chamberlin to be inadequate. (Chamber
lin believed that competition can be pure but also
perfect or imperfect; perfect being an elastic curve
or absence of friction— a device to simplify the
problem; pure meaning homogeneous goods and sellers.)
Marshall was more realistic in his free competition
and covered a wider scope than did Chamberlin with
his pure competition; where there is a consciousness
of monopoly, competition is not pure. Monopolistic
competition deals not only with the problem of an
individual equilibrium, but also with that of a group
equilibrium (much criticized by economists like
Robert Triffin) • In this way it differs from both the
21
theory of monopoly and the theory of competition.
21
Ibid., pp. 68-69, passim
116
Three Kinds of Product
Differentiation
Corwin Edwards distinguished three kinds of
22
differentiation in products. The first, the differ
entiation of a single company's products, is the
simplest case. In this case there is a recognition
of the fact that different consumers have different
tastes which can be satisfied in various ways (although
a seller may endeavor to create product variety among
products that are not spontaneously demanded by his
customers).
The second type is that of differentiation of
products through time. However, no sharp line can be
drawn between change that merely reflects progress
and change that is made to force old models out of
use.
The third type of differentiation usually
reflects a conscious effort by a seller to reduce
the impact of the competition he encounters. What
is functionally significant and what is merely con
venient to the seller may be blended together.
22
Corwin W. Edwards, "Standards and Product
Differentiation," National Standards in a Modern
Economy. D. Reck, editor (New York: Harper and
Brothers, 1956), pp. 327-330.
117
Each of the three types of product differentia
tion is likely to involve a lack of uniformity in
the physical characteristics of commodities, and
is thus likely to run counter to the requisites
of mass production. The techniques of mass pro
duction are those of breaking down the productive
process into a series of sharply defined standard
operations. It is the repetitive uniformity of
each operation which makes possible the extension
of the machine process, the specialization of
labor, and the centralization of control. But
an operation which is standard and repetitive
becomes possible only if it is to have a stand
ardized effect upon each successive unit of the
commodity subjected to it; and a commodity which
takes its form through a standard series of such
standardized effects is necessarily a standard
commodity.23
Edwards thus presented a strong case for a
more standardized product. As the diversity becomes
more superficial, the mass production process is less
disturbed; but, he warned, "it is precisely in these
cases that exploitative element in product differentia
tion is largest and the differentiation itself is
P4.
hardest to justify."
Here the case for quality labels and less
product differentiation of the superficial variety
is the strongest. The consumer may be willing to
pay a premium for variety and quality gains from
experimentation that are often associated with product
differentiation, but the increased production costs
23Ibid.. pp. 330-331. 24Ibid., p. 334
1X8
of products that are superficially differentiated
cannot be substantiated economically. Neither society
nor the individual consumer benefits under such con
ditions.
To summarize, it may be seen, a priori, that
the universal application of grade labeling will have
the over-all effect of flattening the demand curve
and bringing about a greater degree of competition
into a given market. Chamberlinian analysis, on the
other hand, associates the effects of brand names
with the sloping of the demand curve and a decrease
in the degree of competition.
This concentrated review of some aspects of
product differentiation has undoubtedly shed some
light on the question of how grades and brands fit
into a theoretical framework, but in order to get a
t ,
well-rounded view of the question of grade labels and
the demand curve it is necessary to see what informa
tion the consumer surveys have to offer as far as
consumer thinking on this question is concerned.
CHAPTER VI
EMPIRICAL EVIDENCE
The doctrine for grade labeling as a measure
of quality is based on the proposition that there are
a number of tangible and intangible elements entering
into the concept of quality. The latter, of course,
cannot lend themselves to any form of measurable
specifications. On the other hand, if the measurable
characteristics were recognizable to the consumers
by means of a simplified quality recognition system
(i.e., grade labeling), then the potential purchaser
would be in a better position to concentrate on these
subjective factors.
The question concerning grade labeling, and
its potential importance in this paper, is whether
or not it has a tendency to bring about a greater
degree of price.competition among the labeled products
within a given market. Empirical verification was
attempted by means of a random sample of the telephone
directories of El Paso, Texas and Silver City, New
Mexico and completion of question forms through the
telephone medium.
I. SURVEY RESULTS OF EL PASO
AND SILVER CITY
120
The steps guiding the research procedure are
carefully outlined and the significant results sup
plied. The results between the El Paso and Silver
City surveys and some of the findings in the current
literature were surprisingly similar.
Research Steps
In order to plan a research project it is
necessary to anticipate all of the steps which must
be undertaken if the project is to be completed suc
cessfully.
The problem. It is necessary first to formulate
the problem. Empirical evidence is then gathered by
means of a consumer survey in order that the consumers'
views toward the effectiveness of grade labeling in
market purchases may be approximated. The problem
might be stated, for this purpose, as follows: are
there indications that consumers react to grade labeled
products in such a way as to make them conscious of
the price variations of competing goods within a given
grade or quality level?
121
The objectives. Once the problem has been
formulated, the researcher should specify the objec
tives of the research project which may be undertaken.
A decision should then be made as to what information
is needed to attain these objectives and to determine
whether such information is already available. It
was found that surveys made during and prior to World
War II threw little light upon the objectives of
obtaining the attitude and thinking of the consumer
public toward grade labeling. It was necessary to
find more recent and more representative views in
current literature which could be supplemented by
surveys in a representative city, El Paso, Texas, and
a representative town, Silver City, New Mexico.
Representative locations. El Paso and Silver
City are representative in the sense that they include
housewives who purchase food products in retail out
lets of a representative type usually found in loca
tions of similar size, i.e., chain supermarkets,
independent supermarkets, grocery stores (some of
which belong to a cooperative wholesale society),
and so forth. This would mean that these housewives
would have access to a representative line of food
products and would be subject to similar grading and
122
branding stimuli which might be found in similarly-
situated locations throughout the United States*
The current literature, reviewed in Chapter VII,
supplied a number of consumer surveys dealing with
consumer thinking in the area of grade labeling con
ducted in various cities in the United States. The
main benefit of these surveys was to give substance
to some of the findings of the surveys conducted for
this dissertation in the Southwest, and to give geo
graphic support to such results. A careful check was
made of the method by which the data were obtained in
the surveys found in the literature, and for internal
consistency, to determine if they had been reported
with care and precision.
Preparation of forms. Preparation of data
collection forms is linked to the listing of informa
tion required to achieve the project objective. The
listing is the starting point in designing these forms.
Special attention must be paid to designing the
questionnaire since it will influence the data obtained.
Certain kinds of questions lend themselves more to
interviewer bias than others. The way in which ques
tions Eire worded has a great effect on the reliability
of the answers given by respondents. In interviewing
123
housewives, for example, the questionnaire must use
words which all respondents will understand— words
which have the same meaning to all concerned. Also,
questions should not be used that the respondent
cannot or will not answer.
Questions can be worded to give some idea of
the strength of the respondents' answers. It is
often necessary to get a quantitative expression of
relative importance of, for example, brand or grading;
or the magnitude of the desire for a higher quality
product over a lower one in terms of the premium the
consumer is willing to pay for the higher quality item.
The question of what terms to use, i.e., those
which could be used in the questionnaire of a survey
to communicate ideas most effectively, is only one of
many problems that might possibly plague a research
project. Each research step is a source of error,
and it is the responsibility of the researcher to
minimize these errors in such a way that, for a given
investment of finances and time, he obtains the best
possible over-all results.
In order to ask consumers questions on grading
effectively, it was recognized that the scope of
inquiry would have to be narrowed to the goods that
were almost universally labeled by grades on the
124
retail level. This meant that meaningful questions
were designed to inquire about food purchases, prin
cipally eggs and meat.
Sampling method. The first task in sampling
is to define carefully just what group of people are
to be sampled. In this instance the concern was with
the consumer— the person doing the food purchasing.^-
Another aspect of sample design has to do with
the selection of the sample. Of the various proba
bility techniques, random sampling from a telephone
directory was chosen in the following systematic
procedure: taking the two top names on the odd
numbered pages and the two bottom names from the
even numbered pages. In cases of no reply, a non
consumer, or a language barrier, every third name
was used up or down the page, even and odd numbered
pages, respectively.
Economic considerations were strong in the
choice of this sampling method. The fact that some
i
E. M. Moore, Purchasing Practices and Quality
Recognition for Eggs. Bulletin 947 (Ithaca, New York:
Cornell Agriculture Experiment Station, June, 1954),
p. 19; per capita "take home" pay had little effect
on the source of eggs purchased or length of time
eggs had been purchased from the present source;
therefore, income groupings were not too significant
in this study.
125
consumers would not have telephones was considered,
but it was felt that any distortion to the random
selection of consumers would be very slight since
all but a very small percentage did have telephones
and therefore most ' ‘consumers would be included in
the telephone directory.
Another sampling problem is the size of a
sample. In the light of the problem at hand, the
budget, and the type of questions to be asked, one
hundred samples were selected in both Silver City
and El Paso. It was a question of weighing cost
2
against usefulness.
Form processing. After the telephone calls
had been made there remained the difficult task of
processing the completed forms in a manner which
would enable the project objectives to be attained.
First the forms were edited to make sure data results
were logically consistent within each form. Then the
data were tabulated for analysis. Percentages and
averages were computed and compared. Some correlation
2
The outline of the survey technique and a
copy of the questionnaire were sent' to Professor
Meyers, Marketing and Transportation Department,
College of Commerce, University of Southern California,
for his suggestions, which were incorporated into the
final draft of the questionnaire.
126
was shown between the results of the Silver City and
the El Paso studies, and attempts were made to justify
differences.
Evaluations, Conclusions were reached in line
with survey results found in the current literature,
reviewed in Chapter VII, and an evaluation of all
surveys in Chapter VIII. In these conclusions it was
pointed out that these two surveys had the limitations
of all such surveys in that they assumed that what
people say is what they do. These surveys at least
approximated what people think they think or do.
II. THE EL PASO SURVEY
The main objective of the field surveys was
to supplement the current literature available for
finding out how important quality, in the recognized
form of grade labeling, was in relation to the price
of an article. For example, if the majority or a
substantial percentage of the housewives tested
indicated that they would buy the item among those
same products within the same grade level with the
lowest price (with other factors being of lesser
consideration), then we might conclude that price
competition was the predominant influence in the
127
market for these labeled items. If, on the other
hand, there was a very strong pattern of brand loyalty,
it could be concluded that nonprice competition was
the predominant influence. A strong price relation
ship to the similar products of the same grade would
tend to support the thesis that grade labeling tended
to flatten the demand curve. Strong brand loyalty,
in contrast, would tend to support the thesis that
there was an increased slope to the demand curve for
market of the product concerned.
Quality-Price Relationships
One of the key questions asked the housewives
(picked by random selection from an El Paso telephone
directory) was: when you buy graded eggs (AA, A, B,
and C) what do you consider most important: (1) the
highest grade at the lowest price, (2) my favorite
brand on the carton of eggs no matter what the price,
(3) the highest grade but I do not check the price,
(4) the lowest price but I do not check the grade,
(5) the lowest price but I do not check who produced
them, (6) the lowest price for my favorite grade
(what is your favorite grade), (7) just the lowest
3
price, (8) I do not remember?
3
El Paso, Texas-Silver City, New Mexico con
sumer survey made by the author, September 6-9, 1962,
128
Forty housewives out of one hundred, or 40 per
cent, surveyed in the El Paso city area (compared
with 44 per cent of those in the Silver City area)
thought that the highest grade at the lowest price
best fitted their egg purchasing thinking. On the
other hand, only 2 per cent of those questioned indi
cated that the lowest price for their favorite grade
described their buying behavior.
One explanation for these results was that the
largest number of respondents thought they wanted the
highest grades at the lowest price but they were not
interested in a lower grade of eggs. The grades
bought in egg purchases were predominantly grades
AA and A (Question Number 8 of the survey).
Some support was given to the highest grade
by the third strongest category, 16 per cent of the
housewives, which designated: the highest grade but
I do not check the price. On the other hand, the
second largest grouping, 24 per cent of the house
wives living in El Paso, indicated strong brand
loyalty since they chose their "favorite brand on
the carton of eggs no matter what the price."
3 (Continued)
Question Number 9 of the survey, A copy of this
survey may be found at the end of this chapter.
129
The fourth category, 12 per cent of the
sample, thought they would purchase eggs just at the
lowest price. This El Paso percentage did not check
with the Silver City results which showed a zero
response to this question.
Looking at the El Paso data from another
approach, 56 per cent of the respondents (59 per
cent in Silver City) were influenced by low prices
of eggs, while the remaining indicated a willingness
to pay market price to get what they wanted or were
not certain what they would do.
A majority of these price-conscious consumers
in both surveys desired a high quality grade of eggs.
The above results would indicate a strong
relationship between price and quality in the egg
market. The author assumes that these relationships
are not, however, quite as strong as might perhaps
be found if these housewives had received more con
sumer education, i.e., pointing out the values of
graded products.
Grade Recognition
How widespread was the recognition of grades
in eggs? Although eggs were recognized to be graded
by the largest number of El Pasoan respondents, this
130
4
amounted to only 54 per cent of the housewives.
Fresh meat was second with recognition by 30 per cent
of the consumers. Canned goods, on the other hand,
were recognized as graded by only eight out of the
hundred housewives. Similar figures were found in
the Silver City study.
Brand Loyalty
Canned fruits and vegetables showed strong
brand attachments. In both surveys, 50-odd per cent
of the respondents would pay a premium for their
5
favorite brand. Brand names, it would seem, tended
to dominate in the canned foods field, in contrast
to the situation in the fresh meat, eggs, and dairy
products areas. On the other hand, as a result of
a specific inquiry about canned pineapple, 62 per
cent of the housewives in El Paso were either uncer
tain or would pay no premium for a well-known brand.
Premiums for Higher Quality
In purchasing fresh meat the respondents were
asked what premium they would be willing to. pay for
one point of the highest quality hamburger over a
4
Question Number 7 of the survey.
5
Question Number 4 of the survey.
131
lower quality hamburger. Thirty per cent of the
housewives (only 23 per cent in Silver City) would
pay six to ten cents more. Sixteen per cent would
pay less than six cents and 10 per cent of the sample
would pay over ten cents more for the highest grade
(18 and 24 per cent, respectively, in Silver City).
Over a majority in both studies were willing to pay
such a premium for quality.
In purchasing eggs 24 per cent of the respond
ents would be willing to pay a six to ten cent premium
in El Paso, while one-fourth of the two-city house
wives showed a willingness to pay a one to five cent
premium, and ten (twelve in Silver City) respondents
thought they would pay more than ten cents in a
premium. In the case of eggs, therefore, the majority
sampled were willing to pay a premium for grade AA
eggs over grade A eggs, while approximately a fourth
g
of the two-city respondents were undecided.
The questions about the premiums that the
respondents were willing to pay were designed to show
the magnitude of the desire on the part of the persons
answering the questions. The fact that a majority of
consumers reported a willingness to pay a premium for
g
Question Number 4 of the survey.
132
a higher quality product was an indication that these
housewives recognized the importance of quality.
III. THE SILVER CITY SURVEY
The results of the Silver City survey were,
in most respects, very similar to those of the El
Paso survey. One additional question was added to
the Silver City questionnaire, but otherwise the
questions were identical0
The main difference between the surveys was
that Silver city is a town in the southwestern part
of New Mexico with a population of approximately
eight thousand people in contrast to El Paso which
is located in the southwestern part of Texas with a
population of approximately two hundred seventy-seven
thousand people.
The El Paso survey was handled entirely by the
author, but the Silver City survey was the result of
a class project in the author's marketing class.
Fifteen students in the marketing class were thoroughly
briefed on the requirements of the survey and super
vised by the author and a graduate student. The
survey was approached as a class exercise in market
ing research. All phone calls were made at the
graduate student's home for reason of control. Each
i
i
i
133
of the questionnaires was checked by the graduate
student and by the author for logical consistency
after the forms were completed.
Comparison of Questionnaire
Data
The first query in the questionnaire was
designed to direct the housewife1s attention to the
graded products she had recently purchased and to
test her knowledge of the scope of grading in food
products. Most of the purchases of graded foods
were made within a week period, with 76 per cent in
El Paso and 72 per4cent in Silver*City having made
7
such purchases within the week.
Graded products results. The graded products
that the respondents remembered purchasing during
the given period were as follows: (1) sixty-four of
the Silver Citians and seventy-four of the El Pasoans
remembered purchasing graded eggs; (2) fourteen and
thirteen, respectively, in Silver City and El Paso
thought they had purchased graded meat; (3) only
seven and four, respectively, in Silver City and
El Paso did not remember purchasing graded food
7
Question Number 1 of the survey.
134
products. The food products that these housewives
remembered being graded were all dairy products,
canned goods, fresh meat, eggs, and one said frozen
foods.®
In answer to the second question, which asked
if the housewives were willing to pay a higher price
for high grades, i.e., grade A, than lower grades,
i.e., grade B, found on products, 60 per cent said
yes, 24 per cent answered no, and 16 per cent were
uncertain in El Paso as compared with 66 per cent
who gave affirmative, 12 per cent negative, and 22
' a
per cent "not sure" answers in Silver City. The
majority of answers confirmed the strength of the
price consciousness of the representative consumers
in Silver City and El Paso communities.
If you see two brands of grade AA eggs at
different prices would you buy the grade AA eggs at
the lower or higher price? In answer to this ques
tion, sixty-one out of a hundred in El Paso and 55
per cent in Silver City said "lower"; the remaining
respondents gave qualified answers, "higher" or
g
Question Number 1 of the survey.
g
Question Number 2 of the survey.
"uncertain. nl®
Branded goods results. Canned fruits and
vegetables were mentioned thirty-eight times in El
Paso and twenty-six times in the Silver City study,
to become the most mentioned item to be bought along
brand lines.11 Approximately 40 per cent of the
respondents in both studies were willing to pay the
premium for canned fruits, and similar results were
obtained for canned vegetables. On the other hand,
only about one-twelfth of both studies indicated a
12
strong grading influence. The use of grading labels
on canned goods has not developed in the southwestern
section of the United States.
In the specific case of canned pineapple,
slightly over one-half in El Paso and about two-thirds
13
in Silver City preferred one brand, while in the
former about 55 per cent were willing to pay a premium
14
for their favorite brand. Brand loyalty appeared
^Question Number 3 of the survey.
11Question Number 7 of the survey.
12
Question Number 4 of the survey.
13
Question Number 5 of the survey.
14
Question Number 4 of the survey.
136
to be stronger in this specific item than in canned
fruits in general.
If you saw two cans of peas that you thought
to be the same in quality but one had a lower price,
which would you purchase— the lowest or the highest
priced one? The question was asked to see if the
housewives saw the relationship between quality and
price. Approximately two-thirds of the respondents
in both studies would pay the lower price; 11 and 14
per cent in Silver City and El Paso, respectively,
failed to see the relationship, and over half of
these seemed to have no idea of what grading meant.
15
The remaining categories were undecided.
IV. CONCLUSION
Two fairly clear pictures emerged. Canned
foods primarily influenced consumers by means of
brand names, although there was little indication
of strong brand loyalty in any one brand. On the
other hand, grading tended to predominate in the
purchases of eggs, fresh meat, and dairy products.
Of all food products, eggs showed the strongest
grade * purchase patterns.
15
Question Number 6 of the survey.
137
It may be concluded that egg purchases tended
to show the price-quality relationships more in line
with the thesis: that consumers react to graded eggs
in such a way as to make them conscious of the price
variations of eggs within a given grade or quality
level.
Questions
Number 1:
Number 2:
Number 3:
EL PASO, TEXAS AND SILVER CITY, NEW MEXICO CONSUME
Answers
When did you last buy a product with One to three days ag
a grade marking (AA, A, B, C)? About one week ago
Over one week ago
Do not remember
a. What product (or products) was it?
b. What grade was marked on it?
c. What other products do you remember
with a grade labeling?
Are you willing to pay a higher price for
high grades (i.e., grade A) than lower
grades (i.e., grade B) found on products?
Eggs
Meat
Milk
Butter
Canned goods
Cheese
Do not remember
AA
A
B
C
Other (choice meat)
Do not remember
Eggs
Butter
Meat
Canned goods
Milk
Cheese
Chicken
Other
Do not remember
Yes
No
Undecided or depends
If you see two brands of grade AA eggs at
different prices would you buy the grade
AA eggs at the lower or higher price?
Lower
Higher
Undecided
(Continued)
138
CITY, NEW MEXICO CONSUMER SURVEY RESULTS— FALL, 1962
El Paso, Silver City,
Answers Texas New Mexico
One to three days ago 50 38
About one week ago 26 38
Over one week ago 12 19
Do not remember 12 __5
Total 100 100
Eggs 74 64
Meat 14 13
Milk 6 10
Butter 2 1
Canned goods 0 5
Cheese 0 2
Do not remember 4 7
AA 38 45
A 30 30
B 2 0
C 0 0
Other (choice meat) 10 5
Do not remember 22 16
Eggs 2 10
Butter 2 1
Meat 26 24
Canned goods 6 3
Milk 12 18
Cheese 8 6
Chicken 0 1
Other 6 1
Do not remember 48 20
Yes 60 66
No 24 12
Undecided or depends 16 22
Total 100 100
Lower 61 55
Higher 11 26
Undecided 28 19
Total 100 100
(Continued)
SURVEY (CONTINUED)
Questions Answers
Number 4: a. How many more cents would you be 10 to 50
willing to pay for the highest quality 60 to 100
grade of: Over 100
(1) Meats (i.e., hamburger)? None
Uncertain
(2) Eggs? 10 to 50
60 to 100
Over 100
None
Uncertain
b. How many more cents would you be
willing to pay for your favorite
brand of:
(1) Canned fruits?
10 to 50
60 to 100
Over 100
None
Uncertain
(2) Canned Vegetables? 10 to 50
60 to 100
Over 100
None
Uncertain
Number 5: a. Do you find one brand of canned
pineapple better than another?
Yes
No
Undecided
b. Would you pay more for your
favorite brand?
Yes
No
Undecided
c. How many cents more: 10 to 50
60 to 100
Over 100
None
Uncertain
(Continued)
139
SURVEY (CONTINUED)
Answers
10 to 50
60 to 100
Over 100
None
Uncertain
10 to 50
60 to 100
Over 100
None
Uncertain
10 to 50
60 to 100
Over 100
None
Uncertain
10 to 50
60 to 100
Over 100
None
Uncertain
Yes
No
Undecided
Yes
No
Undecided
10 to 50
60 to 100
Over 100
None
Uncertain
El Paso,
Texas
16
30
10
24
20
Total 100
26
24
10
18
22
Total 100
40
12
2
28
18
Total 100
42
12
2
28
16
Total 100
52
24
24
Total 100
38
38
24
Total 100
20
8
2
38
32
Total 100
Silver City,
New Mexico
18
23
24
6
29
100
25
20
12
14
29
100
41
10
4
8
37
100
37
14
6
5
38
100
61
18
21
100
66
16
18
100
100
(Continued)
Questions
Number 6:
Number 7:
Number 8:
If you saw two cans of peas that you
thought to be the same in quality but
one had a lower price, which can would
you purchase— the lowest or highest
priced one?
When you are looking for a quality product,
do you look for grades (A, B, or C) on some
of the food products you buy or do you look
for trade marks (producer's identification)
when you purchase food?
a. What food purchases are influenced
primarily by grading?
b. What food purchases are influenced
primarily by brand names?
What grade eggs do you usually buy?
SURVEY (CONTINUED
Answers
Lowest
Highest
Depends (undecided)
(Of the total, tho
standing of the g
Grades
Trade marks
Both
Uncertain
Eggs
Meats
Canned goods
Milk
Cheese
Butter
All goods
Others
Frozen food
Canned goods
Bread
Coffee
Tea
Meats
Jam
Vegetables
Milk
Fruit
Eggs
Other goods
Most goods
Do not know
AA
A
B
C
(Continued)
SURVEY (CONTINUED)
El Paso, Silver City,
Answers Texas New Mexico
Lowest 66 69
Highest 14 11
Depends (undecided) 20 20
Total 100 100
(Of the total, those with no under
standing of the grading system) 8 3
Grades 10 13
Trade marks 56 51
Both 28 30
Uncertain ___6 __6
Total 100 100
Eggs 54 43
Meats 30 27
Canned goods 8 6
Milk 6 13
Cheese 4 2
Butter 4 1
All goods 2 0
Others 0 7
Frozen food 0 1
Canned goods 38 26
Bread 0 1
Coffee 0 1
Tea 0 1
Meats 4 0
Jam 0 1
Vegetables 0 14
Milk 0 2
Fruit 0 11
Eggs 6 0
Other goods 16 0
Most goods 8 1
Do not know 12 5
AA 58 48
A 28 47
B 2 0
C___________________________________________________0 __0
Total 100 100
(Continued)
SURVEY (CONTINUED)
Questions
Number 9: When you buy graded eggs (AA, A, B, and
C) what do you consider most important?
Answers
1. The highest grade (AA) at the
lowest price
2. Jfy favorite brand on the carton
of eggs no matter what the price
3» The highest grade but I do not
check the price
4. The lowest price but I do not
check the grade
5. The lowest price but I do not
check who produced them
6. The lowest price for my favorite
grade (what is your favorite grade?)
7. Just the lowest price
8. I do not remember
TotaJ
Number 10: Where do you get your eggs
(from what sources)?
Retail store
Supermarket
Private farm source
SURVEY (CONTINUED)
Answers
El Paso,
Texas
Retail store
Supermarket
Private farm source
Silver City,
New Mexico
1°
The highest grade (AA) at the
lowest price
40 44
2. ify favorite brand on the carton
of eggs no matter what the price 24 21
3o The highest grade but I do not
check the price 16 16
4. The lowest price but I do not
check the grade
2 2
5. The lowest price but I do not
check who produced them 0 0
6. The lowest price for my favorite
grade (what is your favorite grade?) 2 13
7. Just the lowest price 12 0
8. I do not remember 4 4
Total 100 100
34
49
17
Total 100
CHAPTER VII
SURVEY RESULTS IN OTHER SECTIONS
Current literature has produced a number of
studies that tend to give breadth and support to the
consumer surveys conducted in Silver City, New Mexico
and El Paso, Texas.
In summarizing the significant results of some
of the more complete consumer studies on eggs, an
analysis was made by A. W. Jasper of thirty-one which
were conducted in eighteen different states and in
Canada.^
Quality grade, price, and size appeared to be
"about equally important factors to housewives in
2
making egg purchases." However, in at least one
large city a surprisingly large number of consumers
interviewed stated they considered nothing in par
ticular in purchasing eggs, or simply depended upon
the reputation of the dealer to supply a good product.
Apparently a vast majority of consumers gave
little or no consideration to brand names when pur
chasing eggs, although in the State of Washington,
*A. W. Jasper, "Consumer Egg Preferences,"
Marketing Activities (Washington: United States
Department o f Agriculture, August, 1953), p. 14.
2Ibid., p. 15.
143
where consumers preferred to buy by brands, they
stuck with the same brand until they got a bad egg,
3
after which they usually changed to another brand.
Most housewives, according to the review, had
a number of ways to evaluate egg quality— some of
thefr valid and others not. However, studies in
several cities revealed that from two-thirds to
three-fourths of the respondents could identify
high quality eggs, and a "majority of them have a
reasonable understanding of at least one method of
4
determining the quality of broken-out eggs."
Many of the studies revealed that housewives
were willing to pay a premium for quality eggs, thus
giving general support to the findings of the author's
surveys. E. M. Moore, for example, in his study of
Rochester, New York, got results similar to the El
Paso and Silver City studies (although a decade
earlier):
Less than half the housewives interviewed
indicated they would be willing to pay a premium
for grade AA eggs over grade A eggs. Of those
3Ibid.
4
Ibid., p. 16; broken-out eggs are eggs with
out shells. The shells are removed in order to
inspect the contents of the eggs.
who were willing to pay a premium, nearly all
said they would be willing to pay five cents
or more for AA quality eggs.5
The current literature gives further substan
tiation to come of the author's findings. On the
other hand, some of the areas covered by the El Paso
and Silver City surveys were not investigated in the
previ ou s survey s.
I. STUDIES IN SPECIFIC AREAS
A major problem in agricultural economics is
the large range of "qualities" of the products that
are produced and marketed. Variations in quality
arise at the level of production due to differences
in weather, breed, land, disease, feed, and management.
Other variations in quality show up in the process of
marketing due to distance, handling, time, product
0
characteristics, and so forth.
"Consumer grade standards are designed to aid
consumers and the trade in making purchases and
g
E. M. Moore, Purchasing Practices and Quality
Recognition for Eggs. Bulletin 947 (Ithaca, New York:
Cornell Agricultural Experiment Station, June, 1954),
p. 20.
0
L. D. Bender, et al., "Do Consumer Grade
Standards for Shell Eggs Reflect Consumer's Preferences
for Interior Quality?" Poultry Science, XXXVII (July,
1959), 882.
145
consequently standards aid in reflecting preferences
7
through prices." How effective are these grade
standards in aiding the consumer?
St. Louis Study
In three studies made in Columbia, Marshall-
Windsor, and St. Louis, Missouri, L. D. Bender and
his associates found that "the consistency of the
g
mean ratings between surveys was remarkable." The
consumer surveys on visual preference for interior
qualities of eggs were made in four areas in Missouri.
Information on visual preferences was obtained by
using a display of broken-out eggs.
The results of these surveys were as follows:
1. The major criteria used by these consumers
in evaluating interior quality were yolk
shape, albumen thickness, and/or the
presence of the chalaza cord. The rela
tive evaluation of the A, B, and C grade
eggs was greatly influenced by the criteria
consumers used.
2. Consumers making any reference to albumen
thickness as a quality criterion discrimi
nated between the A and B grades of eggs
7Ibid. 8Ibid., p. 884.
146
and showed even stronger discrimination
between the B and C grades.
3. Consumers using only the yolk as a criterion
did not discriminate greatly between the
A and B grades of eggs but discriminated
greatly against the C grade eggs.
4. Consumers making no comment on any of the
major criteria rated the B grade eggs almost
as high as the A grade and discriminated
only slightly against C grade eggs. This
group showed the smallest difference between
the mean rating of all grades.
5. Consumers who noted the presence of the
chalaza, regardless of any other comments
that were made, rated the B grade eggs
.f
higher than the A grade eggs. The differ
ence between the mean ratings of the A and
Q
C grades was not great.
There was a close agreement in the mean rating
scores of the various groups in the St. Louis and
Marshall-Windsor studies. Exactly the same patterns
were exhibited by the consumer groups in all areas.10
The results upheld the hypothesis that consumers
9Ibid.. pp. 886-887. 10Ibid., p. 887.
147
evaluating interior quality factors presently used
in the standards would rank the eggs in the order
A, B, C with greater consistency than consumers using
11
other criteria.
Indiana Study
Several factors bearing upon consumer quality
recognition appeared in a study by R. L. Kohls and
N. Oppenheimero Terre Haute, Indiana, was selected
as a medium-sized city with urban and rural influences
which might be typical of many communities in Indiana
12
and the Middle West. Random samples of approximately
two hundred cases were taken from two high income and
two low income areas and a randomly selected seven
other areas out of a possible thirty equal areas
dividing the city of Terre Haute.*3
'V
The results can be summarized briefly into four
general sections, as follows:
U Ibid., p. 883.
12
R. L. Kohls and N. Oppenheimer, Quality
Recognition and Purchasing Habits of Egg Consumers,
Bulletin 592 (Lafayette, Indiana: Purdue University,
July, 1953), p. 4.
13Ibid., p. 23.
148
1. Over two-thirds of the consumers had a
mental picture of a high quality egg which
agreed, at least in part, with the quality
criteria of the federal grading standards.
2. Less than half of the consumers were aware
of the grading terminology. Many who had
a correct idea of high quality according
to the standards did not associate this
with grade A terminology.
3* Consumers demonstrated no significant
ability to recognize grade A eggs as being
superior to grade B. On the other hand,
they readily distinguished the difference
between grade A and grade C eggs. There
was evidence that those consumers purchas
ing from sources which sold grade labeled
eggs were better qualified to judge grade
differences than those housewives buying
eggs from other sources.
4. Prices paid for eggs varied widely. There
were some indications that consumers were
willing to pay a price premium for what
they considered high quality eggs. The
large majority of the eggs in the homes
149
14
visited were grade B or better.
Columbus. Ohio. Study
A similar approach was used by A. W. Jasper
and JR. E. Cray in a study of the consumer preferences
and practices in Columbus, Ohio. According to the
results of their survey, almost 75 per cent of the
consumers interviewed were willing to pay a premium
for good eggs, and more than 97 per cent stated that
they did not buy any particular brand of eggs. Over
60 per cent of the respondents listed "quality" first
when asked to name their most important consideration
in buying eggs. Eighty-two per cent of the consumers
interviewed had no egg buying problems or complaints
about recent egg purchases. Forty-one per cent of
the consumers interviewed purchased quality graded
eggs.15
These studies are only a few of those available
in this area, but they are the most relevant to the
problem designed for the El Paso and Silver City
14Ibid. , p. 21.
15
A. W. Jasper and R. E. Cray, Consumer
Preferences. Practices and Demands in Purchasing Eggs
and Poultry in Columbus. Ohio. Bulletin 736 (Columbus,
Ohio: Ohio Agricultural Experiment Station, October,
1953), p„ 30.
150
surveys. Supplemental information found in current
articles will now be reviewed.
II. STUDIES WITH SUPPLEMENTAL INFORMATION
Grade standards for eggs were enacted in the
early twenties by the United States Department of
v
Agriculture for use on a voluntary basis. These
standards are evaluated and changed every four or
five years, but the changes since 1925 have only been
16
minor.
Support for Changes
One area covered by much of the current litera
ture but not referred to in the author's surveys was
the need for changes in grading standards.
New York study. Test results from a study made
in New York City, for instance, indicated that yolk
color does materially affect yolk visibility, and
therefore visibility in the standards for individual
17
eggs does discriminate against yolks of darker color.
16Bender, o£. cit., p. 882.
1 7
F. L. Thomsen and B. Winton, Consumer
Preferences for Egg Yolk Color and Shell Color in
New York City. Bulletin 329 ^Columbia, Missouri:
Missouri Agricultural Experiment Station, August,
1933), pp. 19-20.
151
According to the study, slightly more than
one-third of the interviewed consumers expressed a
preference for light yolks, one-quarter for dark yolks,
one-fifth for yolks of medium color, and the remainder
had no preference at all. This indicates, noted the
authors of this study, that a price premium for any
yolk color is not justified from the viewpoint of
18
either consumers or distributors.
In view of this conclusion, it would be
desirable for those in charge of state and
Federal grading regulations to carefully con
sider the possibility of altering either the
standards of individual eggs, or the prevailing
market interpretation of these standards, in
such a way as to avoid any discrimination against
yolk color which may in actual practice exist.*,
as a result of the operation of grading laws.
It has been suggested that the best methods
for accomplishing this objective would be to eliminate
entirely references to yolk visibility found in the
standards. This may be supported on the grounds that
all factors influencing visibility, other than yolk
20
color, are not capable of objective determination.
There is a need, wrote these authors, for a
program of consumer education to eliminate false
prejudices against medium to dark yolk eggs and
18Ibid., p. 23.
20Ibid.
*8Ibid., p. 20.
152
brown-shelled eggs and make it possible to obtain
premiums only when actual quality justifies this price
increase.2' * '
Grading compliance. Not only do some of the
bases of the standards for eggs need revision, but a
Rhode Island study pointed out that consumers seldom
insisted upon strict grading compliance.
A study of the relationship between consumer
demand, preference, and purchases of eggs and
the quality of eggs which actually reach the
consumer's hands suggests that consumers seldom
insist upon strict compliance with their prefer
ences.22
F. R. Taylor and his associates found that even
though a majority of the eggs purchased by the respond
ents in this study were grade A eggs, an examination
of these eggs in the consumer's home showed only two-
thirds of them to be A quality (31 per cent were B
quality and the remainder were C quality) according
23
to their broken-out appearance.
21Ibid., p. 23.
22
F. R. Taylor, et al., Consumer Egg Quality.
Size and Price Relationships. Bulletin 322 (Kingston,
Rhode Island: University of Rhode Island Agricultural
Experiment Station, February, 1955), p. 5.
23Ibid.
153
This study raises a question as to whether
present grades and standards conform with varia
tions in quality which are recognized by the
consumers and, therefore, whether an effort to
assure strict compliance with existing grades
and standards is applicable.24
It seemed apparent to Taylor and his co-authors
that present merchandising practices do not operate
in such a way as to provide purchasers with eggs which
conform strictly to specifications. It would also
appear that the standards which form the basis for
25
consumer grades are too rigid for practical purposes.
There is no indication that extra effort was
extended to secure eggs of the preferred quality
or that weekly per capita consumption was increased
by access to eggs of the preferred quality.
Swedish system. Under the system of informative
labeling which is employed in Sweden, the information
on the labels is standardized so that consumers can
readily compare one product with another of similar
type or having a similar function. The aim is to
enable a buyer to judge how a product will perform in
use, and whether it is of a quality that will suit his
27
purposes. Although no over-all grades are supplied,
24Ibid., p. 6. 25Ibid.
26Ibid., p. 5.
2 7
Statens Konsumentrad, "Aiding the Consumer"
(Stockholm, Sweden: Statens Konsumentrad, 1962),
p. 15. (Mimeographed.)
154
specific ratings are given for certain key properties
which affect performance and possibly also the price.
This means that consumers can select products with
28
just those properties they require. Details of the
program will be found in Chapter X.
Flexibility with strict control found in the
Swedish system puts the burden on a consumer informa
tion and education program. The system can be effec
tive only after the program has matured to the level
that consumer knowledge is fairly universal.
Need for consumer education. The current
literature supplies a number of articles that show
the need for consumer education. Such educational
programs would undoubtedly make a grade labeling
system more effective and perhaps more universal.
"Much of the misinformation which presently
exists in the consumers' minds could be dispelled by
29
a well thought out consumer education program,"
wrote Taylor. In the light of the present quality
situation, continued Taylor, a definite need exists
for a comprehensive education program on the consumer
28Ibid., pp. 15-16.
29
Taylor, oj>. cit. , p. 7.
155
level to present the facts regarding egg quality,
size, price, and source of supply. He also suggested
reducing prices to a common denominator, such as the
pound, and showing the price per pound as well as per
package. Kohls and Oppenheimer confirmed this need
by stating that there "were indications that informa
tional programs can improve the consumers* knowledge
30
of the current grading standards."
Such programs would present some problems since
Americans are generally oriented more toward thinking
along production channels than along the often fruitful
consumption avenues. Nevertheless, much can be done
through and within our public education facilities.
Some of the studies not included in this chapter
will be reviewed in the evaluation and conclusion found
in Chapter VIII. For reasons of continuity of the
material presented, it was felt that the present
chapter should concentrate on the current literature
pertaining to consumer preferences and demands in egg
purchases.
30
Kohls and Oppenheimer, oj). cit., p. 22.
i
i
i
. . j
CHAPTER VIII
CONSUMER SURVEY DATA CONCLUSIONS
Flexibility in quality usually may not compen
sate for inflexibility in price, wrote Fritz Machlup.^
Although both quality and price competition tend to
complement each other when going in the same direction,
price flexibility within a given grade level seems, to
this author, to have in balance the most advantage for
consumers.
In line with this thinking, the thesis of this
paper is that grade labeling tends to bring about a
greater degree of price competition. What results do
the Silver City-El Paso surveys and those surveys
found in current literature supply in support of this
thesis?
I. SURVEY LIMITATIONS
Before answering this question it would be
sound procedure to recognize the limitations to our
tool of research. Under conditions that could be
considered ideal, the results of these surveys only
*Fritz Machlup, The Economics of Seller1s
Competition (Baltimore: The Johns Hopkins Press,
1952), p. 164.
157
gave an indication of what people thought they did.
One can only assume that what people thought they did
is what they actually did. This is not always a
realistic assumption. However, in the light of
scarcity of statistical material categorized in terms
of graded products, the consumer survey seemed the
most feasible approach.
Economy, primarily in the financial sense,
influenced the use of random sampling by means of
telephone contacts. It was realized that perhaps
not all consumers had telephones. On the other hand,
the percentage of such consumers seemed insignificant.
Problem of Wording Questions
The difficult problem of wording questions to
be asked of potential respondents arose. It was
decided that relative objectivity might be approached
if the questions were worded in terms of the con
sumer's recent purchase activity in order to modify
the variable factors of memory and place the question
in a realistic context for a greater general under
standing.
Nevertheless, the element of misunderstanding
did enter the picture. To what extent it is not
known. There was undoubtedly a correlation between
i
f
J
158
the amount of misunderstanding or misinterpretation
on the one hand, and the number showing little
knowledge of grading and the grading system on the
other. As near as it could be determined, sur
prisingly few people had not seen or realized the
significance of the grade on familiar food products.
The Inquiry Narrowed
$
In order to ask questions on grading effec
tively of consumers, it was recognized that the scope
of inquiry would have to be narrowed to those goods
which have a high degree of universality in grade
labels on the retail level. This meant that mean
ingful questions were designed to inquire about food
purchases, principally eggs and meat.
It would be unrealistic to assume that eggs
and meat were typical representatives of products in
general. It would not be realistic to make such an
assumption, in turn, in the area of foods. Again the
surveys were restricted.
There is, on the other side of the picture, a
conceivable correlation between price consciousness
in terms of such goods as eggs and meat and the
potential price reaction to the other goods that are
conducive to grade labeling. Price consciousness
159
seems to be a frame of mind, and institutions such
as the discount houses would not have survived had
such an influence not been present.
To define the populations of Silver City and
El Paso as typical also runs into soma difficulty.
Both these communities have a strong minority of
Spanish-speaking people whose traditions and customs
are more or less tied to that of Mexico. Nevertheless,
many such cities have similar minority influences that
should be taken into consideration. The current lit
erature on surveys in other sections of the country
tended to support many of the results of these two
communities. Ideally, Silver City and El Paso have
a representative number and variety of food retail
outlets for their size.
Price Consciousness
The problem stated for the purpose of approxi
mating the consumers' views toward the effectiveness
of grade labeling was: are there indications that
consumers do react to grade labeled products in such
a way as to make them conscious of the price variations
of competing goods within a given grade or quality
level? It is possible that such a question, if
answered, might not give a true indication that the
i
........ J
interplay of the forces of supply and demand deter
mined price. Price consciousness could mean that the
consumer was willing to pay a higher price for such
reason as prestige. But, just the same, there is a
conceivable correlation between price flexibility and
price consciousness.
The majority of consumers interviewed in the
surveys showed a tendency to purchase goods of the
highest grade or quality level for the lowest price.
There was a strong indication here that the respond
ents showed not only a substantial degree of price
consciousness but also of quality consciousness.
A strong element of price flexibility would
certainly be one if not one of the main characteristics
of a highly (price) competitive market. Certainly a
price conscious public would tend to stimulate and
be stimulated by price flexibility if, of course,
obstructions such as government intervention did not
interfere with such an influence. Under conditions
found in the egg market, therefore, an assumption of
price consciousness on the part of the consumer could
conceivably be an indication of and a necessary
ingredient for price flexibility.
Check on Current Literature
In the surveys found in the current literature
a careful check was made of the methods by which the
data were obtained and for internal consistency to
determine if they had been correctly reported with
care and precision. Such a check, even under con
ditions of the best organized presentations, are far
from ideal. A check of this type would only give an
indication of a consistent application of the method
ology used, but it is not always an indication of the
accuracy of the data presented.
Again, it was necessary to assume that if the
writer were fairly meticulous about his methodological
approach he would also be as precise in his field work.
An internal consistency approach would, never
theless, seem sufficient for the purposes of this
paper, since the current literature was used primarily
to give breadth to the Silver City-El Paso surveys and
to give an additional check to those findings. It
should be noted that the two surveys tended to support
each other, thus requiring less confirmation from the
current literature.
Student Part ic ipat ion
Student participation in the Silver City survey
could have led to some problems in the field operations
162
Such problems, however, were believed to have been
kept at a minimum. The marketing class of fifteen
students showed a high degree of enthusiasm in class
discussions of field work technique. They were sup
plied with a general background in research techniques
and instructed thoroughly in the steps needed in the
field operation for the research project. They were
informed., that they must adhere strictly to the wording
of the questions in the forms and were supplied with
appropriate introductory remarks.
The students were supervised by a graduate
student and the author during the entire field opera
tion. With the experience of the El Paso survey in
the background, the author was able to supply much
insight and aid in handling the unusual situations
that tend to arise in any contact with the public.
The students were able to follow the survey
from the stage of the evaluation of the questions in
the survey form to the final evaluation of the data
collected. An additional question was added by the
class to supply a stronger feeling of participation
by the class members. The author felt that, under the
circumstances of a well-planned procedure with control
and checks on each step, the field operation in the
Silver City survey was most successful and the results
were quite reliable
163
II. OVER-ALL SURVEY RESULTS
The current literature has produced a number
of studies that tend to give breadth and support to
the consumer surveys conducted in Silver City, New
Mexico and El Paso, Texas.
Quality and Price
Quality grade, price, and size appeared to be
about equally important factors to housewives in
making egg purchases. This was one of the findings
by Jasper in a survey of thirty-one consumer studies
on eggs conducted in eighteen different states and
2
Canada.
Quality identification. Two-thirds to three-
fourths of the respondents in these studies could
identify quality eggs, and a majority had a reasonable
understanding of at least one method of determining
the quality of broken-out eggs. With one city
excepted, brand names influenced egg purchasers very
little at the retail level.
2
A. W. Jasper, "Consumer Egg Preferences,"
Marketing Activities (Washington: United States
Department of Agriculture, August, 1953), p. 14.
i
. . . ..J
164
Local survey results. The El Paso and Silver
City surveys also pointed out the importance of quality
and price in egg purchases* The largest group of
respondents described their egg purchasing habits as
purchasing the highest quality grade at the lowest
possible price* Although this group constituted only
44 per cent in Silver City (40 per cent in El Paso) of
the total number of consumers questioned, there
appeared to be substantial support for price and
quality consciousness in that other answers indicated
an equal or at least a partial concern with both
quality and price. Over three-quarters of the
respondents in Silver City were so categorized.
Brand names in egg purchases appeared to be
higher, on the other hand, in the El Paso and Silver
City surveys than most of the surveys in current
literature, constituting about one-fourth of those
questioned. It was in the area of canned fruits and
vegetables that brand loyalty tended to dominate the
purchasing.
Only 7 per cent in the Silver City survey and
4 per cent of the respondents in El Paso did not
remember purchasing any graded products. This result
alone, with the consistent responses to the other
questions in the form (i.e., it was noted that most
165
of the respondents fitting into the above category
were unsure of several of the "check" questions),
indicated only a small minority were not familiar
with the grade label. Therefore, there was a correla
tion between the author's conducted surveys and the
current literature on this question.
Problem of quality recognition. According to
Professor Jasper's review, a majority had a reasonable
understanding of at least one method of determining
the quality of broken-out eggs. The problem for the
consumer in such a situation is to determine the
quality before the purchase is made. A majority may
be able to determine the quality after purchase and
when the shells are broken out, but few have the
equipment or knowledge to determine the quality before
buying the eggs.
The case for a graded purchase would conceivably
be fairly strong under conditions in which the quality
was unknown or not easily fathomed. Since this fact
is fairly well-known among consumers, the need for
guidance in such techniques as grade labeling can
readily be seen. The consumers, on the other hand,
tend to rely also on other guides to the unknown.
Brands, in the case of canned goods, seem to conform
166
roughly to their requirements.
III. THE PROBLEM OF GRADES AND BRANDS
There can be no real problem in the use of both
grade and brand labels together. The Canadian experi
ence, described in Chapter IX, shows that the two
labels tend to supplement each other. In the author's
opinion, grade labels give guidance to the measurable
quality characteristics of a given product and brands
can more readily and usefully be associated with the
subjective quality characteristics, such as taste.
Grade labeling might modify the monopolistic tendency
of nationally advertised brands, and at the same time
brands could conceivably keep graded products from
becoming so standardized that price fixing, price
control, and price maintenance might be facilitated.
The case for grade labels is one of balance with, not
exclusion of, trade marks or brands. In fact, brands
may well increase with grading requirements. New
brands and private brands may be given a better start
and better support with quality markings. This has
been the Canadian experience.
IV. SUMMARY AND CONCLUSION
167
Any of the social science tools have their
*
limitations. The task of the researcher is to compre
hend the weaknesses and advantages of the techniques
available to him and to use the tools best suited to
the job he sets out to do.
Summary
It was expedient to assume, from the first,
that what people thought they did is what they actually
did in the light of nonexisting statistical verifica
tion in grade groupings.
Random sampling of telephone directories and
telephone contact with housewives appeared to be
economically advantageous and a sound research pro
cedure. The sample was not felt to be influenced to
any extent by the , , nontelephone" population.
Purchase-activity slanted questions aided in
modifying the barriers of misunderstanding between the
respondents and the researcher. Only a small fraction
of the sample appeared to lack at least an elementary
understanding of the grading system.
The scope of the inquiry was narrowed to food
products with widespread retail level utilization of
grade labels. Eggs, in particular, lent themselves
168
to the requirements of the survey. The largest number
£
of respondents indicated strong price consciousness
and conceivably evidence of price flexibility and
price competition in the egg market.
The pertinent surveys of secondary sources were
carefully checked for internal consistency and sup
ported, to some extent, the primary source material.
Breadth was acquired in the current literature due to
extensive geographical coverage of these surveys.
Student participation in the Silver City study
was strictly supervised and thoroughly controlled.
Quality grade, price, and size appeared to be
about equally important factors to housewives in
making egg purchases, and a majority of the respond
ents appeared to have a reasonable understanding of
at least one method of determining the quality of
broken-out eggs.
Conclusion
The results of the local surveys pointed to the
small fraction of the answering housewives having no
grasp of the grading system. There was a recurring
concern with quality and price in both the primary and
secondary sources used in the project.
169
There is a strong indication that grade label
ing does tend to flatten the demand curve and stimulate
price competition. Although such a conclusion is
based on the assumption that what people think they do
is what they actually do, the price fluctuations in
such a grade labeled market as that for eggs tends to
point to a price consciousness on the part of consumers.
It would be logical, to assume a relatively close rela
tionship between price consciousness and price flexi
bility in a market free from intervention.
Price flexibility may not always be clearly seen
in markets containing products with both grade labels
and brand names. Trade markings may conceivably
counteract the competitive influence of grading. A
study of such a market may be seen in the following
chapter, which reviews the extensive Canadian experi
ence with grade labeled products. The Canadian insight
will tend to support some of the findings of the Silver
City-El Paso surveys and contradict others. It is
necessary to note, however, that an analysis dealing
solely with graded products is not expected to fit
exactly the one with both grade labels and brands.
3E1 Paso, Texas-Silver City, New Mexico con
sumer survey made by the author, September 6-9, 1962,
Question Number 10, p. 141 of this dissertation.
CHAPTER IX
CANADIAN GRADING PROGRAMS
"Canada, although not unique with respect to
grading requirements, is indeed a pioneer in the
field."1 Grade labeling of canned fruits and vege
tables has, for example, been mandatory in Canada
since 1918, and fresh fruits, vegetables, and eggs
2
since 1923.
Canadians understood at a relatively early
date that dependable markets could not readily absorb
the large quantity of primary economic products, and
therefore the Canadian people sought buyers elsewhere.
I. GRADE LABELING IN CANADA
The geographic location of the market from the
source of the goods in Canada pushed the development
of quality guarantees, and the characteristics of the
Canadian goods simplified this requirement. Canada's
^P. K. Norsworthy, "Some Effects of Grade
Labeling," The Business Quarterly, 1952, p. 117.
2
Jessie V. Coles, Standards and Labels for
Consumer1s Goods (New York: Ronald Press Company,
1949), p . 325.
3
Norsworthy, loc. cit.
171
grading system then soon became established, and its
grade markings were recognized as a dependable sign
4
of quality.
Grade Labeling Development
Grade labeling of foods in Canada "came about
more through an evolutionary process than by any
BJ
sudden enactment." Various acts of parliament from
1884 on gradually laid down the specifications con
cerning description of product, identification of
source, and information concerning the quality grade
6
and weight.
Fruits and vegetables. The labeling of canned
fruits and vegetables by grades has been mandatory
since 1918. The Meat and Canned Food Act of 1907, as
amended in 1908, provided that all containers of these
foods be marked with a "true and correct description
7
of the contents of the package."
In 1918 an administrative order was issued
establishing positive standards and requiring labeling
4Ibid. 5Ibid., pp. 117-118.
6Ibid., p. 118.
7
Coles, op. cit., p. 332.
and grading of canned fruits and vegetables. These
specific requirements were incorporated into the
1925 act.8
Grading of fresh vegetables and fruits commenced
with the grading of apples in 1901. Regulations
adding other vegetables and fruits were included under
the act until 1923. Since that year all closed
packages containing fruits and vegetables must be
grade labeled if grades have been provided for those
products.8
Eggs. Export eggs have been under mandatory
grade labeling since 1918. These requirements were
extended to Canadian consumption in 1923. All shell
eggs selling in Canada must now be grade labeled.^
Poultry and meat. Dressed poultry standards
for grading were originally set up by the Canadian
government in 1928, with the present regulations
dating back to 1943. Even though sale by grade is
not mandatory everywhere in Canada, a large share of
the poultry is now sold according to grade in large
cities.XX
8Ibid.
10Ibid., p. 334.
9Ibid.
X1Ibid.
173
To date, the only graded meat which can be
12
purchased in Canada for domestic use is beef.
Other products. Grade labeling of creamery
butter is mandatory in most provinces. On the other
hand, Canadian cheddar cheese must be graded only
before it is exported. Grades for maple sugar and
syrup were established in 1931, "but very little is
sold by grade."^3
Administrat ion of Regulations
The grading regulations in Canada are admin
istered by the Dominion Department of Agriculture
under the various appropriate acts.
Procedure. The regulations require that
processors must apply to the Canadian Department of
Agriculture for a registration certificate which is
issued if the business conforms to the sanitary and
other regulations. All containers must show the
permit number of the business producing them and
14
labels must be submitted for approval before use.
12Ibid. 13Ibid.. p. 336.
*4Fruit and Vegetable Division of the Marketing
Service, The Meat and Canned Foods Act (Ottawa:
Canadian Department of Agriculture, 1954), pp. 14-16.
174
Individual processors do the inspecting and
grading, since government inspectors are not located
in all businesses producing grade labeled goods.
The inspectors do, however, check on the grading done
by the processors. They grade samples and may send
samples to Ottawa for grading. They furnish reports
15
to the businesses of all inspections they have made.
Noncompliance with the regulations may mean
that the Minister of Agriculture will refuse inspec
tion, marking, and certification of the products, or
he may close the business. Goods not conforming to
grade on the label may be detained and cannot be
16
moved until a recheck of the grade is made in Ottawa.
Further disagreement may be settled in the courts,
but only a few cases concerning fruits and vegetables
have had to be settled in this manner.
Grading cost. "The costs of compulsory grading
of canned fruits and vegetables in Canada are negli-
17
gible." Comparatively few government-paid inspectors
^Coles, oj>. cit. , pp. 336-337.
^6Fruit and Vegetable Division of the Marketing
Service, 0£. cit., pp. 8-9.
17
Coles, o£. cit., p. 337.
: i
i
175
do all the necessary checking of the grades. There
is no cost to the canners except for the samples they
supply. The low cost of enforcement, however, prima
rily is due to the strong support of the Canadian
businessmen themselves. (It is doubtful that such
low costs could be maintained in an atmosphere of
wholesale resistance from such producers.)
Canada has, therefore, built a system of stand
ards which is compulsory for some goods "in all cases
and for others in certain places and under certain
1 O
conditions."
II. COMMODITIES THAT CAN BE GRADED
Experience has shown that grade establishment
and grading are most practical for commodities
whose units have a considerable uniformity, the
varieties of which are somewhat limited, the
qualities of which are retained for a sufficient
time to complete marketing process and which are
produced and are acceptable to consumers in a
similar range of qualities and sizes from year
to year so that a grade once fixed is more or
less continuously applicable.19
X8
Norsworthy, op. cit.. p. 118
1 Q
Coles, op. cit., p. 368.
176
III. REASONS FOR DIVERGENT CANADIAN
AND AMERICAN POLICIES
Canadian policy is notably at variance with
that of the United States in the field of compulsory
grade labeling. Although it has its drawbacks, com
pulsory grade labeling has functioned very satis
factorily in Canada.
The Canadian economy itself supplies a different
atmosphere in which grade labeling may function.
Over two-thirds of Canada's national income
depends upon her production of primary goods,
which are chiefly staples and usually standar
dized, and Canadian quality markings have had
to uphold their fine reputation in the export
market, for the latter is indeed important to
Canadian business and hence to the Canadian
consumer.20
Each type of commodity produced in Canada is
grown in fewer regions than in the United States, and
probably fewer varieties need to be accounted for in
drawing up standards.
"Producers tend to be smaller, and they do not
advertise as extensively as American firms because of
21
smaller budgets and lack of appropriate media."
20
Norsworthy, 0£. cit., p. 128.
21Ibid.
177
They also tend to be less numerous, and it is not only
easier to reach agreement and gain cooperation but
also less difficult to arrange inspection.
Most important is the fact that Canadian lobby
ists are somewhat less numerous and powerful than those
22
in Washington.
Professor Jessie V. Coles, of the University.,
of California at Berkeley, pointed out that it is true
that Canadian industries are much smaller than found
in the United States.
Yet this does not seem to be a valid argument
as to why members of the larger industry in the
United States could not be equally successful
with grade labeling, unless one assumes that they
are less efficient.23
IV. THE EFFECTS OF GRADE LABELING
In the Canadian experience an education system,
teaching consumers not only to desire quality goods
but also to choose them intelligently, must be main
tained. It was found easier to eliminate consumer
confusion with a simple grading system. Grading tends
to aid the consumer by timesaving specifications— it
22Ibid.
23
Coles, ££. cit., p. 341.
X78
"eliminates lengthy decisions regarding quality so he
can choose regarding style, etc., and facilitate tele-
24
phone and mail order buying and self service."
The Effects of Grade Labeling
on Brands, Quality, and the
Demand Curve
Both grades and brands guide purchasing, but
brands also guarantee service and satisfaction beyond
quality. With both labels in force, product differ
entiation can continue by varying flavor, style,
package, and so forth.
Effects on brands. Brand choice exists within
grade classifications. It may cause price differential
within grade boundaries within a certain range, espe
cially to the extent that consumers either wish to
discount the graded quality or lack information con
cerning quality ratings.
Brands may increase with grading requirements.
Some Canadian canners have introduced new brands for
25
each product grade produced. In Canada stress is
24
Norsworthy, o£. cit., p. 118.
25Ibid., p. 124.
179
still placed on brand names, although quality grade
marks have assumed greater significance than form-
. 26
erly.
Effects on quality. Before official Canadian
standards for quality were set up many illustrations
of varying quantity and quality could be found,
"Little relationship between quality and quantity
and price existed and labels and brands were not
27
always dependable guides."
The answer to the quality differences in
Canada seemed to be grade labeling. In Canada the
consumer's first reaction was that lower grade quality
was given a "bad mark" and its consumption decreased,
"but this was tempered by the purchasing power of the
28
buyers." As a result of consumer education, differ
ent qualities for different needs tended to be bought
by most people.
There has not been a deterioration in quality
in Canada in the sense that quality has been lowered
to minimum specifications and that products may be
measured by how cheap they are rather than how
36ibid.
28ibid.
27
Ibid., p. 125.
180
satisfactory, and so forth. Canadian packers "get
what they want out of the pack, and do not appear to
29
cut quality . . . ."
Grading has tended to provide an incentive to
improve quality. It insures protection against
adulteration. "A minimum standard still permits
30
variation within each grade for an added premium."
In general, it seems clear that Canadian grade
labels introduce honest quality marking and a con
centrated effort to improve goods.
Effects on the demand curve. The price differ
ential tends to be reduced within quality groups to
the extent that consumers are grade conscious and
31
that they notice no difference in ungraded qualities.
In other words, as the consumers become more sophis
ticated in their knowledge and application of the
grade quality system, then there is movement towards
greater price competition within grade groups (i.e.,
A, B, or C). This observation supports the thesis
that grade labeling tends to flatten the demand curve
for the graded product within its market and tends to
29Ibid., p. 126. 30Ibid.
31Ibid., pp. 124-125.
bring about a higher degree of competition, generally
V. EVALUATION
Canada's successful experience with mandatory
quality control, qualified by the special adaptability
of Canadian business concerns to such a program, may
well be a model for examination by countries contem
plating a similar move. Canada has pioneered effec
tively in an area which today is of great concern to
all who are interested in the maintenance of quality
standards.
Ultimately the further success of Canadian
grading will continue to hinge upon the intelligent
and honest use of quality grade labels on the part
of the Canadian consumers.
CHAPTER X
QUALITY IN THE SWEDISH CONSUMER MARKET
Sweden's labeling system is a relatively recent
one. The Canadian system of grade labeling described
in the previous chapter, on the other hand, supplies
a mature and lengthy experience from which one may
gain insights into a grading program in actual prac
tice. Sweden's program, nevertheless, supplies new
insights into the effect of a multiple grading system
on the demand curve*
A translation of a report by a Swedish com
mission investigating the adoption of a grading and
informative labeling program has been a useful source
of material for this chapter. Although only parts of
the program were adopted, the translation supplies
useful information on the many factors and facets
involved in setting up such a program. The study is
important primarily for this reason.
Sweden adopted the informative labeling phase
of this program. In order to comprehend the effect
of the informative labeling program on the Swedish
economy, it is necessary to outline the various
institutions that have some control over the program.
183
I. BACKGROUND: SWEDISH CONSUMER
ORGANIZATIONS
The first public moves to aid the consumer
were made during the Second World War when a govern
ment organ, known as "Active Housekeeping," was set
up in 1940 to help overcome the shortages of food
and household goods by advising homemakers on the
purchase and care of what was available. Concurrently
a group of housewives and home economists started a
scientific study of housework jointly with government
and private finance.1 This led to the establishment
of the Home Research Institute in 1944.
In the immediate postwar period a number of
government reports were produced touching on consumer
matters. Among the most important were those on
"Family Life and Housework" and "Quality Research and
Consumer Guidance." Various investigations were also
made concerning consumer goods such as furniture,
clothing, and canned foods. A committee appointed
by the Ministry of Social Affairs further investigated
such matters as the centralized preparation of meals
and district laundry facilities.
1Statens Konsumentrad, "Aiding the Consumer"
(Stockholm, Sweden: Statens Konsumentrad, 1962),
p. 2. (Mimeographed.)
184
In 1954 a special ministerial post was created
for dealing with family welfare and consumer matters.
Appropriations were subsequently made for financing
research and informational activities, and in 1957
the Consumer Council was established. This council's
main function is the allocation of funds for consumer
projects. At the same time the Home Research Institute,
with which "Active Housekeeping" had been incorporated,
was taken over entirely by the government and renamed
the National Institute for Consumer Information. The
Institute for Informative Labeling, or VDN, had then
2
been in existence for six years.
The Consumer Council
According to its directive, the Consumer Council
has to watch developments in consumer research and
consumer information, promote collaboration among
various interests in the consumer field, and support
research and information projects or start such
projects itself.
Besides allocating funds for desirable projects,
it is the business of the council to advise the govern
ment on matters concerning consumer research and
guidance. The council is directed to cooperate with
2Ibid., p. 4.
185
consumer and business organizations as well as with
scientific institutions and other bodies involved in
consumer activities, and to lay down the principles
for the type of consumer guidance that the council
JJ
wishes to promote.
Among the informational activities that have
received support may be mentioned the production of
booklets on furniture, household glass, television
sets, and various products covered by informative
labeling. Grants have also been made for films on
kitchen planning and informative labeling, for exhi
bitions showing ways to use space effectively in
houses and apartments, and for training group study
4
leaders.
Besides academic institutions, testing lab
oratories, and individual researchers, bodies that
have been aided by grants include the Institute for
Consumer Information, the Institute for Informative
Labeling, and the Swedish Association for Industrial
Design.
The council finances not only the research
carried out by other institutions but also employs
experts to make investigations directly on its behalf.
3Ibid. 4Ibid., p. 5.
186
It has thus made an index of Swedish projects relating
to consumer research to parallel similar investigations
made in the other Scandinavian countries. This index
will help in planning the council's own activities
and provide a readily available survey for researchers,
product developers, and teachers of home economics, as
well as others who may wish to know what is being done
5
in the field of consumer research.
Cooperation with consumer organizations in the
other Scandinavian countries is maintained through
membership in the Scandinavian Committee on Consumer
Matters. The Swedish Consumer Council is also repre
sented on the Clearing House Committee of the Inter-
0
national Office of Consumer Unions at The Hague.
Institute for Consumer
Information
In general, the aim of this institute is to
demonstrate how homes may be run more efficiently,
and to encourage the production and use of suitable
consumer goods. To this end a fairly wide range of
products is tested, and studies are made of various
housework operations. Whenever practicable this is
5Ibid., p. 6. 6Ibid.
187
done in collaboration with other organizations, both
public and private. The findings of other institu
tions, as well as those of the institute's own
research, are assembled and published for public
, 7
distribution.
Especially important among the institute's
activities is the testing of products for manufactur
ers and importers. In this way the discovery of
weaknesses often has led to product improvements, and
in general, cooperation with business firms has meant
that consumer viewpoints have been brought to the
attention of manufacturers and have been observed in
the development of consumer products.
Research findings are published in a special
bulletin which primarily is intended for readers with
a professional interest in research. A more popular
publication, containing straightforward information
for the ordinary readers, is issued ten times a year.
In addition, buying guides are put out from time to
time describing the construction and performance, in
various respects, of a number of competing products,
Q
but not giving over-all ratings.
7Ibid., pp. 7-10
8Ibid., p. 11.
188
State Council and State
Institute for Building
Research
The relationship of the State Council and State
Institute for Building Research to one another is
essentially the same as that existing between the
Consumer Council and the Institute for Consumer Infor
mation, with the exception that the State Council for
Building Research is expressly forbidden to undertake
research on its own account. Besides allocating funds
and keeping a watch on developments, the council has
to see that research efforts are focused on what are
g
momentarily the most important tasks.
Price and Cartel Office
Broadly, the business of the Price and Cartel
Office is to gather information on prices, and to keep
track of developments both on a nation-wide scale and
in particular areas when this seems called for; to
register cartel and price fixing agreements; and to
investigate any restrictive practices that appear to
be contrary to the public interest.
9Ibid., p. 13.
189
Institute for Informative
Labeling: VPN
Under the system of informative labeling which
is employed in Sweden the information on the labels
is standardized so that consumers can readily compare
one product with another of similar type, or having a
similar function.^ The aim is to enable a buyer to
judge how a product will perform in use, and whether
it is of a quality that will suit his purposes. Thus,
much more is involved than a mere declaration of
materials or contents. For the most part no quality
standards are imposed, as it is considered impossible
for anyone but the consumer himself to know just what
quality he needs for any particular purpose.
For the same reason, no over-all ratings are
given. Ratings, nevertheless, are given for certain
key properties which affect performance and possibly
also the price. Again, this means that consumers can
select products with just those properties they
require. Two persons might, for instance, both like
to have a fabric that is 100 per cent cotton, but one
Statens Offentliga Utredningar, Handelsdepart
mentet, Kvalitetsforskning och Konsumentupplysning
(Stockholm, Sweden: Emil Kihlstroms Tryckeri, 1949),
p. 113.
190
may be more concerned about the fastness of the color
to sunlight and the other about its ability to with
stand repeated washings. Each can see from the labels
which fabrics best meet his or her needs.
The information that has to be given concerning
weight, material, strength, capacity, color fastness,
and so forth is carefully specified, as is the form
in which it is to be presented. Business firms using
the system may not omit any items or add other informa
tion. Firms "write their own labels" on the basis of
values obtained from specified, standard tests; no
pretesting being done by the labeling institute.
The reliability of the statements on the labels, on
the other hand, is verified by continually testing
articles purchased at random in the shops by the VDN
institute's buyers.
Any product can be labeled, provided there is
a published specification for labeling the type of
product in question. The development of specifica
tions is itself dependent, however, on the existence
of suitable methods for testing the properties that
must be declared if the label is to convey really
useful information. If there are no suitable test
methods available, the specification committees must
arrange to have methods developed before they can
191
issue specifications saying how products are to be
labeled. Before being adopted the test methods must,
as a rule, have been accepted as Swedish standards.
The committees working on specifications always
include representatives of consumer organizations as
well as manufacturers, distributors, and experts from
testing laboratories and other specialists. The draft
specifications, moreover, are circulated among a large
number of consumers, as well as trade and other organ
izations, before final adoption.
Labeling is not compulsory. A firm wishing to
label a product simply applies for permission to do
so, and agrees to adhere to the VDN specifications.
This also means that it uses the institute's mark,
VDN Varufakta, to indicate that it is doing this.
The fees of varying amounts, which are payable for
the right to use the system, just about cover the
costs of the check tests.
The general operating costs of the institute
are met through a regular government appropriation,
as well as through annual contributions from business
and consumer organizations. Special projects, such
as developing test methods or providing supplementary
guidance for consumers in the form of literature and
192
films, now often are financed by grants from the
11
Consumer Council.
Other Institutions
In some respects, the work of the following
12
institutions also touches on consumer protection.
State Institute for Public Health. Among the
tasks of this institution is the sanitary control of
foodstuffs. Its research covers public and vocational
hygiene, and nutrition.
Swedish Institute for Food Preservation
Research. Basic and applied research concerning the
preservation and storage of foodstuffs. Special
projects are carried out, usually on behalf of firms
in the food industry.
Swedish Institute for Textile Research. Basic
and applied research, and testing laboratory. Clients
are usually textile manufacturers, but they may also
include consumer organizations.
^Konsumentrad, oja. cit., p. 19.
12Ibido, p. 22.
Research Institute of the Swedish Shoe Industry.
Trade institution financed by the shoe manufacturers
and last makers. The broad aim of this institute is
research to produce good footwear.
State Materials Testing Institute. Usual
activities of a materials testing institute, with
facilities for testing consumer goods such as china-
ware, electric light bulbs, vacuum cleaners and other
electrical appliances, textile goods, and so forth.
The Swedish Society for Industrial Design.
Since the Second World War a broad basis for the
society's activities has been laid down through func
tional studies of furniture and other household goods.
The findings of these studies are being applied in
recommendations for standard sizes and qualities for
13 -
these items.
Economic Research Institute. The institute
focuses its studies on statistical research which is
of direct and indirect value to the consumer research
14
projects of other organizations.
13Ibid.
^1. Ohlsson, On National Accounting (Stockholm,
Sweden: Konjunkturinstitutet, 1953), p. 244.
194
II. LABELING AND QUALITY MARKING
OF MERCHANDISE
Consumers often must choose between different
types of one commodity, while quality and price
differences must be estimated in relation to the
buyer's economic status and to the needs which the
commodity about to be purchased must serve. Consumers
should, therefore, be in a position to estimate accu
rately the relative merits of various merchandise
types (as to their suitability, durability, and other
important properties) before making comparisons
between their respective prices.
An extensive use of informative labeling and
labels should serve to make it easier for consumers
to estimate the merits of various kinds of merchandise.
Such guidance, at the time of purchase, would supple
ment the general merchandise and marketing knowledge
that the consumers may be expected to possess. This
knowledge should be supplied to consumers in their
courses at school, and subsequently through such
channels as the press, broadcasts, and so forth. A
more general use of pertinent information regarding
the properties of merchandise at the time of sale
would have a beneficial effect on the development of
195
good advertising and sales methods, in addition to
increasing the efficiency and work of the sales per
sonnel. In the long run it would be possible to
create a solid basis for more effective competition,
which is extremely important if the quality of mer
chandise is eventually to be raised. Effective
competition acts on the premise that customers are
not only informed as to what there is to be bought,
but that they know where, when, and at what prices
to buy the item. Consumers should also have oppor
tunities to estimate the properties of the merchandise
in order to decide which is best suited to their
budgets and needs. As consumers gradually acquire
better merchandise insight they will increasingly be
able to obtain the merchandise to fulfill their needs.
As a result, the competition between producers intent
on satisfying consumers' wishes will bring forth the
production of the desired articles and qualities.
Labeling of Contents
Labeling of contents, generally including only
merchandise components and their composition, need
not necessarily include information on the properties
of each of the various ingredients. In the case of
most goods it is sufficient to know the product's
196
material contents, kind, and volume (size) as, for
example, some foodstuffs, darning materials, pre
served foods, chemical and technical products, and
the like.15
Informative Labeling
If consumers are to be able to estimate the
quality of merchandise the information concerning
its functional properties should be supplied. The
labeling of contents should also be included in the
new informative labeling.
Just’as it is practical to have uniform length
and space measurements to determine the quantity of
merchandise, so it may often prove useful to acquire
a uniform measuring system to denote various merchandise
properties. Consequently, the important properties
are gauged in accordance with established norms for
testing methods and for labeling material types. If
consumers are to receive proper guidance it is necessary
to insure that the testing methods are objective, and
that the terms and standards which form the bases of
the values and designations given in the labels are
1 5
Chamber of Commerce, Informative Labeling in
Distribution (Washington: United States Chamber of
Commerce, 1945), p. 1.
uniform.
The labeling of properties includes only facts
referring to the essential material and functional
properties of merchandise* The presence of an informa
tive label on a product does not automatically mean
that the product is of a particularly high quality.
The label merely is intended to give the consumer an
opportunity to judge for himself the suitability,
price, and quality of the merchandise. Consumers must,
therefore, receive guidance in the procedure for
reading the labels properly.
Grade Labeling
Quality grading (labeling, and so forth) must
not be confused with content and informative labeling.
Quality grading is based on an estimate of certain
properties in the merchandise on the basis of minimum
standards of requirements. There can be two kinds of
such grading.
Minimum quality requirements can be fixed with
respect to the more important properties. Merchandise
which fulfills such quality requirements could be
provided with a mark of quality and be stamped. Thus,
1 6
Offentliga Utredningar, op. cit. , p. 108.
198
there are electric bulbs (Swedish standard SEN-23),
the letter mark on controlled butter, the stamp on
controlled silver, and so forth. In some cases it
is forbidden in Sweden, and other countries, to sell
goods which are below a certain standard. Such minimum
quality requirements are protected by statutory laws,
particularly in regard to edibles, and are intended to
safeguard consumers against inferior products and
commercial dishonesty. However, this type of grading
17
practically never appears on labels.
In other cases quality grading means that mer
chandise is divided into different quality categories
and marked accordingly. Such markings appear on many
foodstuffs: potatoes, vegetables, types of fruit, and,
but less often, on other consumer goods (such as
electroplated silver and the A and B mark on footwear).
Quality regulations for potatoes and fruit types are
set by Swedish standards.
Quality labeling in accordance with the stipu
lated standards valid for most goods on the Swedish
market is seldom used in the case of more durable
commodities. On the other hand, it is used more often
in the raw material markets and in industry and
17Ibid., p. 109
199
commerce where sales of a considerable number of
staple goods are dominant, such as in hides and leather
goods, timber, steel, different textile raw materials,
and bristles and horsehair, as well as some other
goods. These quality designations generally disappear
as the merchandise passes from hand to hand on its way
to the final consumer. Nor would they be of much use
to the consumer who, for example, would be unable to
understand the statements "frigorifico hides for soles”
of "smoked rubber for goloshes.” When raw material
markings can be considered of some gjuid^jhce to con
sumers an attempt should be made to retain them in a
uniform manner through the whole chain of production,
18
right to the consumer.
Organization for Labeling
It is important that labeling should be so
organized as to be of practical value to consumers.
r
Merchandise information should,' in the first place*
be aimed towards helping consumers choose the "right"
products. The greater part of merchandise has many
properties which cannot be of equal importance to
consumers. The labels would have to be too large if
consumers were to be informed on every property of
18Ibid., p. 110
the merchandise. Only those properties should be
stated, therefore, which are of special importance
for the purposes for which the merchandise is intended.
The information should, in the first place, cover all
those properties which are important but which the
buyers cannot immediately perceive and evaluate. For
example, consumers can easily appraise the shape and
appearance of a man's shirt but, on the other hand,
they need to be told the facts regarding its degree
of shrinkage and whether the color will stay. This
arrangement also applies to mattress stuffings,
cushions, materials used in ready-made garments, the
19
way in which shoes are made, and so forth.
In the case of many consumer goods, buyers
would be better served by learning how a product reacts
under use than by knowing how it is constructed. When
a purchaser contemplates purchasing a vacuum cleaner,
for instance, it is more important for him to know the
sucking strength and electric current consumption than
the materials used in its production. A purchaser who
buys material, for instance, will find it more useful
to be told whether it is liable to shrink, or whether
the color will run, than to be informed as to the
1^Ibid., pp. 110-111
201
number of threads contained in the material.
In other cases it may be important to complement
the labeling information with some kind of quality
grading. Bed and furniture stuffings, bristles, and
waddings should be graded according to quality. Quality
grading of the raw material used in the production of
a finished article is facilitated by limiting the
qualities of the raw material to several standardized
varieties.
As stated before, informative labeling should
be based on uniform terms and standards. If every
company adopted its own quality standards and termi
nology the buyers would lack a common point of depar
ture for quality and price comparisons. Exaggerated
or misleading assertions of quality would be prevented
if the labels were drawn up on the basis of standardized
testing methods and uniform nomenclature. It should be
emphasized in this connection that (based on standar
dized terms and methods of measurement) informative
labeling in no way means or insures that the goods to
which they are attached are standardized. A grade
label indicates, on the other hand, that the commodity
possesses a certain quality established with respect
to its important properties.
202
Uniform nomenclature and testing methods should
be established as preliminary steps to informative and
grade labeling in various merchandise groups, and the
terms used should be the same for all specifications
within each merchandise group.
In order to make such specifications easier to
understand technical, medical, and similar terms
should, as far as possible, be replaced by other forms
of information, thus making it simpler for consumers
to judge the degree of quality for themselves. With
out such simplification the specifications accompanying
merchandise might remain meaningless for consumers.
At the same time, both types of information should
appear in the specifications; partly for the sake of
control, and partly to accustom consumers to certain
technical terms and to give them a feeling of security
through the presence of, and the opportunity to check
on, the technical terms.
If the properties of merchandise, as stated in
the specifications, are to be shown correctly, it is
important that consumers understand how the merchandise
should be used and handled. This applies particularly
to commodities with enclosed specifications (labeling
of properties) and quality grading. The specifications
should, whenever desirable, be provided with directions
203
regarding use, treatment, and storing of merchandise.
The labels should be so constructed that con
sumers will have no difficulty in deciding which of
them are authorized and which are not. When the type
of merchandise makes this possible, the labels should
be placed in a prominent place. Authorized labels
should be provided with a stamp or a fixed form of
marking. From the consumers' point of view it is
particularly important that this should be done, since
a number of producers, importers, and other sellers
may provide their wares with labels on which the wares
are described and graded otherwise than according to
the authorized standards. Such uniform marking should,
furthermore, have the effect of arousing the interest
of producers and businessmen in uniformity for their
own labels.
III. EFFECTS OF INFORMATIVE AND
GRADE LABELING
It is, of course, difficult to judge the effect
of an informative labeling program on consumers’ pur
chasing habits. It may, however, be supposed that the
presence of informative labeling on a large number of
commodities would eventually arouse general interest
in the contents of the labels, thus making it easier
204
for consumers to judge the relationship between price
and quality. Certain principles must be observed if
informative labeling is to have this desired effect
on consumers' merchandise selection. The information
must be so formulated as to be intelligible to buyers,
and must be of universal application. Consumers must
have full confidence in its accuracy and in the
authorities responsible for informative labeling.
Industry, trade, research and information institu
tions, as well as organizations representing big
consumer groups, should cooperate in reaching this
, 20
goal.
The Effects of the Programs
on the Demand Curve
Even though it may be difficult to judge the
effect of an informative labeling program on the con
sumers' buying habits, it is conceivable that the
general effects of such a program would be substan
tially different in their influence on the demand
curve than simple grade labeling.
Grade labeled products generally can be viewed
as essentially competitive in nature in the sense
that not only is there rivalry among the various
20Ibid.« pp. 111-112.
205
grades of one or similar products, but also between
graded and nongraded products. A grade label attempts,
on the other hand, by means of distinguishing some
quality characteristics, to make grade A labeled goods,
for example, unique in some respect. This might be
considered the monopolistic element in grades, or a
multigraded product. Grade labeled products in rela
tion to other products, however, have a tendency to
flatten the demand curve and reduce product differ
entiation.
A multiple rating system, such as is found in
Sweden, is quite different in its effect from the
simple grading system described above. Each measurable
characteristic is unique when rated and adds an element
of differentiation to the product. Since the chances
are that each measurable characteristic of a product
is different, the sum total of these characteristics
of one product is not necessarily the same as the sum
total of those of a similar product. There is no
distinguishable range of standardization for comparison
as might be found in the simple grading category A.
There is, therefore, a tendency for products to remain
differentiated, with the general result that the degree
of competition is not increased and the demand curve
is not flattened.
206
The Swedish multirating system's individual
rating might conceivably have a degree of competition
between the same characteristics of the same or similar
products. The over-all effect, nevertheless, would
not be a competitive one due to the unrealistically
high level of consumer sophistication needed. There
fore, the multirating system found in Sweden's informa
tive labeling program would not tend to flatten the
demand curve.
It is conceivable that the multirating system
would not tend to slope the demand curve either unless
a high level of consumer sophistication also is present.
Each measurable characteristic of a product may lose
its unique character when counteracted by another
measurable rating of that same product. This maze of
multiratings will generally tend to produce a neutral
effect on the demand curve, without a simple grading
system and/or an extremely high level of consumer pur
chasing sophistication.
IV. SUMMARY AND CONCLUSION
The Bureau of Labeling was introduced April 1,
1952, as a result of the commission’s suggestions,
but the over-all rating or grading system was dropped
from the plan.
Summary
Under the system of informative labeling which
is employed in Sweden, the information on the labels
is standardized so that consumers can readily compare
one product with another of similar type or having a
similar function. The aim is to enable a buyer to
judge how a product will perform in use, and whether
it is of a quality that will suit his purposes.
Although no over-all grades are given, ratings
are given for certain key properties which affect
performance and possibly also the price, This has
the advantage of flexibility over the simple grading
systemo
Even though flexibility has its advantages,
the Swedes do not have a sufficiently high consumer
.. 3?
education level to understand the information oif most
labels. On the other hand, there is another side of
the Swedish program. In essence, the use of ratings
for certain key properties which affect performance
and price is what the grade label system does when
functioning properly. Rather than a simple grade
rating for the whole product, different ratings are
given for each main measurable characteristic of the
product. This is a multiple grading system.
203
One advantage of this Swedish "compromise1 1 is
that the Swedish business interests readily; agreed
to its adoption. A multiple grading system would not
conceivably flatten the demand curve or bring a greater
degree of competition to the Swedish product market.
This is especially true in the case in which each
product may have a relatively high rating on one
measurable characteristic and a relatively low rating
on another. The movement toward standardization
within an over-all grade rating is not present since
the individual ratings would tend to balance each
other.
Conclusion
Politically speaking, this program may be far
superior to that of simple grade labeling since a
wider selection of ratings would be a compromise
position and because it would probably be a more
acceptable program to the various interests concerned.
It would, however, take a fairly sophisticated con
sumer to benefit from such a system of labels. It is
comparable to the details supplied by Consumer Guide
without the over-all ratings.
The author's experience under the labeling
system in Sweden (although only for a one year period)
209
impressed him with the need for an over-all rating
system to supplement their present system. Observa
tions during the first year of its operation indicated
that the "average" consumer did not seem to comprehend
the labels. The fact that the Swedish consumer is not
highly sophisticated generally is supported by the
21
Swedish authority, W. M. Lundberg. Grade labeling
might have been more useful and at the same time might
have brought a greater degree of competition to Sweden's
economy.
21
W. M. Lundberg, "Varukritik," Kooperatoren,
XII (June 30, 1953), 227. ,
CHAPTER XI
SUMMARY AND CONCLUSIONS
The general area dealt with in this dissertation
may be illustrated by the following broad question:
how can the public be protected adequately and be
guided in the purchasing of consumer goods under modern
competitive conditions? This problem is a by-product
of the fundamental controversy between the market-
controlled economy and the governmental-controlled
economy. The focal point of this dissertation was the
specific problems will a more extensive use of grade
labeling bring about a greater degree of price competi
tion?
I. SUMMARY
Inquiry into the problem required a passing
look at the history of labeling and at the broader
aspects of mbre recent experience with standards,
brands, and grading in this country.
A theoretical analysis of the effects of grade
labeling on the demand curve, supported by current
literature on trade marks and their relation to product
differentiation and monopolistic competition, gave
further insight into the problem of the competitiveness
of grade labeling.
211
World War II consumer surveys and studies of
periods prior to World War II revealed little light
upon the attitude and thinking of the consumer public
in general. More recent and more representative views
were obtained from current surveys of the consumers’
views toward the effectiveness of grade labeling in
their purchases in the market.
For a more comprehensive look at extensive
systems of labeling in practice today, exploration
was needed into the organizations and procedures of
those found in Canada and Sweden.
History and Background
of Labeling
History. The roots of present-day labels and
trade marks were found in the great mass of records
of the organizations or merchants and craftsmen.
Archaeological research also made a contribution.
The producer’s brand name, with the rise of
middlemen, began to be looked upon as a means of pro
tecting both the consumer and the producer from fraud.
The marks were primarily useful in tracing inferior
goods to the source.
The guilds dominated the Middle Ages and sought
to repress individual good will and emphasize the
212
conforming of goods to the guilds' standards. However,
from the Middle Ages until fairly recent times official
seals of quality regulators disappeared. Only the
individual trade marks survived as a guide to the pur
chasers until the first part of the twentieth century.
There was a historic desire on the part of
governments to maintain official regulation of grades.
Even with modern techniques in grading it is impossible
to escape entirely the variables of human judgment.
Background. The United States Department of
Agriculture, during World War I, began to set up
standards for grading agricultural goods after unsuc
cessful attempts to incorporate grading into past food
and drug laws.
The Office of Price Administration brought about
a controversy during the Second World War by announcing
that the 1943 pack of canned fruits and vegetables had
to be grade labeled. The conflict was between those
advocating grade labels and those supporting trade
marks. The controversy showed the political obstacles
in the way of adoption of compulsory grade labeling
programs. The author, howdver, points out that, in
the light of the Canadian experience, there need be
no conflict between the areas of grade labels and
trade marks.
213
What may not be realized by the business inter
ests (or perhaps realized only too clearly) is that
grade labeling may be indirectly a force for a greater
degree of competition in the economy.
Theory of Demand Behind
Nonprice Competition, Product
Different iation, and Grading
Nonprice character of markets. Nonprice compe
tition expressed itself in a wide variety of ways,
but the two main elements of this type of competition
were selling effort and quality improvement.
Nonprice competition was sometimes practiced
because of existing price restrictions and in order,
in other cases, to avoid price competition.
Abbott's quality competition model tended to
be unrealistic due to its abstractions from some real
world conditions. On the other hand, the concept of
grade labeling tended to account for such conditions.
Ob.iective versus subjective. If the measurable
factors of a product were recognizable to the consumers
by means of a simplified quality recognition system,
then the potential purchaser would be in a better
position to concentrate on the subjective factors
connected with a product, such as taste.
214
Effects of product differentiation on the demand
curve♦ A demand curve was shown to indicate product
differentiation if it produced an elasticity other than
perfectly elastic. Trade marks were shown to have a
tendency to slope the demand curve; on the other hand,
grade labels conceivably tended to flatten the demand
curve for the grade labeled product's market. Grade
labeled products could generally be viewed as essen
tially competitive in nature in the sense that not only
was there rivalry among the various grades of one
product or similar products, but also between graded
and nongraded products.
Current Survey Findings
The sources of current consumer survey findings
were both primary and secondary.
Primary sources. The primary sources were com
posed of two field surveys. One was a telephone survey
of a sample of housewives chosen at random from an
El Paso, Texas, telephone directory. The second, using
the same procedure, was conducted a few weeks later in
Silver City, New Mexico. Both communities surveyed
were considered representative for this type of
research on the basis of number, size, and variety
of retail food outlets in these areas.
215
Secondary sources* The current literature pro
duced a number of studies that tended to give breadth
and support to the consumer surveys conducted in both
El Paso and Silver City. A summary analysis of some
of the complete consumer studies of egg purchasers
made in eighteen different states and in Canada showed
support, in many areas, for the primary source findings.
The primary and secondary data sources supplied
empirical evidence to the theoretical implications
derived from an a priori approach to the problem of
the effect of grade labeling on the demand curve.
Methodological steps used. In order to plan a
research project it was necessary to anticipate all
the steps which had to be undertaken if the project
was to be completed successfully. For the purpose of
the field studies the problem was stated as follows:
are there implications that consumers react to grade
labeled products in such a way as to make them conscious
of the price variations of competing goods within a
given grade or quality level?
Special attention was paid to designing the
questionnaire since the effectiveness of the wording
would influence the accuracy of the data obtained.
The questions were worded for comprehension by the
2X6
housewives, usually in terms of recent purchasing
activity. Also, there was a quantitative measure
of the strength of the respondent's answers in "cents."
In order to ask questions on grading effectively
of consumers, it was recognized that the scope of
inquiry would have to be narrowed to the goods that
were universally labeled by grades on the retail level.
This meant that meaningful questions were designed to
inquire about food purchases, principally eggs and
meat.
After the telephone calls were made and the
questionnaires were filled out there remained the
difficult task of processing the completed forms in
a manner which would enable the project objectives to
be attained. First the forms were edited to make sure
that the resulting data were consistent and logical
within each form. Then the data were tabulated for
analysis. Percentages and averages were computed and
compared. Some correlation was shown between the
results of the El Paso and Silver City studies.
Conclusions were reached in line with survey
results and those found in current literature. The
two field surveys, it was pointed out, had the same
limitation as other surveys of this type: it was dis
covered what people think they think or do.
217
It was concluded that there was a strong indica
tion from the El Paso-Silver City sruveys that a
majority of the respondents showed not only a strong
degree of price consciousness but also of quality
consciousness. The largest group of respondents to
the questionnaire described their egg purchasing habits
as purchasing the highest quality grade at the lowest
price. Although this group constituted only 44 per
cent in Silver City (40 per cent in El Paso) of the
total number of consumers questioned, there appeared
to be substantial support for price and quality con
sciousness in that other answers indicated an equal
or at least a partial concern with both price and
quality. Over three-quarters of the respondents in
Silver City were so categorized.
The Experiences of Canada and
Sweden in Labeling Programs
Canadian experience. Canada, although not
unique with respect to grading requirements, was
indeed a pioneer in the field. Grade labeling of
canned fruits and vegetables, for example, has been
mandatory in Canada since 1918, and on fresh fruits,
vegetables, and eggs since 1923. The move toward
grade labeling has been an evolutionary process.
Processors must apply to the Canadian Department
of Agriculture for a registration certificate, but the
individual processors do the inspecting and grading
which is checked only periodically by the government
inspectors. The cost is negligible due to the small
number of government inspectors and strong support of
the Canadian businessmen.
Canada, therefore, has built a system of stand
ards which is compulsory for some goods in all cases
and for others in certain places and under certain
conditions.
Experience has shown that grade establishment
and grading are most practical for commodities whose
units have a considerable uniformity and the varieties
of which are somewhat limited. A similar range of
qualities and sizes should be maintained from year to
year so that a grade once fixed is more or less con
tinuously applicable.
Both grades and brands guide purchasing, but
brands also guarantee service and satisfaction, in
some cases, beyond considerations of quality. With
both labels in force, as is found in Canada, product
differentiation can continue by varying flavor, style,
package, and so forth. Brand choice exists within
grade classifications. It may cause price differentials
219
inside grade boundaries within a certain range,
especially to the extent that consumers either wish
to discount the graded quality or lack information
concerning quality ratings.
In the Canadian experience brands may actually
increase with grading requirements.
There has not been a deterioration in quality
in Canada in the sense that quality has been lowered
to minimum specifications. Grading, on the other hand,
has tended to provide an incentive to improve quality
in Canada.
The price differential tends to be reduced
within quality groups to the extent that consumers
are grade conscious.
Swedish experience. The Bureau of Labeling was
inaugurated on April 1, 1952, as a result of a Swedish
Study Commission's suggestions, but the over-all rating
or grading system was dropped from the plan.
Under the system of informative labeling which
is employed in Sweden the information on the labels is
standardized so that consumers can readily compare one
product with another of similar type or having a similar
function. The aim is to enable a buyer to judge how a
product will perform in use, and whether it is of a
220
quality that will suit his purposes.
Although no over-all ratings are given, ratings
are used for certain key properties which affect per
formance and possibly also the price. This has the
advantage of flexibility over the simple grading system.
Even though flexibility has its advantages, the
Swedes do not have a sufficiently high consumer educa
tion level to understand the information on most labels.
On the other hand, there is another side of the Swedish
program. In essence, a rating for certain key proper
ties which affect performance and price is a multiple
grading system. Rather than a simple grade rating for
the whole product, different ratings are given for each
main measurable characteristic of the product.
A multiple grading system would not conceivably
flatten the demand curve nor necessarily bring a
greater degree of competition to the Swedish product
market.
The author's experience under the Swedish
labeling program impressed upon him the need for an
over-all rating system to supplement their present
procedure.
II. CONCLUSIONS
221
The theoretical implications of the relationship
between grade labeling and the demand curve for the
grade labeled product in its giyenjnap?k:et is that grade
labeling tends to flatten the demand curve and there-*
fore brings about a greater degree of price competition
within that market.
Translated into terms verifiable by empirical
data, the problem is stated as follows: is there
evidence that consumers react to grade labeled products
in such a way as to make them conscious of the price
variations of competing goods within a given grade or
quality level?
The inquiry brought about an extensive search
on several empirical paths leading to the problem.
Each path supplied its own view or insight into the
objective of the study. The purpose here is to replace
each of these paths, or roads, with a broad highway
to better facilitate the movement toward the problem.
The existing routes may be classed as primary
and secondary source routes. The primary routes led
to empirical data observations gathered from two
cities along the way: El Paso, Texas and Silver City,
New Mexico. The secondary paths led to the current
f
i
i
222
findings of a larger area: eighteen states and Canada.
The findings of the latter were transported by means
of current literature. Observations were also made of
Sweden.
Primary and Secondary
Source Data
Both primary and secondary sources indicated
that quality grade and price were the most important
factors to housewives in making egg purchases within
a given size. The largest group (40 to 44 per cent of
the respondents) of housewives in the El Paso and
Silver City studies believed that purchasing the high
est grade of eggs at the lowest possible price best
described their purchasing procedure.
There was a strong indication that a majority
of the respondents showed not only a strong degree of
r
price consciousness but also of quality consciousness
in egg purchases. A majority of the housewives were
willing to pay substantial premiums for a higher
quality meat as well as for higher quality eggs.
Although it would be unrealistic to assume that
eggs and meat were typical representatives of products
in general or even foods, it is conceivable that there
would be a fairly strong correlation between price
223
consciousness of eggs and meat bn the one hand and the
potential price reaction of consumers to other goods
conducive to grade labeling.
Conceivably, price conscious consumers would
tend to stimulate and be stimulated by price flexi
bility in the market if obstructions, such as govern
ment intervention, did not interfere with such an
influence. In turn, the element of price flexibility
is a major characteristic of a competitive market.
It would be conceivable that price consciousness,
other things being equal, would be an indication of
price competition. It would also be conceivable that
grade labeling might tend to stimulate price competi
tion, as was indicated by its effect on the price
reactions of the consumer surveyed.
Conclusion of primary and secondary source
data. Therefore, there is evidence that a significant
number of consumers react to grade labeled products
in such a way as to make them conscious of price
variations of competing goods within a given grade
level.
Canadian Experience
The price differential tends to be reduced
within quality groups to the extent that consumers
224
are grade conscious and that they notice no difference
in ungraded qualities. In Canada brand choice exists
within grade classifications, and therefore this may
cause price differentials inside grade boundaries
within a certain range. This would tend to be true
especially to the extent that consumers either wish
to discount the graded quality or lack information
concerning quality rating. Consumer education would
be an important variable, therefore, in the effec
tiveness of any grading program.
Effect of the Canadian system on brands. Both
grades and brands guide purchasing, but brands also
guarantee, in some cases, service and satisfaction
beyond quality. With both labels in force, as is
found in Canada, product differentiation can continue
by varying flavor, style, packaging, and so forth.
Brand choice exists within grade classifications.
In the Canadian experience, interestingly
enough, brands may actually increase with grading
requirements. New and private brands may be given
a better start and better support with quality
markings.
Effect of the Canadian system on quality.
There has not been a deterioration in quality in
225
Canada in the sense that quality has been lowered to
minimum specifications. Grading, conversely, has
tended to provide an incentive to quality in Canada.
Grading will also tend to improve the standing
of existing brands. It carries on from the point at
which brand labeling stops and assures the brand pur
chaser that the product meets or exceeds standard
specifications, thus providing a concrete selling
point and thereby fortifying the brand name.
Of course, each business cannot count upon
grading as a definite guarantee of its permanence.
Nevertheless, many of the arguments against grade
labeling have not proven true in the case of Canada.
Effect of the Canadian system on prices. Even
though there is a tendency for grade labeling to
bring about standardization of prices within quality
groups, it is:improbable that complete standardization
within the grade level would ever materialize. The
price differentials would probably be reduced only to
the extent that consumers are grade conscious, and the
price differential would tend to be different for
different products. Therefore, standardization would
be an objective but not a realistic possibility.
Experience has shown that grade establishment
and grading are most practical for commodities whose
226
units have a considerable uniformity and the varieties
of which are somewhat limited* A similar range of
qualities and sizes should be maintained from year to
year so that a grade once fixed is more or less con
tinuously applicable. Obviously, not all products
have characteristics which would be conducive to
grading, but most food products and many textile and
other products would tend to lend themselves to
effective grade labeling, other things being equal.
Conclusion of the Canadian system. Recognizing
that it is conceivable that grade labeling could be
extended to a broader group of products without fear
of quality deterioration or the possibility of complete
standardization within quality groups, then it might
be assumed that a greater degree of competition could
conceivably be brought about under economic circum
stances involving the application of both grade labels
and brands, rather than brands alone.
Swedish Multiple Grading System
The Swedish labeling system does not include
an over-all grading or rating program, but ratings
are used for certain key properties which affect the
performance and possibly the price of goods coming
under the informative labeling project.
227
Multiple grading and the demand curve. A
multiple grading system would not conceivably flatten
the demand curve nor bring about a greater degree of
competition to the given product market. Each meas
urable characteristic is unique when rated and adds
an element of differentiation to the product. Since
the chances are that each measurable characteristic
of a product is different, the sura total of these
characteristics of one product is not necessarily
the same as the sum total of those of a similar product.
There is no distinguishable range of standardization
for comparison as might be found in the simple grading
category A. There is, therefore, a tendency for
products to remain differentiated, with the general
result that the degree of competition is not increased
and the demand curve is not flattened.
Only the most sophisticated consumer would be
able to benefit from a complex number of individual
ratings. Sweden, however, tends to narrow her rating
system to those characteristics which tend to be
pertinent to one side, and tend to be understandable
to the consumer on the other. Sweden's early efforts
in this direction were not, according to the author's
observations, entirely successful. An over-all grading
system might have been a useful transition to supplement
228
the multiple one, and in addition might have brought
about a greater degree of competition to Sweden's
economy.
General Conclusion
Theoretical implications and the empirical
evidence indicate that grade labeling tends to flatten
the demand curve and therefore bring about a greater
degree of price competition within the grade labeled
products market.
V
b i b l i o g r a p h y
BIBLIOGRAPHY
A. BOOKS
Abbott, Lawrence, Quality and Competition. ^ New York:
Columbia University Press, 1955.
A modern classic in which thd author ties a
concept of quality into the theory of monopolistic
competition; background and reference for chapter
on nonprice competition.
Boyd, H. W., and R. Westfall. Marketing Research.
Homewood, Illinois: R. D. Irwin, Incorporated,
1956.
An excellent textbook designed for a course
in marketing research; references to methodology
used for empirical data collected in the dis
sertation's consumer studies.
Bursk, E. C. Text and Case in Marketing. Englewood
Cliffs, New Jersey: Prentice-Hall, Incorporated,
1962.
A textbook on the principles of marketing;
reference to research steps and background.
Chamberlin, E, H, The Theory of Monopolistic
Competition. Cambridge: Harvard University
Press, 1933.
A classic analysis of the theory of value in
which the hitherto separate theories of monopoly
and competition are fused into the theory of
monopolistic competition. Product differentia
tion is the main characteristic of this new
theory; a basic background and reference for
theory behind grade labeling.
Coles, Jessie V. Standards and Labels for Consumer1s
Goods. New York: Ronald Press Company, 1949.
An excellent description of the background,
meaning, use, issues, problems, procedures, and
status related to standards and labels; extensively
used as background with numerous references in a
number of chapters.
Dennison, H. S., and J. K. Galbraith. Modern
Competition and Business Policy. New York:
Oxford University Press, 1938.
A partly theoretical but mainly a policy-aimed
approach to some economic problems of the times;
231
one reference to the author's call for more
extensive publicity for grades was used.
Friedman, M. Capitalism and Freedom. Chicago:
University of Chicago Press, 1962.
The author spells out the changes he believes
are needed to get the United States back under
the direction of Adam Smith's "invisible hand";
a single reference.
Gallahue, E. E. Some Factors in the Development of
Market Standards. Washington: The Catholic
University of America Press, 1942.
An analysis of the development of market
standards in this country; few references but
mainly historic background material.
Haney, L. H. History of Economic Thought. New York:
The MacMillan Company, 1949.
An excellent history of economic doctrines
from the ancients to the present; several
references to classical economist's concepts.
Heilbroner, R. L. The Worldly Philosophers. New York:
Simon and Schuster, 1953.
An excellent and entertaining biographical
sketch of the most influential economists and
an outline of their contributions; one reference
used for Adam Smith's concepts.
Leftwich, R. H. The Price System and Resource
Allocation. New York: Holt, Rinehart and
Winston, 1960.
An excellent and clearly written textbook
for intermediate level economics courses with
an emphasis on micro-economics; reference for
some theoretical analysis and strong background
material.
Machlup, Fritz. The Economics of Seller1s Competition.
Baltimore: The Johns Hopkins Press, 1952.
An excellent and clearly written analysis of
economic problems associated with the seller's
conduct in the market and related problems by
use of well-designed models of relevant human
conduct; several references to support the theo
rizing in the area of nonprice competition.
Strong background material.
232
Margolius, Sidney. The Consumer1s Guide to Better
Buying. Third edition, revised. New York:
New American Library, 1953.
A list of suggestions and hints to consumers
for more effective purchasing; single reference.
Marshall, A. Principles of Economics. Eighth edition.
New York: The MacMillan Company, 1920.
A classic volume on principles of economics
in the neoclassical version: a fusion of some of
the better concepts of the classicals for a
supply analysis and theories of the marginalists
on the demand side to produce a balanced equi
librium analysis; one reference and background.
Meyers, A. L. Elements of Modern Economics. Englewood
Cliffs, New Jersey: Prentice-Hall, Incorporated,
1941.
A textbook for the "Principles of Economics"
college course; a single reference.
Norris, R. T. The Theory of Consumer's Demand.
New Haven: Yale University Press, 1952.
A systematic presentation of short and long
run theories of consumer demand in terms of
human behavior and consumer budget; reference
and background.
Ohlsson, I. On National Accounting. Stockholm,
Sweden: Konjunkturinstitutet, 1953.
A Swedish publication dealing primarily with
the current national income statistical methods
used in Sweden. Only a short reference to the
functions of the Economic Research Institute of
Sweden was used from this book.
Phillips, C. F., and D. J. Duncan. Marketing.
Principles and Methods. Homewood, Illinois:
Richard D. Irwin, Incorporated, 1960.
A textbook on the principles of marketing;
reference for research steps and background.
Robinson, Joan. The Economics of Imperfect Competition.
London: MacMillan and Company, 1933.
In this classic book the author discards the
traditional assumption of. perfect competition,
with absolute monopoly as a special case, and
endeavors to restate the theory of value in a
233
comprehensive formula, in terms of which perfect
competition and absolute monopoly are but limit
ing cases of a general theory; a theoretical
reference.
Rogers, E. S. Good Will Trade-Marks and Unfair Trading.
Chicago: A. W. Shaw Company, 1914.
A descriptive history of early trade marks and
trading practices; passing references for history
of labeling and background.
Schechter, F. I. The Historical Foundations of the
Law Relating to Trade-Marks. New York: Columbia
University Press, 1925.
A history and legal interpretation of the laws
connected with trade marks; material from this
publication used for references in the past history
of labeling and background.
Triffin, Robert. Monopolistic Competition and General
Equilibrium Theory. Cambridge: Harvard University
Press, 1940.
A critical analysis of the theory of monopo
listic competition and the presentation of a model
using the cross-elasticities of demand for the
products of two firms to show the interdependence
between these products within a market; reference
to the cross-elasticity analysis.
B. PUBLICATIONS OF THE GOVERNMENT, LEARNED
SOCIETIES, AND OTHER ORGANIZATIONS
Baker, R. L., and A. P. Stemberger. Economics of
Location in Grading and Cartoning Eggs. State
College: Pennsylvania State College Press,
October, 1953.
Chamber of Commerce. Informative Labeling in
Distribution. Washington: United States Chamber
of Commerce, 1945.
Fruit and Vegetable Division of the Marketing Service.
The Meat and Canned Foods Act. Ottawa: Canadian
Department of Agriculture, 1954.
234
Hollander, S. C. History of Labels. New York:
Allen Hollander, 1956.
Hotchkiss, G. B. Movement for Standardization and
Grading of Consumer Goods. New York: Association
of National Advertisers, 1941.
Jasper, A. W. "Consumer Egg Preferences," Marketing
Activities. Washington: United States Department
of Agriculture, August, 1953.
________, and R. E. Cray. Consumer Preferences,
Practices and Demands in Purchasing Eggs and
Poultry in Columbus. Ohio. Bulletin 736.
Columbus, Ohio: Ohio Agricultural Experiment
Station, October, 1953.
Kaidanovsky, S, P. "Consumer Standards.," T.N.E.C.
Monograph Number 24. Washington: Government
Printing Office, 1941.
Kohls, R. L., and N. Oppenheimer. Quality Recognition
and Purchasing Habits of Egg Consumers. Bulletin
592. Lafayette, Indiana: Purdue University, July,
1953.
Moore, E. M. Purchasing Practices and Quality
Recognition for Eggs. Bulletin 947. Ithaca,
New York: Cornell Agricultural Experiment Station,
June, 1954.
Saunders, R. F. Egg Merchandising Studies in
Supermarkets. Part II. Ithaca, New York:
Cornell University Press, September, 1953.
Statens Offentliga Utredningar, Hendelsdepartmentet.
Kvalitetsforskning och Konsumentupplysning.
Stockholm, Sweden: Emil Kihlstroms Tryckeri, 1949.
Taylor, F a R., et al. Consumer Egg Quality, Size and
Price Relationships. Bulletin 322. Kingston,
Rhode Island: University of Rhode Island Agri
cultural Experiment Station, February, 1955.
Thomsen, F. L., and B. Winton. Consumer Preferences
for Egg Yolk Color and Shell Color in New York
City. Bulletin 329. Columbia, Missouri: Missouri
Agricultural Experiment Station, August, 1933.
235
United States Congress, House of Representatives,
Committee on Interstate and Foreign Commerce.
Brand Names and Newsprint. Hearings before
Subcommittee pursuant to House Resolution 98,
78th Congress, 1st Session, Volumes I and II,
May 10-June 30, 1943. Washington: Government
Printing Office, 1943.
_______ , Senate, Temporary National Economic Committee.
Price Behavior and Business Policy. Monogram
Number 1 Printed Pursuant to Public Resolution
113, 76th Congress, 3rd Session. Washington:
Government Printing Office, 1940.
United States Department of Agriculture, Production
and Marketing Administration. United States
Standards for Quality of Individual Shell Eggs.
Chart Number 741495. Washington: Government
Printing Office, February, 1948.
Willis, P. S. Journal of Commerce. New York: [n.n.],
April, 1943.
C. PERIODICALS
Abbott, L. "Vertical Equilibrium under Pure Quality
Competition," American Economic Review, XLIII
(December, 1953), 828-829, 844.
Bender, L. D., et al. "Do Consumer Grade Standards
for Shell Eggs""5ef lect Consumer’s Preferences for
Interior Quality?" Poultry Science, XXXVIII (July,
1959), 882-887.
Dameron, Kenneth. "Labeling Terminology," Journal of
Business, XVIII (July, 1945), 159-160.
Lundberg, W. M. "Varukritik," Kooperatoren, XII
(June 30, 1953), 225-228.
Norsworthy, P0 K. "Some Effects of Grade Labeling,"
The Business Quarterly, 1952, pp. 117-128.
Parkhurst, Kenneth L. "Konsumentorganisationer for
Varuupplysning i USA," Kooperatoren, XII (June
30, 1953), 229-232.
236
. "Producenter och Konsumentskydd i USA,"
Kooperatoren, V (March 15, 1953), 88-90.
D. ESSAYS AND ARTICLES IN COLLECTIONS
Buckingham, E. "Company and National Standards in
Interchangeable Parts Manufacture," National
Standards in Modern Economy. D. Reck, editor.
New York: Harper and Brothers, 1956. P. 90.
Chamberlin, E. H. "Product Variety," Selected Readings
in Economics. C. L. Harris, editor. Englewood
Cliffs, New Jersey: Prentice-Hall, Incorporated,
1958. P. 110.
Edwards, Corwin W. "Standards and Product Differ
entiation," National Standards in a Modern Economy,
D. Reck, editor. New York: Harper and Brothers,
1956. Pp. 327-334.
E. UNPUBLISHED MATERIALS
*
Parkhurst, Kenneth L. "El Paso, Texas-Silver City,
New Mexico Consumer Survey." Silver City, New
Mexico, September 6-9, 16-23, 1962.
Statens Consumentrad. "Aiding the Consumer."
Stockholm, Sweden: Statens Konsumentrad, 1962.
(Mimeographed.)

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Asset Metadata

Creator Parkhurst, Kenneth Langroise (author)

Core Title Grade Labeling And The Demand Curve: Theoretical Implications And Empirical Evidence

Degree Doctor of Philosophy

Degree Program Economics

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag Economics, General,OAI-PMH Harvest

Language English

Contributor Digitized by ProQuest (provenance)

Advisor Phillips, E. Bryant (committee chair), Anderson, William H. (committee member), Trefftz, Kenneth L. (committee member)

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c18-303268

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