Designing geographical indication institutions when stakeholders’ incentives are not perfectly aligned

Purpose – Geographical Indications (GI) are complex and multi-purpose institutions. Their objectives include encouraging diversification of agricultural production, improving farmers’ income, countering depopulation of rural areas, satisfying consumer demand for high-quality good, and protecting consumers from food fraud. The authors argue that such objectives are not necessarily aligned as divergence may arise among stakeholders (such as farmers, consumers or rural communities) about the optimal design of the GI. The paper aims to discuss these issues. Design/methodology/approach – The authors developed a simple, static game-theory model describing the basic choices that a planner faces in designing a GI. Findings – The authors conclude that the optimal organization requires finding trade-offs among conflicting but equally desirable objectives. Perfect monitoring is not a sufficient condition to resolve such conflicts. Sub-consortia and flexible production agreements may increase the efficiency of a GI.