Value Chain Economics

The course covers the economics of value chains with a focus the agro-food sector. The course provides an overview of the institutional framework in which the EU agro-food sector operates, and covers trends in and challenges to the functioning and performance of the agro- food sectors in the EU, USA and developing countries. The course covers economic models and conceptual frameworks required to analyse the economic effects of various challenges posed by globalization, climate change, growing consumer demand for quality and sustainable products, market power and the imbalance of power within the supply chain. The course introduces students to the EU industrial policy for the agro-food sector and discusses market-based and non-market based solutions to improve the functioning and performance of the agro-food sector, including food labelling and production, processing, and distribution standards, formal and informal coordination and alignment of incentives among different actors of the supply chain.

After successfully completing the module, students will be able to perform an independent analysis of a value chain. This entails being able to: (1) describe the main actors, their interactions and the structure of the value chain (2) describe the institutional environment and the relevant industrial policies (3) assess the performance of the value chain and the distribution of generated welfare along the value chain by applying economic models and conceptual frameworks (4) assess the effect of the institutional environment (including industrial policies) on the functioning and performance of the value chain by applying economic models and conceptual frameworks (5) find suitable market-based and non-market based solutions to improve the functioning and performance of the value chain by applying economic models and conceptual frameworks (6) present in oral form the analysis of a value chain (7) draw up a written report of the analysis of a value chain

The examination is a project that expects students to identify problems and generate ideas concerning market and non-market based solutions. Within this project students work in groups and provide one written report (15 to 20 pages) and two presentations per group. Each of the two presentations lasts 30 minutes and is followed by a 30-minute questions-and- answers session. The presentations take place throughout the semester during class time. The final written report is due at the end of the semester. Students summarize the content of their presentations and incorporate the feedback and information received during the questions-and- answers sessions in the final report. The presentation tests the ability of students to (1) describe in oral form the main actors, their interactions and the structure of value chain(s), and the institutional environment (including industrial policies); (2) explain in oral form the performance of the chain(s), the distribution of welfare, the effect of the institutional environment on the chain’s performance of the chain by applying economic models and conceptual frameworks; (3) explain in oral form potential challenges for the functioning and performance of the chain(s) and related market-based and non- market based solutions by applying economic models and conceptual frameworks. The final paper tests the ability of students to (1) describe in written form the main actors, their interactions and the structure of the value chain(s), and the institutional environment (including industrial policies); (2) explain in written form the performance of the chain(s), the distribution of welfare, the effect of the institutional environment on the chain’s performance by economic models and conceptual frameworks; (3) explain in written form potential challenges for the functioning and performance of the value chain(s) and suitable market-based and non-market based solutions to improve the performance of the chain(s) and related solutions by applying economic models and conceptual frameworks; (4) draw conclusions regarding the analysis of the value chain(s) performed throughout the semester. Each presentation contributes 30% to the final grade. The final report contributes 40% of the final grade. Each student in a group is responsible for one part of the presentation. Individualized grades for each group presentation are obtained as follows: • 10% Organization and structure • 20% Quality of content and originality • 10% Clarity of exposition of the student • 60% Ability of the student to address questions All students in a group contribute to the drafting of the final report. The final report is structured in sections as listed below. Each section contributes to the grade for the final report with a given % weight as explained below. The final report sections and respective weights are as follows: • Abstract, Introduction (10%) • Value chain structure and institutional environment (20%) • Challenges (20%) • Proposed solutions (20%) • Conclusions (20%) • References (10%) Each section of the report is graded as follows: • 25% Organization and structure • 25% Language quality • 50% Quality of content and originality For each section, the group clearly indicates the extent (in %) of each student’s contribution. Individual grades for the final report are obtained by weighting the performance in each section by the student’s contribution and summing up the partial grade for each section of the final report.

Undergraduate level microeconomics and industrial organization.

Lectures are used to provide an overview of the institutional framework, trends and challenges faced by the agro-food sector and to cover the economic models and conceptual frameworks needed to analyse value chains. Frontal lectures are used to provide students with the needed background for the analysis of value chain(s). As exercise aspects, market experiments (e.g., the-market-for-lemons-class-experiment) are used to illustrate economic models and conceptual frameworks. Group work is used to train students to research and summarize information related to value chain(s) and their institutional environment, to assess the performance of value chain(s), to explain challenges to the functioning and performance of value chain(s), to find potential solutions, and to draw up a final report. Student presentations and class discussion are used to train students to present their analysis in oral form and to receive and integrate feedback into a written report.