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Traceability, Liability, and Incentives for Food Safety and Quality

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  • Sébastien Pouliot
  • Daniel A. Sumner

Abstract

Recent food scares such as the discoveries of Bovine Spongiform Encephalopathy and E. coli-contaminated spinach have heightened interest in food traceability. Here, we show how exogenous increases in food traceability create incentives for farms and marketing firms to supply safer food by increasing liability costs. We model a stylized marketing chain composed of farms, marketers, and consumers. Unsafe food for consumers can be caused by either marketers or farms. We show that food safety declines with the number of farms and marketers and imperfect traceability from consumers to marketers dampens liability incentives to supply safer food by farms. Copyright 2008, Oxford University Press.

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Bibliographic Info

Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 90 (2008)
Issue (Month): 1 ()
Pages: 15-27

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Handle: RePEc:oup:ajagec:v:90:y:2008:i:1:p:15-27

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References

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  1. Marcel Boyer & Donatella Porrini, 2002. "Modeling the Choice Between Regulation and Liability in Terms of Social Welfare," CIRANO Working Papers 2002s-13, CIRANO.
  2. Kolstad, Charles D & Ulen, Thomas S & Johnson, Gary V, 1990. "Ex Post Liability for Harm vs. Ex Ante Safety Regulation: Substitutes or Complements?," American Economic Review, American Economic Association, vol. 80(4), pages 888-901, September.
  3. Hiriart, Yolande & Martimort, David & Pouyet, Jérôme, 2004. "On the Optimal Use of Ex Ante Regulation and Ex Post Liability," IDEI Working Papers 274, Institut d'Économie Industrielle (IDEI), Toulouse.
  4. Golan, Elise H. & Krissoff, Barry & Kuchler, Fred & Calvin, Linda & Nelson, Kenneth E. & Price, Gregory K., 2004. "Traceability In The U.S. Food Supply: Economic Theory And Industry Studies," Agricultural Economics Reports 33939, United States Department of Agriculture, Economic Research Service.
  5. Brian Roe, 2004. "Optimal Sharing of Foodborne Illness Prevention between Consumers and Industry: The Effect of Regulation and Liability," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(2), pages 359-374.
  6. Hobbs, Jill E., 2004. "Traceability in the Canadian Red Meat Sector," Economic and Market Information 55304, Agriculture and Agri-Food Canada.
  7. A. Mitchell Polinsky & Steven Shavell, 1999. "The Economic Theory of Public Enforcement of Law," NBER Working Papers 6993, National Bureau of Economic Research, Inc.
  8. Buzby, Jean C. & Frenzen, Paul D., 1999. "Food safety and product liability," Food Policy, Elsevier, vol. 24(6), pages 637-651, December.
  9. Frenzen, Paul D. & Buzby, Jean C. & Rasco, Barbara, 2001. "Product Liability And Microbial Foodborne Illness," Agricultural Economics Reports 34059, United States Department of Agriculture, Economic Research Service.
  10. Jill E. Hobbs & DeeVon Bailey & David L. Dickinson & Morteza Haghiri, 2005. "Traceability in the Canadian Red Meat Sector: Do Consumers Care?," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 53(1), pages 47-65, 03.
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Cited by:
  1. Resende-Filho, Moises & Buhr, Brian, 2007. "Economics of traceability for mitigation of food recall costs," MPRA Paper 3650, University Library of Munich, Germany.
  2. Zheng, Zijuan & Saghaian, Sayed H. & Reed, Michael R., 2012. "Factors Affecting the Export Demand for U.S. Pistachios," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 15(3).
  3. Bulut, Harun & Lawrence, John D., 2007. "Meat Slaughter and Processing Plants’ Traceability Levels Evidence From Iowa," 2007 Conference, April 16-17, 2007, Chicago, Illinois 37576, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  4. Souza Monteiro, Diogo M. & Caswell, Julie A., 2008. "Optimal choice of Voluntary traceability as a food risk management tool," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44394, European Association of Agricultural Economists.
  5. Pouliot, Sebastien, 2010. "Welfare Effects of Mandatory Traceability When Firms are Heterogeneous," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61017, Agricultural and Applied Economics Association.
  6. Ng, Desmond W. & Salin, Victoria, 2012. "An Institutional Approach to the Examination of Food Safety," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 15(2).
  7. Jeon, Sanggon & Lee, Jungmin & Chai, Sanghyen & Lee, Hyungwoo, 2010. "Economic Impacts Of The Law Of Cattle And Beef Traceability In Marketing Channels On The Domestic Hanwoo Beef Industry," Journal of Rural Development/Nongchon-Gyeongje, Korea Rural Economic Institute, vol. 33(2), July.
  8. Bailey, DeeVon, 2007. "Political Economy of the U.S. Cattle and Beef Industry: Innovation Adoption and Implications for the Future," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 32(03), December.
  9. Pouliot, Sébastien, 2012. "On the Economics of Adulteration in Food Imports: Application to US Fish and Seafood Imports," Working Papers 148596, Structure and Performance of Agriculture and Agri-products Industry (SPAA).
  10. Pouliot, Sebastien, 2008. "Estimating the Costs and Benefits of Cattle Traceability: the Case of the Quebec Cattle Traceability System," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6522, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  11. Ng, Desmond W. & Salin, Victoria, 2012. "An Institutional Approach to the Examination of Food Safety," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 15(2).
  12. Brofman Epelbaum, Freddy Moises & Garcia Martinez, Marian, 2014. "The technological evolution of food traceability systems and their impact on firm sustainable performance: A RBV approach," International Journal of Production Economics, Elsevier, vol. 150(C), pages 215-224.
  13. Alexander E. Saak, 2012. "Collective Reputation, Social Norms, and Participation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(3), pages 763-785.
  14. Nganje, William E. & Skilton, Paul F. & Jensen, Helen H. & Onyeaghala, Raphael, 2011. "Traceability in Food Systems: An Economic Analysis of LGMA and the 2006 Spinach Outbreak," 85th Annual Conference, April 18-20, 2011, Warwick University, Coventry, UK 108776, Agricultural Economics Society.
  15. Fritz, Melanie & Schiefer, Gerhard, 2009. "Tracking, tracing, and business process interests in food commodities: A multi-level decision complexity," International Journal of Production Economics, Elsevier, vol. 117(2), pages 317-329, February.
  16. E. Rouvière & K. Latouche, 2014. "Impact of liability rules on modes of coordination for food safety in supply chains," European Journal of Law and Economics, Springer, vol. 37(1), pages 111-130, February.
  17. Rouviere, Elodie & Soubeyran, Raphael, 2012. "Small is Beautiful? Firm's Size, Prevention & Food Safety," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 123410, Agricultural and Applied Economics Association.

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