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Agrifood safety standards, market power and consumer misperceptions

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  • Giraud-Heraud, Eric
  • Grazia, Cristina
  • Hammoudi, Abdelhakim

Abstract

This paper analyzes how the implementation of a food safety standard affects firms’ strategic behaviour within the context of a food chain. We provide a formal analysis, which considers that the sanitary risk results from a strong heterogeneity of upstream production conditions and the final demand depends on consumers’ risk estimations (given that consumers may underestimate or, conversely, overestimate the sanitary risk). We show how downstream (processing or retailing) firms may be prompted to play a positive role with respect to food safety, either by selecting only the safest upstream producers or by encouraging the improvement of suppliers’ production conditions. When the degree of consumers’ risk misperception is relatively low, then a downstream firm may adopt the latter strategy and increase the marketed quantities as the food safety standard is improved. However, we show that the actual contamination risk is not necessarily decreasing in the level of the food safety standard.

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File URL: http://purl.umn.edu/7849
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Bibliographic Info

Paper provided by European Association of Agricultural Economists in its series 105th Seminar, March 8-10, 2007, Bologna, Italy with number 7849.

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Date of creation: 2007
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Handle: RePEc:ags:eaa105:7849

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Related research

Keywords: food safety standards; market power; risk misperception; Food Consumption/Nutrition/Food Safety;

References

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  1. Henson, Spencer & Heasman, Michael, 1998. "Food safety regulation and the firm: understanding the compliance process1," Food Policy, Elsevier, Elsevier, vol. 23(1), pages 9-23, February.
  2. Antle, John M., 1999. "Benefits and costs of food safety regulation," Food Policy, Elsevier, Elsevier, vol. 24(6), pages 605-623, December.
  3. Schmitz, Patrick W., 2000. "On the joint use of liability and safety regulation," International Review of Law and Economics, Elsevier, Elsevier, vol. 20(3), pages 371-382, September.
  4. A. Mitchell Polinsky & William P. Rogerson, 1982. "Products Liability, Consumer Misperceptions, and Market Power," NBER Working Papers 0937, National Bureau of Economic Research, Inc.
  5. Fox, John A. & Shogren, J. & Hayes, Dermot J. & Kliebenstein, James, 1995. "Experimental Auctions to Measure Willingness to Pay for Food Safety," Staff General Research Papers 5343, Iowa State University, Department of Economics.
  6. Unnevehr, Laurian J. & Jensen, Helen H., 1999. "Economic Implications of Using HACCP As a Food Safety Regulatory Standard (The)," Staff General Research Papers 1631, Iowa State University, Department of Economics.
  7. Unnevehr, Laurian J. & Jensen, Helen H., 1999. "The economic implications of using HACCP as a food safety regulatory standard," Food Policy, Elsevier, Elsevier, vol. 24(6), pages 625-635, December.
  8. Fox, John A. & Shogren, Jason F. & Hayes, Dermot J. & Kliebenstein, James B., 1995. "Chapter 06: EXPERIMENTAL AUCTIONS TO MEASURE WILLINGNESS TO PAY FOR FOOD SAFETY," Valuing Food Safety and Nutrition (1995), Regional Research Project NE-165 Private Strategies, Public Policies, and Food System Performance, Regional Research Project NE-165 Private Strategies, Public Policies, and Food System Performance, number 25986.
  9. Starbird S. Andrew & Amanor-Boadu Vincent, 2007. "Contract Selectivity, Food Safety, and Traceability," Journal of Agricultural & Food Industrial Organization, De Gruyter, De Gruyter, vol. 5(1), pages 1-22, February.
  10. Marcel Boyer & Donatella Porrini, 2002. "Modeling the Choice Between Regulation and Liability in Terms of Social Welfare," CIRANO Working Papers 2002s-13, CIRANO.
  11. Innes, Robert, 2004. "Enforcement costs, optimal sanctions, and the choice between ex-post liability and ex-ante regulation," International Review of Law and Economics, Elsevier, Elsevier, vol. 24(1), pages 29-48, March.
  12. 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.
  13. Eric Giraud-Héraud & Hakim Hammoudi & Louis-Georges Soler, 2006. "Food Safety, Liability and Collective Norms," Working Papers hal-00243034, HAL.
  14. Loader, Rupert & Hobbs, Jill E., 1999. "Strategic responses to food safety legislation," Food Policy, Elsevier, Elsevier, vol. 24(6), pages 685-706, December.
  15. Fulponi, Linda, 2006. "Private voluntary standards in the food system: The perspective of major food retailers in OECD countries," Food Policy, Elsevier, Elsevier, vol. 31(1), pages 1-13, February.
  16. Henson, Spencer & Caswell, Julie, 1999. "Food safety regulation: an overview of contemporary issues," Food Policy, Elsevier, Elsevier, vol. 24(6), pages 589-603, December.
  17. Julie A. Caswell & Jaana K. Kleinschmit v. L., 1997. "Using Benefit-Cost Criteria for Settling Federalism Disputes: An Application to Food Safety Regulation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 79(1), pages 24-38.
  18. 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.
  19. Harrington, Winston & Portney, Paul R., 1987. "Valuing the benefits of health and safety regulation," Journal of Urban Economics, Elsevier, vol. 22(1), pages 101-112, July.
  20. Bazoche Pascale & Giraud-Héraud Eric & Soler Louis-Georges, 2005. "Premium Private Labels, Supply Contracts, Market Segmentation, and Spot Prices," Journal of Agricultural & Food Industrial Organization, De Gruyter, De Gruyter, vol. 3(1), pages 1-30, February.
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Citations

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Cited by:
  1. Russo, Carlo & Perito, Maria Angela & Di Fonzo, Antonella, 2011. "Our products are safe (don't tell anyone!). Why don't supermarkets advertise their private food safety standards?," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland, European Association of Agricultural Economists 115987, European Association of Agricultural Economists.
  2. Perito, Maria Angela & Hammoudi, Abdelhakim, 4. "Food safety standards and their impact on the small farms of developed countries," Politica Agricola Internazionale - International Agricultural Policy, Edizioni L’Informatore Agrario, Edizioni L’Informatore Agrario, issue 4.
  3. Cristina Grazia & Abdelhakim Hammoudi & Oualid Hamza, 2012. "Sanitary and phytosanitary standards: Does consumers’ health protection justify developing countries’ producers’ exclusion?," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 93(2), pages 145-170.
  4. Cristina Grazia & Abdelhakim Hammoudi & Oualid Hamza, 2012. "Sanitary and phytosanitary standards: Does consumers' health protection justify developing countries' producers' exclusion?," Post-Print hal-00939245, HAL.
  5. Cristina Grazia & Abdelhakim Hammoudi & Oualid Hamza, 2012. "Sanitary and phytosanitary standards: Does consumers’ health protection justify developing countries’ producers’ exclusion?," Working Papers 167021, Institut National de la Recherche Agronomique, France.

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