Valuing Private Sector Incentives to Invest in Food Protection Measures in the Milk and Green Onion Sectors
AbstractThis study provides a framework to value investment strategies to mitigate possible agro-terrorism occurrences in the food supply chain and to determine where these investments would reduce the most risk. This framework is applied to two food sectors that could be at risk: milk and green onions. Stochastic optimization is used to determine the costs and risk premiums of alternative tracking strategies. The real options method along with a portfolio of options, also referred to as the "tomato garden" framework, is used to determine where and when alternative intervention strategies should be implemented to reduce the most risk. Finally, policy implications are derived on the cost-risk tradeoffs, probability of attacks, and containment efforts if there is an attack by using game theory to determine the incentives needed to motivate participants in the milk and green onion supply chains to invest in security measures.
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Bibliographic InfoPaper provided by North Dakota State University, Department of Agribusiness and Applied Economics in its series Agribusiness & Applied Economics Report with number 7630.
Date of creation: 2007
Date of revision:
Agro-terrorism; Stochastic optimization; Real options; Game theory; Milk; Green onions; Food Consumption/Nutrition/Food Safety;
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