Food Safety, Liability and Collective Norms

Over the last few years, retailers have implemented new collective private norms in order to improve food safety and reduce the risks related to microbial contamination and pesticide residues. In this paper, we propose a model of vertical relationships in which a group of retailers imposes more stringent specifications to upstream producers. We consider that the contamination risk is endogenously determined by the efforts made by the producers in order to improve food safety. We also consider that the penalty costs – related to the liability rule in the event of a crisis – decrease accordingly as the requirement level of the collective norm rises. We show how the liability rule influences the level of the collective norm and the contamination risk