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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.

Suggested Citation

  • Sébastien Pouliot & Daniel A. Sumner, 2008. "Traceability, Liability, and Incentives for Food Safety and Quality," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(1), pages 15-27.
  • Handle: RePEc:oup:ajagec:v:90:y:2008:i:1:p:15-27
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    File URL: http://hdl.handle.net/10.1111/j.1467-8276.2007.01061.x
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    1. Marcel Boyer & Donatella Porrini, 2004. "Modelling the choice between regulation and liability in terms of social welfare," Canadian Journal of Economics, Canadian Economics Association, vol. 37(3), pages 590-612, August.
    2. Steven Shavell & A. Mitchell Polinsky, 2000. "The Economic Theory of Public Enforcement of Law," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 45-76, March.
    3. 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.
    4. Hiriart, Yolande & Martimort, David & Pouyet, Jerome, 2004. "On the optimal use of ex ante regulation and ex post liability," Economics Letters, Elsevier, vol. 84(2), pages 231-235, August.
    5. 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.
    6. 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.
    7. 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, March.
    8. Hobbs, Jill E., 2004. "Traceability in the Canadian Red Meat Sector," Economic and Market Information 55304, Agriculture and Agri-Food Canada.
    9. Buzby, Jean C. & Frenzen, Paul D., 1999. "Food safety and product liability," Food Policy, Elsevier, vol. 24(6), pages 637-651, December.
    10. 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.
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