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The effects of information on producer and consumer incentives to undertake food safety efforts: A theoretical model and policy implications

Author

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  • Elamin H. Elbasha*

    (Health Economic Statistics, BL 2-3, Merck Research Laboratories, 10 Sentry Parkway, Blue Bell, PA 19422, USA. Tel: (484)344-4045,, Fax: (484)344-3855, E-mail: elamin_elbasha@merck.com)

  • T. Lynn Riggs

    (Chicago Census Research Data Center, 230 S LaSalle, Chicago, IL 60604, USA. Tel: (312)423-4692, Fax: (312)322-2357, E-mail: tlriggs@frbchi.org)

Abstract

Food safety presents a double moral hazard problem. This author develops a model of food safety where consumers and producers undertake unobservable preventive measures to reduce the probability of a food-borne illness. Losses from a food-borne illness are shared by consumers and producers according to the existing tort law. We characterize the optimal solution and show that this risk-sharing arrangement and imperfect information create an incentive problem where suboptimal levels of precautions by producers and consumers are attained in a noncooperative Nash equilibrium solution. We conduct comparative static analysis to trace out the effects of changes in the size of losses, the degree of orientation of the legal system, and government regulation of information provision on precautions undertaken by consumers and producers. [EconLit citations: L150, Q180.] © 2003 Wiley Periodicals, Inc. Agribusiness 19: 29-42, 2003.

Suggested Citation

  • Elamin H. Elbasha* & T. Lynn Riggs, 2003. "The effects of information on producer and consumer incentives to undertake food safety efforts: A theoretical model and policy implications," Agribusiness, John Wiley & Sons, Ltd., vol. 19(1), pages 29-42.
    • Handle: RePEc:wly:agribz:v:19:y:2003:i:1:p:29-42
    DOI: 10.1002/agr.10043
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    References listed on IDEAS

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    Cited by:

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    2. Martino, Gaetano & Bavorovà, Miroslava, 2014. "An Analysis of Food Safety Private Investments Drivers in the Italian Meat Sector," 2014 International European Forum, February 17-21, 2014, Innsbruck-Igls, Austria 199366, International European Forum on System Dynamics and Innovation in Food Networks.
    3. Bénédicte Coestier & Estelle Gozlan & Stéphan Marette, 2005. "On Food Companies Liability for Obesity," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(1), pages 1-14.
    4. Minten, Bart & Assefa, Thomas & Hirvonen, Kalle, 2017. "Can Agricultural Traders be Trusted? Evidence from Coffee in Ethiopia," World Development, Elsevier, vol. 90(C), pages 77-88.
    5. Oh, Miyoung & Hennessy, David A., 2014. "Upstream and Downstream Strategic Food Safety Interactions," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 174105, Agricultural and Applied Economics Association.
    6. Eric Giraud-Héraud & Hakim Hammoudi & Louis-Georges Soler, 2006. "Food Safety, Liability and Collective Norms," Working Papers hal-00243034, HAL.
    7. Goldsmith, Peter D. & Turan, Nesve A. & Gow, Hamish R., 2004. "Firms, Incentives, And The Supply Of Food Safety: A Formal Model Of Government Enforcement," 2004 Annual meeting, August 1-4, Denver, CO 20343, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. Oh, Miyoung, 2014. "Three essays on consumer choices on food," ISU General Staff Papers 201401010800005236, Iowa State University, Department of Economics.
    9. Olmos, Marta Fernández & Grazia, Cristina & Perito, Maria Angela, 2011. "Quality and Double Sided Moral Hazard in Share Contracts," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 12(1).
    10. Minarelli, Francesca & Galioto, Francesco & Raggi, Meri & Viaggi, Davide, 2016. "Modelling asymmetric information in a food supply chain within Emilia Romagna Region," 149th Seminar, October 27-28, 2016, Rennes, France 245071, European Association of Agricultural Economists.
    11. B. Coestier & E. Gozlan & Stephan Marette, 2003. "La responsabilité des entreprises et le risque d'obésité," THEMA Working Papers 2003-42, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.

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