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Welfare Effects of Mandatory Traceability When Firms are Heterogeneous

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  • Pouliot, Sebastien

Abstract

We develop a framework in which the cost of producing a quantity food and the cost of food safety differs across firms. We show that large firms may supply the safest food even though small firms have a cost advantage in producing safe food. The model shows that mandatory traceability can decrease the overall safety of food when small firms that supply the safest food exit the industry. Our model applies to food safety but can be applied to a wide range of issues related to regulation and product quality.

Suggested Citation

  • Pouliot, Sebastien, 2010. "Welfare Effects of Mandatory Traceability When Firms are Heterogeneous," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61017, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea10:61017
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    File URL: http://purl.umn.edu/61017
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    References listed on IDEAS

    as
    1. Dickinson, David L. & Bailey, DeeVon, 2002. "Meat Traceability: Are U.S. Consumers Willing To Pay For It?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 27(02), December.
    2. S├ębastien 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.
    3. Jason A. Winfree & Jill J. McCluskey, 2005. "Collective Reputation and Quality," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(1), pages 206-213.
    4. Steven Berry & Joel Waldfogel, 2003. "Product Quality and Market Size," NBER Working Papers 9675, National Bureau of Economic Research, Inc.
    5. Hobbs, Jill E., 2004. "Traceability in the Canadian Red Meat Sector," Economic and Market Information 55304, Agriculture and Agri-Food Canada.
    6. Crespi John M. & Marette Stephan, 2009. "Quality, Sunk Costs and Competition," Review of Marketing Science, De Gruyter, vol. 7(1), pages 1-36, August.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Food safety; quality; traceability; regulation; Industrial Organization; Marketing; Production Economics; D21; L11; L15; Q10;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General

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