Contract Selectivity, Food Safety, and Traceability

Journal of Agricultural & Food Industrial Organization, Vol. 5, No. 2, Article 2, 2007

Posted: 17 May 2006

See all articles by S. Andrew Starbird

S. Andrew Starbird

Santa Clara University - Department of Information Systems & Analytics

Vincent Amanor-Boadu

Kansas State University - Department of Agricultural Economics

Abstract

Contracts are an increasingly common method for coordinating exchange in the food industry. Contracts often include specifications for product attributes including food safety. One of the goals of explicit safety specifications is to discourage or deter suppliers who would deliver unsafe food. In this article, we use a principal-agent model in the context of adverse selection to examine how contracts that include traceability can be used to select against producers who cannot meet a processor's safety specifications. We find that the motivation to select against unsafe producers depends on the magnitude of the failure costs and the proportion of the failure costs allocated to producers. We also identify the conditions under which the processor selects against unsafe producers regardless of traceability. Our results are important to regulators and negotiators who want to support safe producers and deter unsafe producers.

Keywords: contracts, food safety, traceability

JEL Classification: Q13, L14

Suggested Citation

Starbird, Sterling Andrew and Amanor-Boadu, Vincent, Contract Selectivity, Food Safety, and Traceability. Journal of Agricultural & Food Industrial Organization, Vol. 5, No. 2, Article 2, 2007, Available at SSRN: https://ssrn.com/abstract=902442 or http://dx.doi.org/10.2139/ssrn.902442

Sterling Andrew Starbird (Contact Author)

Santa Clara University - Department of Information Systems & Analytics ( email )

500 El Camino Real
Santa Clara, CA 95053
United States

HOME PAGE: http://omis.scu.edu/

Vincent Amanor-Boadu

Kansas State University - Department of Agricultural Economics ( email )

Manhatten, KS 66506-4001
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
1,088
PlumX Metrics