Do Inspection and Traceability Provide Incentives for Food Safety?

Journal of Agricultural and Resource Economics, Vol. 31, No. 1, pp. 14-26, 2006

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

One of the goals of inspection and traceability is to motivate suppliers to deliver safer food. The ability of these policies to motivate suppliers depends on the accuracy of the inspection, the cost of failing inspection, the cost of causing a food borne illness, and the proportion of these costs paid by the supplier. We develop a model of the supplier's expected cost as a function of inspection accuracy, the cost of failure, and the proportion of the failure cost that is allocated to suppliers. We use the model to identify the conditions under which the supplier is motivated to deliver uncontaminated lots. Surprisingly, our results show that when safety failure costs can be allocated to suppliers, minimum levels of inspection error are required to motivate a supplier to deliver uncontaminated lots. This result does not hold when costs cannot be allocated to suppliers. We use our results to analyze the technical requirements for suppliers of frozen beef to the USDA's Agricultural Marketing Service.

Keywords: food safety, inspection, traceability

JEL Classification: Q13, L14, L15

Suggested Citation

Starbird, Sterling Andrew and Amanor-Boadu, Vincent, Do Inspection and Traceability Provide Incentives for Food Safety?. Journal of Agricultural and Resource Economics, Vol. 31, No. 1, pp. 14-26, 2006, Available at SSRN: https://ssrn.com/abstract=902446

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

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