Voluntary vs. mandatory approaches to food safety: considering heterogeneous firms.
A critical assessment of voluntary approaches in regulatory programs is presented. When accounting for heterogeneous firms, with varying effectiveness of risk control, the optimality of a lump-sum financial incentive to encourage voluntary adoption is questioned. The paper uses a game-theoretic model to characterize the strategies of a regulator and firms. Using robust comparative statics, it can be shown that less efficient firms are less likely to participate in a voluntary food safety program. Adverse selection leads to lower overall risk control, suggesting mandatory control may be preferred.
Department of Agricultural, Environmental, and Development Economics, The Ohio State University, Columbus, Ohio 43210, USA.
Bo-Hyun
BH
Cho
Neal H
NH
Hooker
D000818:Animals; D003257:Consumer Product Safety; D003657:Decision Making; D003663:Decision Trees; D005525:Food-Processing Industry / Q000331:legislation & jurisprudence* / Q000592:standards*; D006801:Humans; D006920:Hygiene; D011786:Quality Control; D018570:Risk Assessment