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.
Cho
Bo-Hyun
BH
Department of Agricultural, Environmental, and Development Economics, The Ohio State University, Columbus, Ohio 43210, USA.
Hooker
Neal H
NH
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