A Principal‐Agent Model for Evaluating the Economic Value of a Traceability System: A Case Study with Injection‐site Lesion Control in Fed Cattle

Abstract

Traceability can link the identity of cattle feeders with retail beef cuts. The economic problem for the packer implementing traceability is to choose the level of investment in traceability and the level of incentive payments to cattle feeders so that cattle feeders will avoid production actions that can damage retail beef cuts. A case study of injection-site lesions in cattle is the basis for technical parameters to numerically solve this principal-agent problem. Results show that cattle feeders will give injections in sites preferred by the packer even with low rates of successful tracking and minimal incentives. Copyright 2008, Oxford University Press.

Moderating effect of traceability on value chain governance of credence goods: a perspective of New Institutional Economics framework

“…Secondly, Hobbs posits that the adoption of traceability systems is promoted by threats of legal action against fi rms producing unsafe food and the resulting damages that may result from a lack of demonstrable products or process trace or tracking. ResendeFilho (2007) and Resende-Filho and Buhr (2008) highlight two directions that traceability as a liability function has taken. They state that information asymmetry on food safety and quality has developed due to adverse selection or withholding of information and problems related to opportunistic behaviour.…”

Estimating the Parameters of Principal Agent Models

“…(b) Resende-Filho and Buhr (2008) contend that such costs will force the agent to be more efficient. That is, they reduce the costs that he incurs in delivering output y.…”

The Economics of Voluntary Traceability in Multi‐Ingredient Food Chains

“…Unsafe food can originate either at the farm or marketer levels and food-safety incidents increase in the number of firms in the supply chain and with imperfect traceability systems. Finally, Resende-Filho and Buhr (2008) propose a principalagent model where the choice of investment in traceability depends on the benefits from linking cattle feeder practices with the quality of retail beef cuts. They find that the larger investment costs are the higher is the rate of traceback success.…”