How Should Food Safety Certification be Financed?

Abstract

An analytical framework where consumers are imperfectly informed about the safety of products is used to investigate the welfare effects of a public certification system. Several certification fees under alternative structures of certification cost are analyzed. By maintaining competition among numerous sellers, voluntary certification financed by a per‐unit fee is efficient (and sufficient) to signal product safety. However, mandatory certification linked with a fixed user fee may be necessary if a seller wields monopoly power. Further, certification by a single, private agency results in a distorted fee.

A Cost-Benefit Framework for the Assessment of Non-Tariff Measures in Agro-Food Trade

“…The optimal partitioning of costs between consumers, taxpayers, producers and the government depends on the nature of inspection and certification costs (see Crespi and Marette, 2001). If both domestic and foreign firms incur the same inspection and certification costs that depend on quantities, economic theory suggests that they are factored into consumer price.…”

An economic model of ecolabeling

“…Since all sellers of brown units are indifferent between testing and not, the equilibrium quantity of brown units must be determined indirectly. Specifically, when combined with the equilibrium quantity Q Gt (as induced by G ++ ), the equilibrium quantity Q Bt must be such that the conditional probabilities " and #, as given by equations (3) and (4), generate rational expectations prices P c and P un [as found from equations (6) and (7)] that are consistent with equation (14) and that provide the proper incentives to brown sellers to deliver the value of B ++ given in equation (15) and to green sellers as to deliver the value of G ++ given in equation (17). That is, the complete equilibrium is determined by the combination of equations (3), (4), (6), (7), (14), (15), and (17).…”

“…Likewise, 1 In addition to articles focusing on ecolabeling, there is a parallel literature that investigates the role of labeling in agricultural markets, e.g., with reference to food safety or genetically modified organisms. For contributions to this literature, see Crespi and Marette [14], Kirchhoff and Zago [15], Marette et al [16], or Runge and Jackson [17], and the references cited therein. One important aspect of the problems this cohort of papers study is that consumers of agricultural products generally perceive direct personal benefits (e.g., from consumption of safer foods or non-GMO products).…”

Adverse Selection Revisited in the Context of Food Safety

“…Such systems have included a public certification system (Crespi & Marette, 2001;Jahn, Schramm & Spiller, 2005;Albersmeier, Schulze, Jahn & Spiller, 2009), HACCAP (Starbird, 2005), safety standards systems (Hammoudi, Hoffmann & Surry, 2009), and traceability systems (Sykuta, 2005;Starbird & Amanor-Boadu, 2006;Starbird & Amanor-Boadu, 2007). In addition, researchers have examined the most appropriate methods with which to implement these systems (for example, Farina, Gutman, Lavarello, Nunes & Reardon, 2005;Cho & Hooker, 2007).…”