Joint Private Safety Standards and Vertical Relationships in Food Retailing

Abstract

In recent years, it has become common for downstream firms to impose Joint Private Standards (JPSs) on upstream producers. In this paper, we present an original model of a vertical relationship, explaining the incentives for and the effects of such JPSs with an example concerning food safety. The risk of a food crisis is endogenously determined. Using the concept of cartel stability (d'Aspremont et al., 1983), it is shown that liability rules are crucial for JPSs to emerge, that a JPS can become a minimum quality standard, and that a more stringent JPS does not necessarily reduce the market risk.

On the Emergence of Private Standards: An Industrial Organization Approach

“…A 'liability function' is then performed in the sense that standards provide additional security vis-à -vis the threat of civil legal actions against a firm producing unsafe food (and the resulting financial damages) (Hobbs 2004). Hence, liability rules are shown to be crucial for these standards to emerge and the risk of a market sanction (fall in demand in the case of a sanitary accident) is not always sufficient to favour the emergence of such initiatives (see Giraud-Héraud et al 2012a). Other authors argue that private standards afford "domain defense" (Caswell and Johnson 1991) and protect market share and reputation (Fulponi 2006).…”

“…The coexistence of cooperation and non-cooperation is very complex to represent formally. In order to adequately model the specificities of the applied context, the paper by Giraud-Héraud et al (2012a) combines models of Industrial Economics (vertical relationships and product differentiation) and the concepts of the stability of coalitions (Bloch 1995). Giraud-Héraud et al (2012a) model the development of a private standard as a process leading to the creation of a second spot market starting from an initial configuration, where only one intermediary spot market exists (see Fig.…”

“…Another originality of the paper by Giraud-Héraud et al (2012a) consists in considering the endogenous formation of the sanitary risk on the market.…”

Food Safety, Market Organization, Trade and Development

“…In order to adequately model the specificities of the applied context, the paper by Giraud-Héraud et al (2012a) combines models of Industrial Economics (vertical relationships and product differentiation) and the concepts of the stability of coalitions (Bloch 1995). Giraud-Héraud et al (2012a) model the development of a private standard as a process leading to the creation of a second spot market starting from an initial configuration, where only one intermediary spot market exists (see Fig. 5.2a with n ¼ R).…”

International Regulation and Standards in Food Safety

“…Its collaborative approach brings together international food safety experts from the entire supply chain at Technical Working Group and Stakeholder meetings, conferences and regional events. They share knowledge and promote a harmonized approach with a shared vision of "safe food for consumers everywhere" [12].…”