Public goods, hysteresis, and underinvestment in food safety

Timothy Richards, William E. Nganje, Ram N. Acharya

Research output: Contribution to journalArticle

4 Scopus citations

Abstract

Despite the economic damage inflicted by a foodborne disease outbreak, firms at all points in the supply chain appear to be reluctant to invest in the necessary food safety technologies and practices. We argue that these investments are subject to both hysteretic and public good effects, and construct a theoretical model of food safety investment, calibrated to describe the 2006 E. coli outbreak in California spinach. Both effects are found to induce delays in food safety investments, but the public good effect dominates. We suggest a number of policy options that improve incentives to contribute to the public good.

Original languageEnglish (US)
Pages (from-to)464-482
Number of pages19
JournalJournal of Agricultural and Resource Economics
Volume34
Issue number3
StatePublished - Dec 1 2009

Keywords

  • Food safety
  • Hysteresis
  • Investment
  • Public goods
  • Real options
  • Simulation

ASJC Scopus subject areas

  • Animal Science and Zoology
  • Agronomy and Crop Science
  • Economics and Econometrics

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