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Equilibrium Analysis of Food Safety Liability Insurance and Government Supervision in China

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  • Gongliang Zhang

    (College of Management, Zhongkai University of Agriculture and Engineering, Guangzhou 510225, China)

  • Ying Zhu

    (College of Economics & Management, South China Agricultural University, Guangzhou 510642, China)

Abstract

Food safety liability has required consideration around the world. It is realistic to establish a system of food safety liability insurance. However, the existing difficulties include members’ behavior decisions, influential factors, and the responsibility as well as obligations between the players. We build an evolutionary game model to discuss the behavior of food firms and the government in the context of food safety liability and identify evolutionary stability strategy of the participants in the game. Then, we simulate the stable evolution trend of the interaction between food firms and the government using MATLAB software. The results indicate that the initial probabilities of two-party game strategies affect the time length and convergence speed of system evolution but not the overall trend and final result of the evolution. Furthermore, decisions on purchasing food safety liability insurance be affected by the returns of food firms and government supervision. The more severe the punishment for food safety issues, the stronger the sense of crisis among food firms, and the higher probability they will purchase food safety liability insurance. The governance cost of food safety risks plays a role in affecting the strategic decision of the government. The ideal stable equilibrium state of the government and food firms cannot be achieved through spontaneous circulation. Suggestions are given from the perspective of government supervision and punishment to motivate food firms to insure actively.

Suggested Citation

  • Gongliang Zhang & Ying Zhu, 2022. "Equilibrium Analysis of Food Safety Liability Insurance and Government Supervision in China," Sustainability, MDPI, vol. 14(21), pages 1-12, October.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:21:p:13950-:d:954665
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    References listed on IDEAS

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    2. Friedman, Daniel, 1991. "Evolutionary Games in Economics," Econometrica, Econometric Society, vol. 59(3), pages 637-666, May.
    3. Boys, Kathryn A., 2013. "Food Product Liability Insurance: Implications for the Marketing of Specialty Crops," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 28(4), pages 1-5.
    4. May Chu & Jianhua Wang, 2018. "Central–local collaboration in regulating food safety in China," Public Money & Management, Taylor & Francis Journals, vol. 38(6), pages 437-444, September.
    5. Yang, Zhiqing & Liu, Xiaowen, 2022. "The impacts of compulsory food liability insurance policy on stock price crash risk: Evidence from Chinese food industry," Finance Research Letters, Elsevier, vol. 50(C).
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