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Welfare Effects of Mandatory Traceability When Firms are Heterogeneous

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  • Pouliot, Sebastien

Abstract

We develop a framework in which the cost of producing a quantity food and the cost of food safety differs across firms. We show that large firms may supply the safest food even though small firms have a cost advantage in producing safe food. The model shows that mandatory traceability can decrease the overall safety of food when small firms that supply the safest food exit the industry. Our model applies to food safety but can be applied to a wide range of issues related to regulation and product quality.

Suggested Citation

  • Pouliot, Sebastien, 2010. "Welfare Effects of Mandatory Traceability When Firms are Heterogeneous," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61017, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea10:61017
    DOI: 10.22004/ag.econ.61017
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    References listed on IDEAS

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    1. Dickinson, David L. & Bailey, DeeVon, 2002. "Meat Traceability: Are U.S. Consumers Willing To Pay For It?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 27(2), pages 1-17, December.
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    3. Hobbs, Jill E., 2004. "Traceability in the Canadian Red Meat Sector," Economic and Market Information 55304, Agriculture and Agri-Food Canada.
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    5. Jill E. Hobbs & DeeVon Bailey & David L. Dickinson & Morteza Haghiri, 2005. "Traceability in the Canadian Red Meat Sector: Do Consumers Care?," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 53(1), pages 47-65, March.
    6. Crespi John M. & Marette Stephan, 2009. "Quality, Sunk Costs and Competition," Review of Marketing Science, De Gruyter, vol. 7(1), pages 1-36, August.
    7. Avinash Dixit, 1979. "Quality and Quantity Competition," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 46(4), pages 587-599.
    8. Sébastien Pouliot & Daniel A. Sumner, 2008. "Traceability, Liability, and Incentives for Food Safety and Quality," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(1), pages 15-27.
    9. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
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    Cited by:

    1. Pouliot, Sebastien, 2011. "The FDA Food Safety and Modernization Act and the Exemption for Small Firms," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103885, Agricultural and Applied Economics Association.

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