Optimal Policy Response to Food Fraud
By: Meerza, Syed Imran Ali ; Giannakas, Konstantinos; Yiannaka, Amalia
Meerza, Syed Imran Ali ; Giannakas, Konstantinos; Yiannaka, Amalia, Optimal Policy Response to Food Fraud, Journal of Agricultural and Resource Economics, Volume 46, Issue 3, September 2021, Pages 343-360
We analyze the optimal government response to food adulteration and mislabeling while accounting for heterogeneity in consumer preferences and producer efficiency, endogeneity in producer quality choices, and asymmetries in food fraud detection. When more-efficient producers commit fraud, the optimal policy response is a strict monitoring and enforcement system. For less-efficient producers, both increased certification costs and monitoring and enforcement can deter food fraud. When the government desires to increase average product quality, the optimal policy is strict monitoring and enforcement. Increasing monitoring and enforcement in the presence of corruption provides increased incentives for collusion between dishonest producers and corrupt policy enforcers.