Starbird, S. Andrew

By: Starbird, S. Andrew; Amanor-Boadu, Vincent
One of the goals of inspection and traceability is to motivate suppliers to deliver safer food. The ability of these policies to motivate suppliers depends on the accuracy of the inspection, the cost of failing inspection, the cost of causing a foodborne illness, and the proportion of these costs paid by the supplier. We develop a model of the supplier's expected cost as a function of inspection accuracy, the cost of failure, and the proportion of the failure cost that is allocated to suppliers. The model is used to identify the conditions under which the supplier is motivated to deliver uncontaminated lots. Surprisingly, our results show that when safety failure costs can be allocated to suppliers, minimum levels of inspection error are required to motivate a supplier to deliver uncontaminated lots. This result does not hold when costs cannot be allocated to suppliers. As a case study, we use our results to analyze the technical requirements for suppliers of frozen beef to the USDA's Agricultural Marketing Service.
By: Starbird, S. Andrew
In the United States, federal, state, and local governments are involved with the regulation of the safety of the food supply. Food safety regulations that set standards for food processors usually include inspection policies for monitoring performance and penalties for processors who do not comply with regulatory standards. In this analysis, we examine how penalties and inspection policies interact to influence processor behavior. We distinguish between internal penalties (imposed by the regulator) and external penalties (imposed by the market or by the court). Using a model of the processor's expected annual cost, we find that under a given inspection policy internal penalties are only relevant under specific conditions. For cases in which internal and external penalties can be influenced, we use comparative statics to discover that internal penalties are more economically efficient for motivating processors than external penalties. These results imply that regulators should utilize internal penalties for noncompliance rather that rely on market or court-imposed penalties.
By: Starbird, S. Andrew
In California, acceptance sampling is used to monitor the quality of processing tomatoes delivered by growers to processors. A proposal to change the current quality assurance policy was recently put forth to reduce the growers' incentive to use pesticides. In this article we examine the effect of alternative quality assurance policies on profit-maximizing growers' demand for pesticides. The results indicate that the demand for pesticides is sensitive to changes in the quality assurance policy and that the proposed policy would reduce the optimal level of pesticide use on processing tomatoes. Disregarding the impacts of quality assurance policy may be the reason that the demand for pesticides has been underestimated so often in the past.