ArticlePDF Available

Consumer demand for traceability


Abstract and Figures

Consumers have become more discerning in their food consumption choices. Food safety and food quality issues have moved to the forefront of consumer concerns, industry strategies, and in some cases, government policy. A variety of private sector and public policy traceability initiatives have emerged, partly with the objective of reducing consumer information asymmetry with respect to food safety and food quality attributes. This paper examines the role of traceability systems in the food industry and distinguishes between ex post traceback systems and ex ante quality verification systems. Examples of voluntary private sector livestock traceability systems and public sector raceability programs are discussed, including the trade implications of mandatory traceability and labeling. The paper presents preliminary results from experimental auctions measuring consumer willingness-to-pay for traceability, food safety and on-farm production assurances.
Content may be subject to copyright.
International Agricultural Trade
Research Consortium
Consumer Demand for Traceability
Jill E. Hobbs*
Working Paper #03-1
The International Agricultural Trade Research Consortium is an informal association of University and
Government economists interested in agricultural trade. Its purpose is to foster interaction, improve
research capacity and to focus on relevant trade policy issues. It is financed by United States
Department of Agriculture (ERS, and FAS), Agriculture and Agri-Food Canada and the participating
The IATRC Working Paper series provides members an opportunity to circulate their work at the
advanced draft stage through limited distribution within the research and analysis community. The
IATRC takes no political positions or responsibility for the accuracy of the data or validity of the
conclusions presented by working paper authors. Further, policy recommendations and opinions
expressed by the authors do not necessarily reflect those of the IATRC or its funding agencies. For a
copy of this paper and a complete list of IATRC Working Papers, books, and other publications, see
the IATRC Web Site
This paper was presented at the IATRC Annual Meeting, December 15-17, 2002, Monterey,
California. The Theme Day focused on “Consumer-Driven Agriculture and Trade.”
*Jill Hobbs is an Associate Professor in the Department of Agricultural Economics at the University of
Correspondence regarding this paper should be addressed to:
Jill E. Hobbs
Department of Agricultural Economics
University of Saskatchewan
Saskatoon, Saskatchewan
S7N 5A8 Canada
April 2003
ISSN 1098-9218
Working Paper 03-1
Jill E. Hobbs*
Associate Professor
Department of Agricultural Economics
University of Saskatchewan
Prepared for the Theme Day “Consumer Driven Agricultural Trade” at the International
Agricultural Trade Research Consortium Annual Meeting, December 15-17 2002
* Department of Agricultural Economics, University of Saskatchewan, Saskatoon,
Saskatchewan, S7N 5A8, Canada. Email:
Consumers have become more discerning in their food consumption choices.
Food safety and food quality issues have moved to the forefront of consumer concerns,
industry strategies, and in some cases, government policy. A variety of private sector and
public policy traceability initiatives have emerged, partly with the objective of reducing
consumer information asymmetry with respect to food safety and food quality attributes.
This paper examines the role of traceability systems in the food industry and
distinguishes between ex post traceback systems and ex ante quality verification systems.
Examples of voluntary private sector livestock traceability systems and public sector
traceability programs are discussed, including the trade implications of mandatory
traceability and labeling. The paper presents preliminary results from experimental
auctions measuring consumer willingness-to-pay for traceability, food safety and on-farm
production assurances.
A series of high profile food safety scares has heightened public awareness and
concerns over food safety, for example the Bovine Spongiform Encephalopathy (BSE)
crisis in the UK beef industry; in the US, E. coli O157:H7 outbreaks attributed to ground
beef (Jack-in-the-Box; Tyson meats); in Scotland, the deaths of 22 senior citizens linked
to E. coli O157:H7 contaminated meat purchased from a local butchers shop; in Belgium,
the scare created by the contamination of animal feed with potentially cancerous dioxins
in 1999; in Australia, the ‘Garibaldi’ incident in 1995 in which E. coli O157:H7 from a
contaminated meat sausage resulted in several illnesses and the death of a child.
Food quality has become more important, particularly the widening dimensions of
‘quality’. This is partly supply driven as a result of technological change and increased
product differentiation possibilities. It is partly demand driven, with increased consumer
interest in a wider array of intrinsic and extrinsic food attributes. Intrinsic quality
attributes include palatability, nutrition, the functional (health) properties of food, etc.
Extrinsic quality attributes include elements of the production environment, such as farm
animal welfare, environmental stewardship, organic food. Many of these are credence
attributes that cannot be detected by consumers without some form of quality signal, such
as a label.
Often the same is true of food safety. Unless severe product deterioration has
occurred, consumers cannot detect food safety hazards through sensory means prior to
purchase. Occasionally food safety can be an experience attribute if a consumer
experiences a food borne illness immediately following consumption of a specific food
item. Usually, food safety has credence attribute properties. Clearly, this was the case for
BSE in the UK beef industry – it was impossible for a consumer to know whether they
had consumed BSE-infected beef immediately after consumption.
Consumers incur information costs in determining whether an experience or
credence attribute may be present. Market failure can arise as a result of information
asymmetry if the market adversely selects lower quality (or unsafe) food in the absence
of information signals to consumers. Grossman (1981) argues that the market has a self-
correcting mechanism if quality disclosure is costless. Sellers of high quality products
have an incentive to disclose quality. Therefore, non-disclosure implies low quality. This
self-correcting mechanism hinges on the ability to (costlessly) verify product quality
disclosures ex post. McCluskey (2000) shows that profit-maximizing producers can gain
from deceiving consumers with false quality claims. Repeat-purchase relationships and
third-party monitoring are necessary for efficient markets in high quality credence goods.
Efficient markets in credence goods require credible product quality signals. Traceability
systems facilitate the provision of quality signals to consumers. Yet (as will be argued
below), many of the emerging livestock traceability systems appear ill designed to
provide credible ex ante quality signals to consumers.
Voluntary labeling by firms, sometimes supplemented by third party certification,
can be used to identify credence attributes. If there is a market premium for ‘safer’ food,
there is an incentive for firms producing products with enhanced levels of food safety to
identify this attribute in a label. Irradiated meat products in the US are a good example.
A credible monitoring and enforcement mechanism is necessary to reduce the risk of
cheating through mislabeling. A self-policing industry quality assurance or safety
labeling program could be effective if those firms producing ‘high quality’ (or
demonstrably safer) food are able to censure those firms who free-ride on the certification
program through false or misleading labeling. In the absence of an effective self-policing
mechanism the market failure problem persists for products with negative quality or
safety attributes. A firm will not voluntarily disclose low quality.
Private sector traceability initiatives in the livestock sector include individual
supply chain initiatives and industry-wide programs. Supply chain partnerships
delivering traceability have emerged in the UK beef industry, largely as a result of the
loss in consumer confidence following the BSE crisis. One example is Tracesafe, a small
farmer-owned company that has developed a network of cattle breeders and finishers who
rear cattle to specific production guidelines. The production protocols specify the
purchase of feed from a set of contracted feed mills and include an extensive system of
on-farm record keeping. Tracesafe differentiates its beef on the basis of its ability to
trace the history of individual meat cuts to the animal of origin, with an implied safety
assurance. The beef is sold in specialist retail outlets and restaurants under the Tracesafe
brand name (Fearne, 1998).
The meat processing sector has also recognized the potential role of traceability in
bolstering consumer confidence in food safety, and as a product differentiation strategy.
Michael McCain, President and CEO of Maple Leaf Foods Inc. (a major Canadian pork
and poultry processor) recently referred to traceability as the “holy grail of the food
supply chain”. Maple Leaf is currently funding the development of DNA identification
technology to facilitate the traceback of meat to the farm of origin (Powell, 2002).
Pressure from export markets, particularly the Japanese market, appears to be a
significant driver for this development.
In other cases, private sector traceability initiatives are a result of pressure from
downstream food retailers. A desire to reduce risk exposure or reduce the transaction
costs of monitoring product quality or downstream production methods are the
motivators. This does not necessarily mean that traceability information is made available
to consumers on retail packages. UK supermarkets require their beef suppliers to be
members of accredited quality assurance programs, although the meat may not be
traceable to the specific farm of origin. The Canadian retailer Sobeys requires its
suppliers to demonstrate that specific production, processing, transport and handling
processes have been implemented. While traceability back to the farm may not be an
explicit requirement, it can be a necessary condition for providing information on
production and processing methods (Hobbs, 1996; Fearne, 1998; Bredahl et al. 2001).
Industry-wide private sector traceability programs have also been introduced by
industry associations or producer groups. The Canadian Cattlemen’s Association
established the Canadian Cattle Identification Agency (CCIA). In July 2002, the CCIA
implemented a national cattle identification system to facilitate the traceback of cattle in
the event of a food safety problem. The industry initiated CCIA as a risk reduction
strategy. Prior to the introduction of the traceback system, the identification and tracing
of animals in the event of a major crisis on the scale of BSE would have been virtually
Cattle leaving the herd of origin are issued a unique ID number displayed on a
CCIA tag with a barcode. Tags are distributed by authorized service centers that record
which ID numbers are allocated to which producers. The unique ID number is maintained
to the point of carcass inspection in the packing plant. Monetary penalties for non-
compliance can be imposed on producers. In the event of a food safety problem, the
Canadian Food Inspection Agency (CFIA) (a Federal government agency) initiates a
traceback procedure. CFIA uses information from the CCIA database to identify the last
location of the animal and the herd of origin (CCIA, 2002). This information is used to
track cattle movements both backwards and forwards in the supply chain. Producers are
not required to maintain records. In this regard the Canadian system is quite different
from the ‘cattle passport’ system in the UK. The UK system requires producers to
register all cattle movements on or off a farm with the national identification agency. In
the UK system the unique animal ID number should allow immediate identification of all
farms on which the cattle have been located. The Canadian system only allows
identification of the herd of origin and the final location of the cattle, with traceback
beyond those two points relying on the ability of producers to provide this information.
The Australian beef industry has a voluntary quality assurance system that
includes a national identification program including DNA sampling for traceback. The
Australian system is an industry-government partnership in the sense that the system is
led by a government agency, the Meat and Livestock Agency (MLA). A series of quality
management protocols covering production, handling and processing were developed
under the umbrella of “Cattle Care”. A producer selling cattle signs a National Vendor
Declaration form that identifies the seller and provides basic production information (e.g.
whether the cattle were treated with a growth-promoting hormone; information about the
feeding program, etc). This information, combined with a cattle tag, enables the
traceback of cattle in the event of a problem (Lawrence, 2002).
A voluntary grading system, Meat Standards Australia (MSA), uses a series of pre
and post-slaughter measures to predict the eating quality of meat. Blood samples are
taken from each carcass that qualifies for the MSA program while the carcass can still be
identified with a seller. If a consumer complains of a bad eating experience from MSA-
graded meat, a DNA sample from the meat and can be matched with the blood sample
from the carcass. In this way, meat cuts can be traced through the supply chain and to the
farm of origin. The traceback in the MSA system is focused primarily on quality rather
than just food safety. It allows a direct link to be made between eating quality and
production and processing methods. It can assist in identifying where improvements may
be necessary or in identifying sellers who consistently misrepresent cattle on their
National Vendor Declaration form (Lawrence, 2002).
The Australian systems of identification and quality assurance are voluntary.
They establish the information infrastructure onto which individual supply chains can
bolt on their own quality branded beef programs. There are several examples of
Australian branded beef programs that use the MSA system as part of a product
differentiation strategy (Lawrence, 2002).
Mandatory traceability and labeling initiatives have been introduced in some
countries. The European Union (EU) has a beef labeling regulation that requires all
Member States to have in place compulsory beef labeling and traceability systems by
2003. There are three components to the regulation. First, each Member State will have a
national cattle identification and registration system. Second, beef products will be
labeled with a traceability number identifying origin, including where the animals from
which the meat was derived were born, reared, slaughtered and processed. Third, the
regulation introduces rules for voluntary labeling with additional information (for
example, production information, animal welfare information, etc.).
The 2002 US Farm Bill introduced retail-level country of origin labeling for beef,
lamb, pork, fish, fresh and frozen fruits and vegetables and peanuts. In the interim this is
voluntary but a mandatory regulation will be established by September 30 2004. To
receive a US country of origin designation livestock must be born, raised and slaughtered
in the United States. Mandatory country of origin labeling has major ramifications for
the traceability, record keeping and information systems that will be required in order to
substantiate the ‘born, reared and slaughtered’ claim for any meat products.
These examples have shown that there are numerous examples of private and
public sector initiatives, offering various degrees of traceability and quality assurances
with respect to credence attributes. A valid question, therefore, is the extent to which
traceability and origin labeling should be a private or public sector responsibility? This
depends on whether there is market failure, and if so, whether the benefits to consumers
of mandating traceability and/or labeling outweigh the costs. To help assess these
questions, it is useful to consider the functions and potential economic benefits of a
traceability system.
There are three main functions of a livestock traceability system. The first is to
facilitate the traceback of products or animals in the event of a food safety problem.
Effective traceback enables the scope of a food borne illness to be contained, thereby
minimizing private and public costs, e.g. pain and suffering, lost productivity, medical
costs, damage to a firm or industry’s reputation, liability costs, etc. By identifying and
isolating the source of contamination, a traceability system can protect firms who practice
due diligence from free riders who fail to invest in good production practices or
preventative measures. A traceability system allows ex post cost reduction after a
problem has arisen. It performs a reactive function. Most livestock traceability programs,
for example the Canadian cattle identification system, perform this reactive function.
The second function of a traceability system is to enhance the effectiveness of tort
liability law as an incentive for firms to produce safe food. The threat of civil legal
action and the resulting financial damages and damage to brand name capital provide the
incentive. To the extent that industry-wide traceability systems can facilitate the
establishment of legal liability, the incentive for firms to adopt measures that enhance
food safety is strengthened. In this sense, traceability systems also perform an ex post
information function.
The third function of a traceability system is pre-purchase quality verification to
reduce information costs for consumers through labeling the presence of credence
attributes. This is an ex ante information function requiring proactive information
provision and quality verification. The EU and Canadian livestock identification and
traceability systems facilitate ex post traceback in the event of a problem. They do not
provide ex ante provision of information on product attributes to reduce consumer
information asymmetry. However, the frequent justification for introducing mandatory
traceability and labeling, such as the EU beef labeling regulation, is the provision of
useful information to consumers that the market would otherwise fail to provide.
Several EU Member States have already implemented beef labeling regulation.
Initial experiences suggest that this is indeed an ex post, reactive labeling system rather
than an ex ante information system that would reduce consumer information asymmetry
with respect to important credence attributes.
Other Member States report that their consumers, even when well
informed, have not notably changed their patterns of consumption of beef
(Commission of the European Communities, 1999, p.7)
The question “What do consumers really want?” lies at the heart of this issue. In
other words, is traceability information useful to consumers? If so, is the absence of
traceability information an indication of market failure and therefore a justification for
mandatory traceability and labeling programs to correct the market failure? Or can
voluntary traceability labels be a useful product differentiation strategy for individual
firms or supply chain alliances? Before we can begin to answer these questions, we need
a better understanding of consumer responses to traceability and quality verification
A set of research experiments assessing Canadian consumers’ willingness-to-pay
(WTP) for traceability, food safety and on-farm production information for beef and ham
products were carried out in 20021. Laboratory (experimental) auction markets involving
consumers in western and eastern Canada were used to collect bids on meat
characteristics. Experimental auctions are a method of eliciting non-hypothetical bid data
in the absence of publicly available market data on the demand for traceability and
quality verification characteristics.
Following Shogren et al (1994), participants were given a beef (or ham) sandwich
containing standard store-bought beef (ham) and had the opportunity to ‘upgrade’ their
sandwich for a sandwich with additional verifiable characteristics. A sum of Cdn$20 was
provided as an incentive for attending the session. Four ‘auction’ sandwiches were used,
1 This research was conducted in collaboration with researchers from Utah State University who were
conducting experiments in the US, the UK, Japan and Canada (Dickinson and Bailey, 2002). Additional
Canadian data collection was funded by Agriculture and Agri-Food Canada.
each with different verifiable information. The meat in one sandwich had an extra
assurance with respect to humane animal treatment. The second sandwich had an extra
assurance regarding food safety standards or procedures that were over and above the
industry norm. The third sandwich contained meat that was traceable to the farm of
origin. The fourth sandwich combined all three characteristics: the meat was traceable to
the farm of origin, with an extra assurance of humane animal treatment and an extra
assurance of food safety standards/procedures2.
The experiment consisted of ten rounds of bidding for each sandwich. Bids were
collected for sandwich 1 (humane animal treatment), then sandwich 2 (food safety), then
sandwich 3 (traceability), then sandwich 4 (all 3 characteristics). This process was
repeated ten times. Participants wrote down their bids, so that individual bid information
was private. At the beginning of each round of bidding for each sandwich, the second
highest bid (or ‘market price’) from the previous round was announced. At the end of the
10th round, a random draw determined which of the simultaneous sandwich auctions
would be binding. Another random draw determined which of the 10 rounds of bidding
was binding. The highest bidder in that round for that sandwich exchanged their
sandwich for the auction sandwich and paid the second highest bid price. Only one
sandwich was auctioned off in each experiment. There was an equal chance that any of
the rounds of bidding would be binding; thus participants had an incentive to bid honestly
each time.
2 It was explained to participants that there was nothing inherently ‘wrong’ with the sandwich they had
been given. It was simply regular meat purchased in a regular store and therefore met all the requisite food
safety standards. Instead there was additional verifiable information about each of the auction sandwiches.
No deceit was used. The additional information was truthful.
Conducting multiple rounds of bidding and announcing the ‘market price’ allows
for bid stabilization over the ten rounds and provides a corrective mechanism to assist
participants in understanding the experiment (Shogren et al., 1994; Dickenson and
Bailey, 2002). The fact that participants were asked to eat their sandwich before leaving
the room and the exchange of money by the highest bidder in the randomly selected
round is intended to encourage honest bidding.
The experiments were conducted in Saskatoon, Saskatchewan and Guelph,
Ontario in March and September 2002 respectively. Subjects in Saskatoon were
recruited from a range of demographic groups at the University of Saskatchewan,
including students, faculty, professional administrative staff and maintenance staff.
Subjects in Guelph were recruited from the consumer database of a private consumer
research firm. A total of 204 people participated in the study, 98 in Ontario and 106 in
Saskatchewan, with 104 participating in the beef auctions and 100 in the pork auctions.
Analysis of the results is ongoing. A preliminary assessment reveals some
interesting trends. Figures 1 and 2 display average bid information for the beef and pork
experiments respectively over the ten rounds of bidding. Marginal bid information (i.e.
the amounts on average that were bid to exchange the current sandwich for an auction
sandwich) is presented as a percentage of the base sandwich value of Cdn$2.82 for the
beef sandwich and Cdn$2.85 for the ham sandwich3. Traceability to the farm of origin,
without additional quality assurances, elicited the lowest average willingness to pay. An
ex ante quality verification such as an additional food safety assurance or an animal
welfare assurance was of more value to the participants. Combining a traceability
3 The base sandwich value was calculated by asking respondents how much they would typically expect to
pay for the type of sandwich provided to them in the experiment, and averaging these responses.
guarantee with positive quality assurances yielded the highest bids on average, although
the average bid for the ‘all inclusive’ sandwich was less than the sum of bids for the
individual attributes, suggesting a decreasing marginal willingness to pay for the
attributes. This is consistent with results from an equivalent WTP study in the US
(Dickenson and Bailey, 2002).
Figure 1: Average WTP Bids - Beef
(Base Sandwich value = Cdn$2.82)
Bidding Rounds
Marginal bids as %
of base sandwich
animal treatment food safety
traceability all attributes
Figure 2: Average WTP Bids - Pork
(Base sandwich value = Cdn$2.85)
Bidding Rounds
Marginal Bid as % of base sandwich
animal treatment food safety traceability all attributes
Average WTP (averaged across all subjects for the last 5 bidding rounds in both
locations) to upgrade to a traceable beef sandwich was Cdn$0.20 (7%). Average WTP to
add a food safety assurance was Cdn$0.56 (20%), to add an animal welfare assurance
was Cdn$0.50 (17.6%) and to add all 3 assurances was Cdn$1.12 (40%)4. For the ham
sandwiches, average bids were Cdn$0.28 (10%) for traceability, Cdn$0.47 (17%) for
food safety, Cdn$0.44 (15.6%) for animal welfare and Cdn$0.93 (33.4%) for all three
4 This compares with US$0.23 (7.6%), US$0.63 (21%), US$0.50 (16.7%)and US$1.06 (35%) respectively
in a similar US experiment where the base sandwich value was approximately US$3 (Dickinson and
Bailey, 2002).
5 In US experiments using ham sandwiches, Dickenson and Bailey (2002) report average bids of US$0.50,
US$0.59, US$0.53 and US$1.14 (or 16.67%, 17.6%, 19.7% and 38%) for traceability, food safety, animal
welfare and all three assurances respectively. The base sandwich was valued at approximately US$3.
It should be emphasized that these are average values and mask considerable
variations in bids across participants. For example, there were a high number of zero
bids for the ‘traceability only’ sandwich. Furthermore, due to the nature of a one or two
day experiment, these bids are usually considered to be an upper bound on WTP
(Dickinson and Bailey, 2002; Hayes et al, 1995). Finally, caution should be exercised in
extrapolating these numbers into other contexts. While the data may suggest a 10%
average WTP for traceability information or a 33% average WTP for the addition of the
three assurances for a ham sandwich, these percentages cannot be extrapolated across an
entire consumer budget. That is, the results should not be used to claim that Canadian
consumers would be willing to pay 10% or 33% more for all food products with these
assurances. Budget constraints typically limit WTP. Also, WTP for an additional food
safety assurance may differ among products depending on consumers’ risk perceptions
regarding those products.
The key point to take from this preliminary analysis is that traceability, by itself,
may not deliver much value to most consumers6. In essence, consumers want to know
their food is safe before they consume it. Quality assurances with respect to specific
credence attributes, bundled with traceability, have more appeal. While ex post reactive
traceability systems perform an important economic function in limiting the costs from a
food safety problem and in maintaining consumer confidence in an industry, they do little
to reduce consumer information asymmetry. It is important to distinguish between the
different functions of a traceability system and to recognize the extent to which the
traceability systems being put in place by industry or mandated by policy can deliver on
one or all of the objectives: limiting the ex post costs of a food safety problem;
strengthening liability incentives; and ex ante provision of information to consumers.
Traceability may be a necessary but not sufficient condition for ex ante verification of
quality attributes.
Also of interest is the credibility of different information sources about credence
attributes such as origin, food safety or on-farm production practices. The debate around
traceability and labeling systems includes questions over who should be responsible for
sanctioning credible information provision to consumers. Is it the role of industry
associations or the role of individual firms or supply chains, or is there a market failure
indicating that it could be the role of government? The Canadian consumer research also
asked participants to indicate which sources they most trusted and least trusted to provide
information about production practices from a list of seven potential sources. Figure 3
displays the responses to this question.
Almost 50 percent of respondents said they would most trust a Federal
government agency, such as the Canadian Food Inspection Agency, to provide this
information. Another quarter of respondents placed most trust in an independent quality
assurance firm. Respondent comments revealed that the Federal government (CFIA)
tended to be trusted because it was seen to be working in the public interest.
6 Although clearly it is of some value to some consumers, given the non-negative average bids.
Figure 3: Credibility of Information Sources About
Production Practices (N=204)
Fed. Govt
Prov. Govt
Ind. Assoc.
Welfare/Enviro Group
Indept. QA Firm
Not Trust Any
% of Responses
Most Trusted Least Trusted
Almost one third of the participants indicated that animal welfare or
environmental groups (such as Greenpeace or PETA – People for the Ethical Treatment
of Animals) were the least trusted. Several people commented that they felt these sources
had an agenda, and were therefore not seen as objective or trustworthy. Interestingly
food processors and retailers were regarded as the least trusted source of information by
25% and 23% of respondents respectively. Comments revealed that some people felt
these sources had a vested commercial interest that gave them an incentive to mislead
consumers. This points to a potential credibility problem for industry sources in
providing traceability and quality assurances to consumers. A potential solution to this
credibility problem is the Australian model, whereby individual branding and product
differentiation can be bolted onto the national identification and quality standards
programs developed jointly by industry and government.
Although an entity (e.g. industry, government or interest group) may not be
considered a reliable or trustworthy source of information, the information it disseminates
can still influence consumer perceptions if the message is not closely associated with the
source. For example, “I read it somewhere”, “I heard that …”, etc. Thus, the ‘least
trusted’ sources in Figure 3 may still have an indirect impact on consumer perceptions.
Consumer interest in food safety and food quality have precipitated an increased
focus on traceability and quality assurances, including retail labeling of product origin
and/or production methods. In many cases, these are private industry responses to
product differentiation opportunities. Or they may be private sector strategies to reduce
risk exposure and maintain consumer confidence. Regulatory moves to mandate
traceability, origin or production method labeling create problems in the international
trade arena. Mandatory labeling of credence attributes has been justified on the basis of
consumers’ “right to know”, for example, genetically modified foods, country of origin
The labeling of production and processing methods (PPM) poses particular
challenges to the World Trade Organisation (WTO) system. The principle of Non-
Discrimination is based on three concepts. It requires that ‘like’ goods be given the same
treatment – the WTO rules deal with goods, not PPMs because it is goods that are traded.
It requires that foreign like goods are given the same ‘national treatment’ as domestic
goods and that all foreign like goods of member countries are granted equal market
access. The challenge arises when domestic concerns request regulations on PPMs that
violate one of the three bases of non-discrimination. For example if PPMs differ across
countries, a domestic regulation may favor domestic producers or violate the most-
favored nation principle (Isaac and Kerr, 2002). Mandatory traceability and labeling
regulations or country of origin labeling regulations may be challenged at the WTO on
the basis that they violate WTO rules on allowable labels and inhibit trade.
The WTO response to the debate around trade barriers related to PPMs has been
to permit ‘legitimate’ violations of the principle of Non-Discrimination. In a negotiated
compromise, the Tokyo round of GATT negotiations resulted in PPMs being divided into
product-related PPMs and non-product related PPMs. Safety-related trade barriers are
dealt with under the Agreement on Sanitary and Phyto-Sanitary Measures (SPS).
Product-related PPM trade barriers are dealt with under the Agreement on Technical
Barriers to Trade (TBT). A trade barrier based on PPMs may be permissible under the
TBT agreement if the PPM creates a novel product, such that the ‘like’ products
designation no longer applies. However, the National Treatment and Most-Favored
Nation principles still pertain. Non-product related PPMs are out of scope of the TBT
agreement. There is no permissible use of TBT measures to ban trade based on non-
product related PPMs, such as the use of intensive agricultural production methods rather
than an organic system to produce the cotton used to make a shirt (Isaac and Kerr, 2002).
Mandatory labeling policies based on consumers’ right-to-know contravene WTO
rules if a non-product related attribute is being labeled and the labeling policy violates
one of the three cornerstones of non-discrimination. For example, mandatory labeling of
GM food based on consumers’ right-to-know about a processing technique or a
technology (rather than a claim that the product was novel or an objection on the basis of
safety) would contravene WTO rules (Isaac and Kerr, 2002). It could also be argued that
mandatory labeling of traceability information and/or product origin on the basis of
consumers’ right to know would also be in contravention of WTO rules if the Non-
Discrimination principle is violated.
Proponents of mandatory country of origin labeling in the US argue that it
enshrines in law consumers’ right to know about the origin of products. Opponents argue
that a mandatory regulation panders to the domestic protectionist interests of producers. It
imposes unnecessary costs on the food industry and will adversely affect (e.g. livestock)
exports from other countries, particularly as US processors will be required to provide
proportional country of origin content on food labels. Voluntary labeling of “US origin”
would suffice to inform consumers if there is a strong demand for domestically produced
food. Since the country of origin does not alter the product (beef is beef), the Non-
Discrimination principle is violated by a mandatory country of origin labeling
requirement since it attempts to differentiate like products through labeling.
At the heart of this issue is the fact that the WTO was not set up to handle
consumer demand for protection or regulation of imports. In the simple neoclassical
view of the world with perfect information, consumers always win from trade
liberalization as a result of lower prices and more choice. Once we allow for information
asymmetry with respect to credence attributes (on-farm production methods, country of
origin, etc.) and uncertainty over food safety, it is conceivable that some consumers could
demand protection from imports or tighter labeling regulations (e.g. GM food). The EU
has stated its desire to renegotiate WTO rules to allow trade restrictions based on
consumer preferences. The challenge lies in distinguishing between measures taken in
response to legitimate consumer concerns and trade restricting measures driven by vested
producer interests in the guise of ‘consumer interests’.
A first step toward making this distinction is in a better understanding of
consumer attitudes to food safety and food quality issues. This includes an understanding
of how consumers respond to different traceability, labeling and quality assurance
initiatives. Of immediate interest is the extent to which these initiatives belong in the
private sector as innovative product differentiation strategies, or the extent to which a
convincing market failure argument can be made for mandating traceability and labeling
on the basis of reducing consumer information asymmetry.
It appears that the EU mandatory beef labeling and traceability regulation, while
perhaps performing a useful ex post cost reduction function in the event of a food safety
problem, does little to reduce consumer information asymmetry ex ante. The new US
requirements for the mandatory provision of country of origin information at the retail
level will not provide consumers with information about other credence attributes beyond
the country of origin. Mandatory labeling policies create the potential for international
trade tensions when they adversely affect exports.
On the other hand, industry-driven traceability systems have emerged (often with
the encouragement and support of government). In these cases, the private sector is
responding to the need to reduce the potential costs of a food safety outbreak, to reduce
the monitoring and enforcement costs associated with managing supply chain
relationships, to maintain consumer confidence, or has recognized a product
differentiation opportunity. Often the traceability system is a platform on which
additional quality assurances can be provided to consumers. Traceability and ex ante
quality verification throughout the supply chain may yield sufficient economic benefits
without the need to extend traceability labeling to the retail counter.
Mandatory retail labeling of traceability and product origin information is likely
to impose significant economic costs on industry, and will lead to international trade
tensions, without an obvious demonstration of direct consumer benefits. This does not
mean that traceability is unimportant. On the contrary, it can play a central role in
reducing the transaction costs of managing supply chain relationships, in reducing risk
and in strengthening tort liability incentives for food safety. Thus, it is important to
distinguish between the various function of a traceability/quality verification system, and
to recognize the extent to which it plays a supply chain management role or a role in
informing consumers. This paper provides a preliminary analysis of traceability systems
and the potential value placed on traceability information versus specific quality
assurances by Canadian consumers. Further research is necessary to both deepen and
broaden our understanding of these issues within an international context.
Bredahl, M.E., Northen, J., R., Boecker, A. and Normile, M.A. (2001). Consumer
Demand Sparks the Growth of Quality Assurance Schemes in the European Food
Sector. In Regmi, A. (Ed.) Changing Structure of Global Food Consumption and
Trade Washington DC: Market and Trade Economics Division, Economic
Research Service, U.S. Department of Agriculture, Agriculture and Trade Report
WRS-01-1. pp.90-102.
Canadian Cattle Identification Agency (CCIA) (2002).
(accessed November 27, 2002).
Commission of the European Communities (1999). Report from the Commission to the
European Parliament on the Situation Regarding the Implementation of Beef
Labelling Systems in Different Member States As Laid Down in Article 19(3) of
Council Regulation (EC) No. 820/97. Brussels: European Commission, (accessed
24 September 2000).
Dickinson, D.L. and Bailey, D. (2002). Meat Traceability: Are U.S. Consumers Willing
to Pay for It?. Journal of Agricultural and Resource Economics 27(2)
Fearne, A. (1998). The Evolution of Partnerships in the Meat Supply Chain: Insights
From the British Beef Industry. Supply Chain Management: An International
Journal, 3(4):214-231.
Grossman, S.J. (1981). The Informational Role of Warranties and Private Disclosure
About Product Quality. Journal of Law and Economics, 28(3):461-489.
Hayes, D.J., Shogren, J.F., Shin, S.Y. and Kliebenstein, J.B. (1995). Valuing Food Safety
in Experimental Auction Markets. American Journal of Agricultural Economics,
Hobbs, J.E. (1996). A Transaction Cost Analysis of Quality, Traceability and Animal
Welfare Issues in UK Beef Retailing. British Food Journal 98 (6): 16-26.
Isaac, G. and Kerr, W.A. (2002). Genetically Modified Organisms and Trade Rules:
Identifying Important Challenges for the WTO. The World Economy,
Lawrence, J.D. (2002). Quality Assurance “Down Under”: Market Access and Product
Differentiation. MATRIC Briefing Paper 02-MBP 1, Midwest Agribusiness
Trade Research and Information Center, Iowa State University, April. http:
McCluskey, J.J. (2000). A Game Theoretic Approach to Organic Foods: An Analysis of
Asymmetric Information and Policy. Agricultural and Resource Economics
Review, 29(1):1-9.
Powell, G (2002). Leverage the Canadian Brand by Delivering a Gold Standard in Food
Safety Assurance, Food in Canada, September. http:
Shogren, J.F., Shin, S.Y., Hayes, D.J. and Kliebenstein, J.B. (1994). Resolving
Differences in Willingness to Pay and Willingness to Accept. American Journal
of Agricultural Economics, 84(March):255-270.
... The third is related to cognitive experiences, such as participating in relevant training and learning, understanding policy, and other factors (Chen, Zhang, & Tian, 2016;Heyder et al., 2012;Wang & Qiao, 2011;Zhao & Qiao, 2011). The external factors include market demand conditions (Hobbs, 2003;Jin, Zhang, & Xu, 2017;Leyton, Pino, & Ochoa, 2015;Seol, Lee, & Zo, 2016;Walker, 2017;Xavier & Wim, 2001), the policy environment (Caswell, 1998;Cheek, 2006;Duan et al., 2017;Mottaleb, 2018;Wang, 2009) and group behavior (Akkermans & Helden, 2002;Monteiro, 2009;Wang & Qiao, 2011;Wu et al., 2012;Xiao & Wang, 2017;Zhou & Zhang, 2011). ...
Implementing vegetable traceability systems is complex. Farmers are producers and the first point of traceability. Their intention and behavior related to implementation of vegetable traceability systems directly determine the success or failure of the implementation of those systems. The objective of this study was to identify factors that affect participation behavior in vegetable traceability systems by using a structural equation model and a logistic regression model. Data collected from a 2019 in-person interview survey of vegetable farmers located in Jiangxi province, China were analyzed. Results from the structural equation model showed that perceived usefulness positively affected farmers' participation intentions and their participation intentions positively affected their participation behavior. The impacts of social influence on perceived usefulness were greater than the impacts of traceability system characteristics on perceived usefulness. Facilitating conditions such as agricultural instructor availability, government support, economic conditions of farmers, and suitability of vegetable grown had a significant positive impact on the perceived ease of use. Facilitating conditions and perceived usefulness were two key factors influencing participation intention. Results from the logistic regression model showed that gender, age, marital status, cooperative organization membership, and whether the respondents were near a city had a significant impact on participation intention. The conclusions of this study further expanded the current research scope regarding farmers' quality and safety behaviors and revealed the internal decision-making mechanism for farmers' participation behavior regarding vegetable traceability systems. This study has implications for implementing vegetable traceability systems to ensure food safety in China or elsewhere in the world.
... The intrinsic attributes are typical of the food product, and it is not necessary to convey information about them through a label. The extrinsic attributes, on the other hand, cannot be detected by consumers without information appropriately provided through a label (Hobbs, 2003). These of food attributes, which include the quality and authenticity of the product, have to be certified by all the actors "along the entire supply chain in order to allow capitalising on their reputation (Pascucci, 2010)" (Pappa et al., 2018, p. 124). ...
Since the 1990s, governments look to traceability as a part of their safety and quality assurance strategies. This study aims to analyse the diffusion levels of the traceability systems in the Italian agrifood industry. A theoretical framework was developed considering the meaning of traceability as well as the drivers, benefits, barriers and intentions of a company that adopts a traceability system. Nineteen hypotheses were defined and tested through correlation and empirical analysis. Data was obtained through a survey conducted on a sample of Italian agrifood companies. The results showed that variables like what role, educational level and company size affect an agrifood company's propensity to adopt a traceability system.
... RAS also respond to consumer demands in the Global North for regional products. Unsettled by numerous scandals in the food industry and the complexity of global supply chains, consumers have shown a growing desire for greater traceability of agricultural products (Wägeli and Hamm 2013;Hobbs 2003;Gremmer et al. 2016). This trend becomes visible in the increasing demand for organic and regional food (BÖLN 2013(BÖLN , 2016) that both evoke similar associations of more taste, sustainability or health safety (Gremmer et al. 2016;Feldmann and Hamm 2015). ...
Full-text available
EU regulations explicitly preclude recirculation aquaculture systems (RAS) for aquaculture grow-out from organic certification because they are not close enough to nature (Regulation (EEC) No. 710/2009). Meanwhile, according to another EU regulation, one criterion for organic food production is its contribution to sustainable development (Regulation (EEC) No. 834/2007). Against this background, one might argue that in spite of their distance to nature RAS are innovative solutions to sustainability issues in food production. The paper will deal with the claim that RAS for aquaculture could be one innovative solution to sustainability issues. In this respect, the picture is ambivalent. In the past, the organic movement (OM) has searched for innovative alternatives to industrial forms of agriculture and food production that are non-sustainable. Hence, the majority of the OM does not feel fit to support industrial RAS, even though one might argue that these systems comply with many of the European OM’s founding principles. While there are potential positive effects for a sustainable development, we might still regard these systems as techno-scientific solutions to social problems. This paper discusses innovation narratives related to RAS from the perspective of post-normal innovation critique. It first presents potential contribution to a more sustainable food sector. It then contrasts these arguments within critical assessments of innovation narratives for sustainable development. Finally, the paper concludes by discussing moral challenges of RAS for the OM’s self-conception.
... Information asymmetry is an inevitable problem in the food market. Hobbs [36] has pointed out that information asymmetry can cause failure in the food market, with the risk of consumers adversely selecting lower-quality (or unsafe) food in the absence of high-quality information relating to food quality. However, blockchain technology can reduce asymmetric access to information because all blockchain participants have access to the same information. ...
Full-text available
Agri-food trade has a profound impact on social stability and sustainable economic development. However, there are several technological problems in current agricultural product transactions. For example, it is almost impossible to improve the efficiency of transactions and maintain market stability. This paper designs a novel Food Trading System with COnsortium blockchaiN (FTSCON) to eliminate information asymmetry in the food trade, in order to establish a sustainable and credible trading environment, the system uses consortium blockchain technology to meet the challenge of different authentications and permissions for different roles in food trade. Meanwhile, we have used the online double auction mechanism to eliminate competition. We also have designed a improved Practical Byzantine Fault Tolerance (iPBFT) algorithm to improve efficiency. In addition, a case study based on a series of data from Shandong Province, China indicate that the FTSCON can achieve profit improvement of merchants. Therefore, the proposed system proved to have high commercial value.
... Daher können wir annehmen, dass Familienbetriebe, offene Hoftage oder auch die Einbettung von KLA in urbane Lebensräume (urbane Lebensstile) die Identifikation des Sektors mit den Erzeugnissen und Produktionsweisen (Heimatargument) ermöglichen und durch Partizipation und Öffentlichkeit die Glaubwürdigkeit der Produkte (Transparenz) erhöhen.9. Wie ist die sozio-kulturelle Bedeutung von Regionalität bei KLA?Verunsichert durch die zahlreichen Skandale in der Lebensmittelproduktion, der Komplexität von Wertschöpfungsketten und globalen (intransparenten) Warengängen (sowohl in der konventionellen-als auch der Öko-Landwirtschaft), zeigen Verbraucher in den letzten Jahren ein stetig wachsendes Bedürfnis an höherer Transparenz und Nachvollziehbarkeit von landwirtschaftlichen Erzeugnissen(Wägeli / Hamm 2013;Hobbs 2003. Diese Tendenz zeigt sich an dem zunehmenden Interesse an ökologischen und regionalenLebensmitteln (BMEL 2013;BMEL 2016). ...
Technical Report
Full-text available
Geeignete Standorte für herkömmliche Formen der Aquakultur werden weltweit knapp, und eine Erhöhung der Produktion gerät zunehmend mit Zielen des Umwelt- und Naturschutzes in Konflikt. Der in Deutschland extrem geringe Selbstversorgungsgrad mit Fisch kann daher in erster Linie über eine Produktionssteigerung in Kreislaufanlagen (KLA), d.h. in geschlossenen, standortunabhängigen und entsprechend technisierten Systemen, erhöht werden. Im Nationalen Strategieplan Aquakultur für Deutschland wird insofern ein besonderer Fokus auf das Produktionspotential in KLA gelegt, bzw. ein deutliches Wachstum nur in diesem Bereich (Steigerung auf 20.000 t bis 2020) als möglich erachtet. Bei dem hier beantragten Vorhaben wird geklärt, wie relevante Interessensgruppen die Vereinbarkeit von Aquakultur in KLA mit der Ökologischen Lebensmittelwirtschaft bewerten. Die Frage stellt sich einerseits aus Sicht der Erzeuger, denn die Produktion in KLA ist durch hohe Umweltauflagen sowie komplexe Haltungssysteme aufwändig und benötigt daher Wege, ihre Alleinstellungsmerkmale (z.B. Transparenz, Regionalität, Verzicht auf Chemie und Tierarznei) auf glaubhaftem Weg an den Verbraucher zu kommunizieren. Andererseits aus Sicht der richtliniengebenden Ökoverbände und Institutionen, denn sie sind von Seiten des Marktes und der Gesellschaft aufgefordert, zu dieser immer wichtiger werdenden Zukunftstechnologie fundiert Stellung zu beziehen. Summary translation There is a worldwide scarcity of suitable sites for traditional aquaculture, and the extremely low self-sufficiency rate for fish in Germany could mostly be increased by the production in recirculating aquaculture systems (RAS), i.e. in closed, site-independent high-tech systems. The project aimed to clarify the stakeholders’ view on RAS’ compatibility with organic food production. This question is relevant for the producers, because fish farming in RAS is expensive and in search of ways to communicate unique selling points such as transparency, regionality, no-chemicals etc. Furthermore, organic associations and institutions, as standard setters, are called to take a position on this emerging technology.
What started around the late 2000s as the “Clean Label” (CL) trend has now become a meaningful segment of the food market, appealing to consumers who want foods made of a limited number of simple and recognizable ingredients. However, this description and tentative definitions of CL foods are vague, subject to multiple interpretations, and CL remains an informal denomination for foods, making consumers’ demands and food manufacturers’ offerings hardly compatible. Therefore, rather than attempting an illusory definition of CL foods, this narrative review aims to (1) show how CL appears to be a heuristic used by consumers to attempt to make safe and healthful food choices, (2) discuss how this heuristic overlooks many critical aspect of food safety and healthfulness and is consequently ineffective to guide consumers’ choices, and (3) discuss the implications of the CL trend on the food chain's stakeholders and their relationships.
Full-text available
ABSTRAKTujuan dari penelitian ini adalah menggambarkan hasil implementasi dari sistem halal traceability supply chain pada produk makanan halal pengolahan daging di perusahaan Ternaknesia Farm Innovation. Analisis pada penelitian ini menggunakan model Supply Chain Operation Reference (SCOR) sebagai model utama dalam pengembangan halal traceability supply chain. Perusahaan ini tengah mengembangkan sistem jaminan ketelusurah halal (halal traceability supply chain) pada produk daging yang dijual nya dengan membuat model bisnis Ternaknesia 2.0 yang berkelanjutan sebagai perusahaan pertama di wilayah Surabaya Jawa Timur yang memiliki sistem halal traceability. Hasil identifikasi atas Implementasi dari halal traceability supply chain menunjukan bahwa penerapan sistem halal traceability di perusahaan mampu meminimalisir terjadinya ancaman kontaminasi zat haram yang ditelusuri dari implementasi pada proses model SCOR yaitu plan,resource,make, deliver return, dan enable dengan mengembangkan konsep halal dan thoyyib pada produk daging halal yang dijual. Teknologi yang digunakan dalam implementasi pelacakan proses ketertelusuran halal atau halal traceability system yaitu dengan penggunaan label QR Barcode Scan dan didukung penggunakan EPICS code pada produk daging halal yang dijual di perusahaan, sehingga memberikan jaminan ketelusuran halal rantai pasok kepada konsumen. Kata Kunci: halal traceability supply chain dan makanan halal. ABSTRACTThe purpose of this study is to describe the results of the implementation of the halal traceability supply chain system on halal food products for meat processing at the Ternaknesia Farm Innovation company. The analysis in this study uses the Supply Chain Operation Reference (SCOR) model as the main model in the development of halal traceability supply chain. The company is developing a halal traceability supply chain guarantee system for the meat products it sells by creating a sustainable Ternaknesia 2.0 business model as the first company in the Surabaya area of East Java to have a halal traceability system. The results of the identification of the implementation of the halal traceability supply chain show that the implementation of the halal traceability system in the company is able to minimize the threat of contamination of illicit substances traced from the implementation of the SCOR model process, namely plan, resource, make, deliver return, and enable by developing the concept of halal and thoyyib. on halal meat products sold. The technology used in the implementation of tracking the halal traceability system is the use of a QR Barcode Scan label and supported by the use of the EPICS code on halal meat products sold in the company, thus providing guarantees for supply chain halal traceability to consumers.Keywords: halal traceability supply chain and halal meat products.
This chapter aims to explore the feasibility of using blockchain in the beef supply chain to reduce waste. A mono-method, qualitative, inductive, single case study approach was taken on a cross-sectional scale from June 2018 to August 2018, with two individuals interviewed: a beef and a blockchain expert. The case study also involved observations, a field visit, and other secondary source data. Beef is a high demand, valuable food product with a limited shelf life. By using blockchain in conjunction with RFID and sensor technologies, farming and processing stages in the beef supply chain can be streamlined. Firstly, using the technology to monitor the animals on the farm and during transportation can reduce the amount of water and energy wasted. Secondly, blockchain can be used to establish exactly when and where the meat is cut and packaged, improving the accuracy of information between supply chain entities, resulting in improved inventory management, specifically more accurate delivery times and lengthened product shelf lives.
This chapter aims to explore the feasibility of using blockchain in the beef supply chain to reduce waste. A mono-method, qualitative, inductive, single case study approach was taken on a cross-sectional scale from June 2018 to August 2018, with two individuals interviewed: a beef and a blockchain expert. The case study also involved observations, a field visit, and other secondary source data. Beef is a high demand, valuable food product with a limited shelf life. By using blockchain in conjunction with RFID and sensor technologies, farming and processing stages in the beef supply chain can be streamlined. Firstly, using the technology to monitor the animals on the farm and during transportation can reduce the amount of water and energy wasted. Secondly, blockchain can be used to establish exactly when and where the meat is cut and packaged, improving the accuracy of information between supply chain entities, resulting in improved inventory management, specifically more accurate delivery times and lengthened product shelf lives.
This chapter aims to explore the feasibility of using blockchain in the beef supply chain to reduce waste. A mono-method, qualitative, inductive, single case study approach was taken on a cross-sectional scale from June 2018 to August 2018, with two individuals interviewed: a beef and a blockchain expert. The case study also involved observations, a field visit, and other secondary source data. Beef is a high demand, valuable food product with a limited shelf life. By using blockchain in conjunction with RFID and sensor technologies, farming and processing stages in the beef supply chain can be streamlined. Firstly, using the technology to monitor the animals on the farm and during transportation can reduce the amount of water and energy wasted. Secondly, blockchain can be used to establish exactly when and where the meat is cut and packaged, improving the accuracy of information between supply chain entities, resulting in improved inventory management, specifically more accurate delivery times and lengthened product shelf lives.
Full-text available
This case study describes the evolution of supply chain partnerships in the British beef industry, driven by changing consumer demand, food safety legislation, a concentrated and highly competitive retail sector and the BSE crisis. The case examples demonstrate the importance of establishing trust in supply chain partnerships, breaking out of the spot trading environment which characterises commodity markets and focusing explicitly on value added initiatives as a source of differentiation and competitive advantage.
Full-text available
This article reports the results form a series of laboratory auction markets in which consumers bid on meat characteristics. The characteristics examined include meat traceability (i.e., the ability to tract the retail meat back to the farm or animal of hormones, or knowing the animal was humanely treated), and extra assurances (e.g., extra meat safety assurances). This laboratory study provides non-hypothetical bid data on consumer preferences for a sample of consumers in Logan, Utah, for traceability, transparency, and assurances (TTA) in red meat at a time when the United States currently lags other countries in development of TTA meat systems. Results suggest these consumers would be willing to pay for such TTA meat characteristics, and the magnitude of the consumer bids reveals that a profitable market for development of TTA systems in the United States might exist.
Full-text available
Demand for healthy, safe, and environmentally friendly food products has been increasing. In response, producers are marketing organic and other quality-differentiated foods, sometimes claiming to have followed sound environmental and animal welfare practices. These products frequently have unobservable quality attributes. If the profit-maximizing producer is able to deceive the consumer with a false claim, then he or she will enjoy a higher price with lower production costs (compared to the full disclosure outcome). The analysis described in this paper shows that repeat-purchase relationships and third-party monitoring are required for high-quality credence goods to be available. Policy implications of this analysis for national organic food standards are discussed.
Full-text available
This paper tests the conjecture that the divergence of willingness to pay and willingness to accept for identical goods is driven by the degree of substitution between goods. In contrast to well-known results for market goods with close substitutes (i.e., candy bars and coffee mugs), the authors' results indicate a convergence of willingness-to-pay and willingness-to-accept measures of value. However, for a nonmarket good with imperfect substitutes (i.e., reduced health risk), the divergence of willingness-to-pay and willingness-to-accept value measures is persistent, even with repeated market participation and full information on the nature of the good. Copyright 1994 by American Economic Association.
Presents a study of the procurement of beef by UK supermarkets. Investigates the hypothesis that a retailer’s choice of beef supplier is influenced by the transaction costs incurred in different supply relationships. Measures the relative importance of the transaction costs incurred by retailers as a result of concerns over quality consistency, traceability and farm animal welfare using conjoint analysis. Data for the conjoint analysis were collected through a postal survey of UK supermarket retailers. From the results, suggests that the information and monitoring costs arising from the need to ensure that beef supplies are of a consistent quality are relatively important influences on the choice of supplier, followed by the traceability of cattle, whether the beef originates from a farm assurance scheme and the price paid by the retailer. Also analyses procurement preferences of individual respondents, revealing some interesting differences between the retailers. Concludes that strategic alliance partnerships between retailers, processors and marketing groups composed of farmers may emerge as the method of vertical co-ordination which minimizes transaction costs.
In this paper, we value food safety in a nonhypothetical setting - experimental auction markets. First, subjects underestimate the relatively low probabilities of food-borne illness. Second, measures of value are within a relatively fiat range across a wide range of risks, even with repeated market experience and full information on the objective probability and severity of illness, suggesting subjects rely on prior perceptions. Third, marginal willingness to pay decreases as risk increases, suggesting that the perceived quality of new information can affect the weight the individuals place on the information. Finally, pathogen-specific values seem to act as surrogates for general food safety preferences.
This paper analyzes the impact of FORIS contracts on litigation and settlement decisions using a simple divergent-expectations model. A FORIS contract introduces contingent fee arrangements under the British legal cost allocation rule: the plaintiff pays a percentage of his settlement or trial returns to FORIS and obtains coverage for trial costs in case he loses in court; the plaintiff?s attorney receives the standard fee. We take into account the sequential nature of the settlement and trial decisions. Without FORIS contracts, only cases with positive expected value provide credible threats for the plaintiff and thereby motivate the defendant to agree to a settlement. A FORIS contract has two important effects: cases with negative expected value are turned into credible threats, hence a settlement is triggered. Even in positive expected value cases, the settlement result for the plaintiff is increased. According to our results, FORIS should prohibit settlement negotiations before a contract with the plaintiff has been made. The paper argues that FORIS should abolish the non-disclosure clause which prohibits the plaintiff to reveal the existence of the FORIS contract to a third party. -- Das Paper analysiert die Wirkung eines FORIS-Vertrages auf die Bereitschaft zu klagen und zum au�ergerichtlichen Vergleich. Dabei wird ein einfaches Optimismus-Modell angewendet. Der FORIS-Vetrag erlaubt es dem Kl�ger, trotz Geltung der Europ�ischen Proze�kostenregel (Velierer zahlt) mit den (in Amerika �blichen) "contingent fees" kalkulieren zu k�nnen: Der Kl�ger zahlt einen Teil seiner Ertr�ge aus Proze� oder Vergleich an FORIS; diese Firma wiederum zahlt die gesetzlichen Geb�hren an den Anwalt des Kl�gers und tr�gt die Proze�kosten, wenn der Kunde unterliegt. Das Modell zieht die sequentielle Struktur von Vergleichs- und Proze�entscheidungen in Betracht. Ohne FORIS-Vertrag w�re eine Klagedrohung nur dann glaubw�rdig, wenn der Proze� dem Kl�ger einen p
Controversial debates associated with the establishment of international market access rules for genetically modified organisms (GMOs) illustrate a more general challenge facing the World Trade Organisation (WTO); to acceptably accommodate growing consumer concerns regarding a product"s production and processing methods (PPM). This paper aims to clarify the debates by examining the foundations of and the procedures for the WTO"s decision--making on PPM--based market access rules. To illustrate this, both an import embargo and a mandatory labelling regulation for GMOs are examined. The strengths and weaknesses of the current decision--making procedure are discussed and options for future negotiations are proposed. Copyright Blackwell Publishing Ltd 2003