Private standards on food safety: a contract theory model to analyze organizational and promotional aspects

In recent years, large food distributors poured considerable effort in the definition of private standards of food safety for their products. Despite these efforts, medium and large retailers have yet to begin advertising to their consumers the adoption of such standards and, in doing so, do not actively pursue a diversification strategy for their products. This behavior seems paradoxical as large retailers would benefit from product differentiation. This article focuses on the role of standards in the coordination of the supply channels and proposes a theoretical model that gives an economic motivation to the current behavior of large retailers. The first objective of this study is to demonstrate how the adoption of standards is a rational choice for large retailers, even in the case in which consumers are not willing to pay for food safety. The reason is that standards can also be used to solve information asymmetry problems and organize the supply chain. Secondly, the theoretical model of contracts suggests that, investments related to the promotion of standards to the consumers, might, under certain conditions, undermine the profits of the large distribution.

Keywords: Standard privati di sicurezza alimentare, food supply chain, teoria dei contratti

Jel codes: Q13, L14, L15

Antonella Di Fonzo, Maria Angela Perito, Carlo Russo, Gli standard privati di sicurezza alimentare: un modello di teoria dei contratti per l’analisi degli aspetti organizzativi e promozionali in "ECONOMIA AGRO-ALIMENTARE" 2/2012, pp 85-105, DOI: 10.3280/ECAG2012-002005