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Abstract
Private food safety standards (PFSS) are widely adopted by firms in the agro-food
system, as they meet an increasing consumer demand for safety and quality. Yet, recent
economic literature found that PFSS might serve other purposes than just ensuring food
safety. Our paper contributes to this literature, framing PFSS within a contract-theory
model. We conclude that PFSS can be used to lower the coordination costs along the
supply chain and that their effects go beyond ensuring the production of quality and
safety attributes. The model shows that PFSS can reduce the cost of solving moral hazard
problems for non-discriminating buyers facing heterogeneous suppliers. Noticeably,
the opportunism may concern any of the many dimensions of the transaction, without
being limited to the production of quality or safety attributes that are normed by the
standard. The optimal strategy requires that the supplier’s adoption cost of the standard must
be a non-negligible specific investment. This condition explains why we observe PFSS
that are heterogeneous (i.e., the certification cannot be used in other transaction freely)
and much more rigorous than public regulations (i.e., they require incremental costs).