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Abstract
Despite the economic damage inflicted by a foodborne disease outbreak, firms at all
points in the supply chain appear to be reluctant to invest in the necessary food safety
technologies and practices. We argue that these investments are subject to both hysteretic
and public good effects, and construct a theoretical model of food safety investment,
calibrated to describe the 2006 E. coli outbreak in California spinach. Both effects are
found to induce delays in food safety investments, but the public good effect dominates.
We suggest a number of policy options that improve incentives to contribute to the public
good.