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Abstract
The objective of this article is to describe and to analyse the basic
relationships between control frequency, amount of fines, other social
sanctions, the producers‘ capability to influence certain attributes
(including costs of quality assurance) and damage incidence in
the field of food and feedstuffs safety. For this purpose an economic
model is developed that minimizes monitoring costs including (a)
the harm prevented and (b) the revenues from fines. First, monitoring
measures are optimized by exclusively taking account of the
interests of consumers and taxpayers. In a second step, the model
is enlarged by adding constraints relative to the costs of quality assurance
so that aspects of both producer welfare and total social
costs are explicitly accounted for when simultaneously optimizing
the probability of detection and the degree of punishment.
The results derived from the model show among other things:
- From an economic point of view legal regulation (i.e. the setting
of performance standards) is advisable only in cases of comparatively
high potential damages.
- Even when the entire production is to be free from certain residues,
it is often not necessary to check all units of the commodity
considered.
- In the presence of (a) poor possibilities to influence an attribute -
or a wide range of quality assurance costs among producers -
and (b) prospective damages which justify a control frequency of
one hundred percent, no fines at all should be stipulated in order
to avoid allocative distortions.
- In the case of strong social sanctions (e.g. losses of reputation),
all else being equal the control frequency may be lowered considerably.
Against the background of these conclusions the application of uniform
control frequencies is inappropriate. Instead, every food control
authority should be free to choose the size of samples, taking
into account not only the given structure of fines but also its knowledge
concerning the market specific social sanctions, monitoring
costs, the extent of potential damages from legal transgressions as
well as the producers’ possibilities and costs of influencing the
relevant food or feedstuffs attributes.