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Mandatory vs. Voluntary Approaches to Food Safety

To date there has been little formal discussion in the food safety
literature of the choice between voluntary and mandatory approaches to
consumer protection. However, this choice is not unique to food safety. A
similar question has arisen in the context of environmental policy design,6
and researchers have begun to model this choice explicitly in that context.7

Historically, control of environmental externalities has relied
primarily on the use of regulatory mechanisms that impose requirements
or restrictions on the operations of potentially polluting firms. While these
regulations have generally been credited with generating significant
reductions in emissions of environmental pollutants, there is also a
consensus that comparable reductions could have been achieved at lower
cost (e.g., Tietenberg 1985). The lack of flexibility embodied in most
"command-and-control" regulations prevents firms from choosing cost-
minimizing pollution control strategies. Recently, attention has been
turning to the use of voluntary agreements as an alternative to traditional
regulatory mechanisms for controlling pollution. The hope is that
voluntary approaches will allow firms greater flexibility in meeting
emission reduction goals and will hence achieve those goals at lower costs.
There is a growing body of literature suggesting that under some
conditions increased reliance on voluntary agreements would be desirable.8

This paper draws on the recent literature on voluntary agreements for
environmental protection to examine the question of whether a voluntary
approach to food safety is likely to lead to adequate consumer protection.
We begin by delineating three alternative types of voluntary approaches,
each involving a different role for the government. In the following section
we present a framework that can be used to identify the factors that are
likely to determine whether firms choose to undertake protective measures
voluntarily. We then use a simple model of product safety to examine the
conditions under which demand responses are likely to provide incentives
for efficient investment in food safety. The results suggest that the market
may work well to induce voluntary adoption of food safety measures for
certain types of goods but not for others. The key distinguishing
characteristic between the cases is the extent to which consumers and
producers correctly perceive food contamination risks.

II. Types of Voluntary Approaches

In the context of environmental protection, a number of different types of
voluntary approaches have been identified. Borkey and Glachant (1997)

6 See Davies et al. (1996) and EC (1996) for descriptions of voluntary
environmental programs in the U.S. and Europe, respectively.

7 See, for example, Segerson and Miceli (1997), Wu and Babcock (1996), Bosch
et al. (1995), Stranlund (1995), and Carraro and Siniscalco (1996).

8 See references in footnote 7.



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