Economics of Private Strategies to Control Foodborne Pathogens

Foodborne pathogens are naturally occurring contaminants that public policies and private strategies target for control. In the 1990s, both the Food and Drug Administration (FDA; US Department of Health and Human Services) and the Food Safety and Inspection Service (FSIS; Department of Agriculture) required a new system for many regulated food plants. Hazard Analysis and Critical Control Points (HACCP) is based on preventing pathogens from entering the food supply chain and controlling this contamination after it occurs. The new federal HACCP regulations have not automatically solved the pathogen-contamination problem, and foodborne illness outbreaks and product recalls continue. This paper examines the role of public and private economic incentives in the market for food safety, how pathogen information influences this market, the variety of strategies firms use to control foodborne pathogens, and the firm’s package of choices: Are inputs sold for a cooked or raw product? What are the safety requirements of buyers? What is the risk a firm is willing to bear of a foodborne disease outbreak or product recall? In evaluating economic incentives for pathogen control, the food safety externalities caused by joint production of quality attributes are often overlooked but may alter the willingness of a firm to adopt food safety controls. This paper focuses on the supply chain for meat and poultry products, estimated to cause more than 40% of human illnesses associated with common pathogens. Case studies are examined for economic incentives for achieving pathogen control.