1 The Theoretical Basis Of The Food Safety Issues Business Essay

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Food safety is becoming the world problem, which all the countries across the world focus on. Many scholars from various countries did the research of the causes and treatment methods on the issue of food safety, there are three main areas in the existing solution:

Reputation mechanism.

Food safety Regulation.

Food safety supplies chain management.

In this paper, by a review of the research literature, analyzed the advantages and disadvantages of the various countries in the protection of food safety, and made some constructive comments.


The issue of food safety is not only a serious threat to the life and health of the customers, but also affect the development of relevant industries. How to establish effective food safety measures to protect public health has become the focus of global attention. Many scholars did the research from different points of view on food safety issues.

2.1 The theoretical basis of the food safety issues

International scholars generally believe that, the generation of food safety problem mainly because of the market asymmetry problem. In "The market for 'Lemons' Quality Uncertainty and the Market Mechanism" [1] , the author "George A. Akerlof" first expounded the classical theory, his argument mainly focus on the adverse selection and moral hazard, which are cause by the information asymmetry. The adverse selection would result in inferior quality products can drive the high quality products out of market. Moral hazard means, the producers took the opportunity to seek benefits through hiding or distorting information.

Then Nelson upgrade introduced the adverse selection in "Information and Consumer behavior" [2] , he divided goods into three categories, according to the ease of consumers access to quality information of goods. The "search goods", "experience goods" and "Credence goods". "Search goods" are the goods that consumers can know the quality from the appearance of goods. "Experience goods" are the goods that consumers can know the quality from using them. "Credence goods" are the goods that consumer cannot know the quality, even after using them.

Then, Antle.J.M further pointed out the information asymmetry can be divided into asymmetric incomplete information (AII) and symmetric incomplete information (SII), in "Choice and Efficiency in Food Safety Policy" [3] . AII means consumers don't know the food safety information, but producers know. SII means consumers and producers do not know the food safety information, such as the safety related to the chemical residues, heavy metal residues and microbial contamination.

These analyzes indicated that there has many problems of asymmetric information in all aspects of food production, which requires a third-party that sufficient to enable consumers to trust in or for the establishment of rules and regulations of asymmetric information.

The reputation mechanism of the food safety

Reputation mechanism is proposed to solve the problem of adverse selection, according to "The information role of warranties and private disclosure about product quality" [4] , Grossman pointed out the unique high-quality and high price market equilibrium can be established by the reputation mechanism. In long-term trading, high quality goods would bring high-yield and high reputation. So it's no need to solve the problem of food security. But Klein and Leffler didn't agree with the Crossman's view. In "The Role of Market Forces in Assuring Contractual Performance" [5] , they believed that only the producers could get the price premium, they would stop the low-quality goods production. So, the reputation mechanism couldn't solve the problem of adverse selection.

Then, "The Evolution of Credence Goods: A Transaction App Roach Mentioned to Product Specification and Quality Control" [6] pointed out that, when the food quality related to the Credence goods, consumers couldn't determine the quality, the producers are difficult to establish the reputation of quality, but, with the third-party intervention, consumers could determine the quality claimed by the sellers through the third-party certification.

Engel did the research for the behavior of consumers and producers under the conditions of limited rationality, in "Over Compliance, Labeling and Lobbying: The Case of Credence Goods" [7] . He believed that when consumers couldn't judge the credence goods' quality, they might get the quality information from the products advertising and food labeling. Under the third-party detection, the consumers could update the cognitive of the producers' reputation.

In summary, the reputation mechanism maybe a governance of food safety problems to a certain extent, but this governance may rely to the third-parties oversight and the improvement of the quality regulation. In the case of lack of regulation, it's possible causing adverse selection in the market. So the brand construction, manufacturers quality guarantee commitments, product liability law, quality standards, quality certificate and food labeling regulations can be used to governance adverse selection problems.

Food safety regulations

The main purpose of food safety regulation is to protect the consumers spending in the safety food, and reduces the public risk caused by the food safety issues.

Comprehended the points of view in Antle's "Choice and Efficiency in Food Safety Policy" [8] , Caswell's "Using Informational Labeling to Influence the Market for Quality in Food Products" [9] and the Buzby's "Food Safety and Product Liability" [10] , we can know that the government in policy design process should include the use market-based instruments of reputation mechanism and price mechanism, also include the administrative and legislative means, such as the packaging laws, labeling laws, standards strategy, public education and so on, during the policy design process, the government must also consider the income of consumers, the cost and benefit of producers, environmental protection and health risks.

In many countries in Europe and the United States, the scholars more emphasis on the relationship between food safety control policies and social welfare, as well as the impact of food safety control policies on the development of the food industry.

For example, the Pillsbury Company for the U.S. began to complete the HACCP system during the providing food to the U.S. space program. Until now, the HACCP system has been recognized by many national organizations as the worldwide food security and sanitation guidelines. In the JieLi (Chinese)'s book, "The introduction of food safety guarantee system- HACCP" [11] ,

Graeme believed that the complete health and food safety management system in food production process could effectively improve the effect of food safety. He stressed the most important thing in food safety management system is to have the support of senior managers, and clear responsibility and authority.

Sara believed that the purpose of the assessment of HACCP is to determine its effectiveness, and to ensure a safe food supply.

David believed that the food safety management policy and the standard of food safety have the general guiding principles in food production.

Whitehead believed that the farms should establish a complete food safety production management system to reduce the risk of unsafe source of agricultural products.

Cash believed that the food safety policy should focus on considering how to reduce the cost of implementation of food labeling regulation and food safety management standard.

Dorte believed that it's important to ensure the safety of the food supply chain, which is under the food safety management system.

Ellilt 0. Grosvenor believed that the lack of established a coordinated operation system and communication mechanism in food safety regulation is a very important factor that leads to food safety issues.

Most scholars in Europe and America in the widespread adoption of cost-benefit research of food safety regulation to make a quantitative assessment of the government's regulatory costs and benefits and the corporate compliance costs and benefits.

Douglas W.Mcniel analysis investigated the social welfare impacted by the U.S. food safety regulation, from the research of deboned beef and deboned pork, in the book of "Economic Welfare and Food Safety Regulation: The Case of Mechanically Deboned Meat". [12] 

Antle's "No Such Things as A Free Safe Lunch: The Cost of Food Safety Regulation in the Meat Industry" [13] estimated the influence of government regulation to the cost of meat industry by using the date of beef, chicken and pork industry in the U.S.

Through these researches, the food safety regulatory measures increased the cost of companies' compliance.

Food supply chain management and food safety

Food safety involves the entire food supply chain about the agricultural products from grown to production, processing, and then to sales. Strengthen the management of the food supply chain, can effectively improve the food quality and safety. Most scholars in Europe and the United States used the transaction cost theory and incomplete contract theory, focused on the governance structure of the food chain, longitudinal lease collaboration and vertical integration mechanism.

David A.Hennessy discussed the vertical integration to solve the food industry information asymmetry problem in "Information Asymmetry as a Reason for Food Industry Vertical Integration" [14] , David believed that the core enterprises constraints on food quality in the food industry chain, can effectively control the food quality in throughout the food chain.

Hudson d. analyzed the theories and cases of the contract collaboration in the food supply chain in "Using Experimental Economics to Gain Perspective on Producer on Contracting Behavior: Data Need Sand Experimental Design" [15] .

Vetter and Karantininis discussed the behavior by using the vertical integration in governance structure to solve the moral hazard problems, which exist in the market that the consumers are unable to identify the quality characteristics of credence goods in "Moral Hazard, Vertical Integration and Public Monitoring in Credence Goods" [16] .

In "Food Safety and Transparency in Food Chains and Networks: Relationships and Challenges" [17] , Adrie.J considered that to make the extension of the effective running of the food chain, there needs the following conditions in addition to the establishment of a multi-win-win partnership,

Operations consistent.

International exchange.


Separate from the administrative process

Treat the conclusion as the central.

As a large agricultural country, China has the most complete food supply chain. Therefore, many Chinese scholars did the research of the food supply chain management issues.

In "Safe Food Supply Contract Analysis" [18] , Yunhua Zhang established a simplified food quality and safety contract model, analyzed the factors, which affect the contract design, selection and implementation of the food industry quality and safety contracts. In Yunhua Zhang's opinion, to ensure the safety of food quality, the longitudinal contract collaboration and ownership integration of food supply chain must been implemented.

In "Corporate Social Responsibility Perspective of Food Supply Chain Security Mechanism Construction" [19] , Haifei Tao believed that, under the condition of information asymmetric from the point of view of the supply chain governance, if the food security governance system needed to be ultimately formed, a legal system of food regulation must be completed, the third party regulatory organization must be introduced, and the reasonable corporate and social responsibility-sharing and revenue-sharing mechanism must be established.


In summary, as early as the start of the research of food security in Europe and the United States, the theories in Europe and the United States are principles and comprehensive. Other countries are lack of research of the food security, but they also continue to expand the scope of the research. Based on the literature review above, I think,

In the case of asymmetric information, the quality of food may cause moral hazard; the food quality mainly depends on the behavior of food providers. So the appropriate mechanism to motivate the production and operation of enterprises in accordance with quality standard is very important, however, in many countries such as China, the research in this area should be strengthened.

In the aspect of the food safety regulation system, the regulations in Europe and the U.S. are quite perfect, but the system is relatively weak in other countries, especially in the developing countries, and the research in these countries has lack of a cost-benefit analysis.

In the aspect of supply chain management research, most countries in the worldwide are lack of researching in the area of production behavior of farmer. Personally think that it's necessary to in-depth study of the production behavior of farmers and interest compensation mechanism by the aspect of economics.

In the aspect of regulation, the research of regulatory changes or industrial structure adjustment caused by the change of the national food security needs is weak, there need to enhance the research of the balance method to be used between the costs and benefits of government regulation.