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European Review of Agricultural Economics Advance Access originally published online on February 9, 2007
European Review of Agricultural Economics 2007 34(1):81-104; doi:10.1093/erae/jbl030
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© Oxford University Press and Foundation for the European Review of Agricultural Economics 2007; all rights reserved. For permissions, please email journals.permissions@oxfordjournals.org

Incentive systems for food quality control with repeated deliveries: Salmonella control in pork production

Robert P. King1, Gé B. C. Backus2, and Monique A. van der Gaag3

1 Department of Applied Economics, University of Minnesota, USA
2 Agricultural Economics Research Institute, The Netherlands
3 Farm Management Group and Animal Sciences Group, Wageningen University, The Netherlands

Corresponding Author: Gé B.C. Backus, Hollandseweg 1, 6706 KN Wageningen, The Netherlands. E-mail: ge.backus{at}wur.nl

Received January 2006; final version received November 2006

This paper presents a dynamic principal-agent analysis of incentive systems for Salmonella control. The European Union will require Salmonella testing from 2008. On the basis of the producer's performance history in controlling Salmonella, the incentive systems analysed determine quality premiums to the producer, testing frequencies for hogs delivered, as well as charges to the producer for testing and penalties. Using cost estimates and technical parameters, we evaluate two dynamic incentive systems. We also assess the impact of ownership structure on performance. The more efficient incentive system economises on testing costs by reducing the probability of testing in response to a favourable production history and is preferred under all ownership structures.

Keywords: dynamic programming, food quality, principal-agent

JEL classification: L14, Q13, Q18


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