Food safety, regulatory boundedness and institutional arrangement

XIE Kang1,2 LAI Jintian1,2 XIAO Jinghua1,3 WU Jiapei4

(1.Business School, Sun Yat-sen University)
(2.Research Center for Information Economics and Policy, Sun Yat-sen University 510275)
(3.Research Center for Information Economics and Policy, Sun Yat-sen University)
(4.State Information Center 100045)

【Abstract】Most of the research assumed that the food safety regulatory policy should be more stringent, which means that more institution supply would decrease the opportunity of food safety policy violation. This paper is based on the full rationality and bounded rationality of food safety decision making, using the method of simulation and finds that, strengthening the regulatory power would have dual impact on the food producers’ policy violation behavior. In some situation, with the strengthening of regulatory power, the food safety violation behavior would increase (the dilemma of regulation). In the meanwhile, the average revenue and the total revenue of the industry would also decrease (the dilemma of violation) . As a result, this paper comes up with the theory of “regulatory boundedness” in food safety governance. Based on this theory, we concluded that food safety regulatory institution should transform from strengthening regulatory power only, to optimizing the structural regulatory institution arrangement, which means that when regulatory resource was scarce, government should take the food producers, consumers and regulators into consideration. Government should adjust the regulatory power based on the producer revenue and consumers’ willingness to pay, in return the different levels of regulatory power would impact the producer revenue and consumers’ willingness to pay. Finally, the paper concludes that government should balance the regulatory power, producer revenue and consumers’ willingness to pay, instead of strengthening the regulatory power.

【Keywords】 food safety; dilemma of regulation; regulatory boundedness; institutional arrangement; regulatory balance;

【DOI】

【Funds】 The Key Bidding Project of the National Social Science Foundation of China (14ZDA074) The Key Project of the National Social Science Foundation of China (15AZZ013) The Project of National Nature Science Foundation of China (71371198)

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    Footnote

    [1]. ① For example, the Chinese People’s Political Consultative Conference (CPPCC) of Guangdong Province pointed out in November 2015 in a report entitled Special Investigation Report on Strengthening Grassroots Food Safety Regulation that if the strength of tackling the food safety problem is strong enough, producers would not dare to take the risk of violating food policy regulations. However, the report also points out that even if the size of the regulatory institution is expanded by 10 times, it is still not enough to cope with the endless regulation issues. [^Back]

    [2]. ① We appreciate the anonymous reviewers for commenting on and recognizing this contribution. [^Back]

    [3]. ① In developing the cumulative prospect theory, Kahneman and Tversky (1992) defined the weighting function, where the parameter γ = 0.61 and τ = 0.69. [^Back]

    [4]. ② The value of p* differs according to the value used in the utility function and the weighting function. As long as the functions are of the same type, there is always a p*. According to the coefficients given by Kahneman and Tversky (1992), p* is equal to 0.645. [^Back]

    [5]. ① The mathematical derivation for this equation is omitted here. Interested readers could send their request to the authors. [^Back]

    [6]. ② In order to differentiate v (π0·r) from v (πc·r) > v (π0·r) > 0, v (π0·r) is labeled v' (π0·r) here. [^Back]

    [7]. CH and CL represent the costs of qualified and defective products, respectively. r and R represent the acceptance level of the consumer towards food safety and the tolerance of food safety. p1 denotes the payment level of the consumer in the initial period. Due to space limitation, the mathematical derivations are omitted and interested readers could send their request to the authors. [^Back]

    [8]. ② Due to space limitations, the variables of the simulation models, the simulation processes and the functional settings of the producer’s strategy under the full rationality hypothesis and the bounded rationality hypothesis are omitted. Interested readers could send their request to the authors. [^Back]

    [9]. ① The exact simulation results are omitted. Interested readers could send their request to the authors. The same below. [^Back]

    [10]. ① The feature of common-pool resources denotes a natural or human-made resource system whose size is so large that it becomes costly to exclude potential beneficiaries from obtaining benefits from its use (Ostrom, 1990). Food market is a prototype that features excludability and competitiveness, a typical common-pool resources system. As it is impossible to proceed to any activities without involving government institutional arrangements in the food common-pool resources system, regulators, such as the government, is a supplier in this type of common-pool system. [^Back]

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This Article

ISSN:0577-9154

CN: 11-1081/F

Vol 51, No. 04, Pages 174-187

April 2016

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Article Outline

Abstract

  • 1 Introduction
  • 2 Literature review
  • 3 Violation decision analysis under the assumption of full rationality and bounded rationality
  • 4 Simulations and further discussions
  • 5 Conclusions and policy implications
  • Footnote

    References