Food risks may be caused by moral hazard, i.e. by opportunistic behaviour of upstream sellers who exploit the fact that many food product qualities remain uncertain to downstream buyers in the course of conventional market transactions (credence qualities). Due to this lack of market transparency buyers run the risk to pay premium prices for inferior products (quality risks); furthermore, they run the risk to use or consume substances which are harmful (health risks). Therefore, they will want to design optimal contracts and controls preventing opportunistic behaviour. Usually, however, buyers cannot contract contingent on the actions of upstream sellers because they cannot observe them directly (information asymmetry). Motivated by the obviously... |