Market Failure due to Food Safety Hazard

Market Failure due to Food Safety Hazard
Many food safety hazards are not easily detectable. Neither food producer nor consumers are fully informed about many aspects of product safety.

Food producers cannot guarantee a particular level of safety, and consumers cannot always effectively demand safety. Thus improved food safety is not always rewarded in the marketplace.

Incomplete information about food safety is the jurisdiction for public sector intervention.

The degree of market failure varies widely in practice. In export market, countries and industries have a strong incentives to avoid food safety incidents, which can destroy product reputation.

In domestic markets, consumers can exercise control over some hazards through food handling and preparation (e.g. thorough cooking). But this is not possible when they rely on food services or vendors for final preparation.

In some markets, consumers use experience as a guide to identifying relatively safe products and suppliers. For some foodborne hazards the effects may be chronic rather than acute or the exact source may be difficult to trace, given that symptoms often 3 to 5 days after food consumption.

Thus experience can provide only limited guidance and markets would not always punish suppliers of bad food.

The existence of market failure is a necessary but not sufficient condition for intervention. Not all risks can be successfully addressed by intervention and it may not be economic to do so.
Market Failure due to Food Safety Hazard