Economics of Food and Safety: Risk, Information, and the Demand and Supply of Health

Cesar Falconi and Terry Roe

No 7456, Bulletins from University of Minnesota, Economic Development Center

Abstract: A model of expected utility maximization and a stochastic health production function are used to show how consumer's beliefs, the certainty of beliefs, and the presence of information affects demand for goods as they are driven by the demand for health. Then, it is shown that competitive markets fail to account for the health implications of substances in the production of a commodity that affects health, nor are incentives provided to inform consumers of substance concentrations and its implications to health. This result is shown to not necessarily follow in concentrated industries. Finally, conditions are derived whereby a benevolent government, in the absence of rent seeking, chooses optimal levels of information and taxes to attain Pareto optimal outcomes.

Keywords: Food Consumption/Nutrition/Food Safety; Health Economics and Policy (search for similar items in EconPapers)
Pages: 21
Date: 1990
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:umedbu:7456

DOI: 10.22004/ag.econ.7456

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