Government and dealer regulatory decisions on producer illegal production in China's food supply chain

Abstract

Illegal food production in China has proliferated in recent years, triggering serious public concerns on food safety. In this work, we model a regulatory event in a food supply chain comprising a local government, a dealer, and a producer involved in illegal food production, and get equilibrium regulatory decisions of the government and the dealer, and equilibrium production decisions of the producer. The results show that: 1) in a situation where the producer is likely to produce illegally, the government does not regulate, and implements insufficient or sufficient regulation according to the utility-cost ratio of regulating. 2) The regulatory decisions of the dealer depend not only on the regulatory decisions of the government but also on the utility-cost ratio of regulating. 3) Only when the joint regulatory intensity of the government and the dealer is not less than a certain threshold value, the producer will not produce illegally, and the threshold value is the optimal regulatory intensity jointly implemented by the government and the dealer. Otherwise it is ineffective, inadequate, or excessive regulation. Therefore, we suggest that the government and the dealer jointly make regulatory decisions to achieve optimal regulation at the lowest regulatory cost and evade illegal food production by the producer.

Keywords: Food safety; Illegal production; Optimal regulation; Regulatory intensity; Utility-cost ratio.