Optimal provision of food quality attributes

The paper examines the incentives and mechanisms for provision of food quality attributes within the food marketing chain. A mathematical program is used to model two objective specifications: one maximising whole-chain profits and the other maximising profits at the single stage of the chain at which provision occurs. Scenarios presented include a range of technological conditions at different stages of the food chain and the allocation of retail price premia amongst stages. Indicative Danish food industry data are used. Results list provision outcomes, profitability and its distribution amongst chain participants, and LaGrangian multiplier values. The different forms of scope economies at different stages of the chain have important implications for provision: particularly in the single stage model. Shares of price premia have little impact on provision in the whole chain model, but are very influential in the single stage model. Commercial and policy applications of the research include its focus on within-chain compensation, and the identification of appropriate targets and levels for subsidies.