Information asymmetry and the role of traceability systems

Abstract The role of food traceability systems in resolving information asymmetry is explored. Three functions of traceability systems are identified: ex post reactive systems that allow the traceback of affected products in the event of a contamination problem so as to minimize social costs, ex post systems that facilitate the allocation of liability, and information systems that provide ex ante quality verification. A taxonomy of traceability systems illustrates the multidimensional nature of the information problems related to food safety and food quality. A model of ex ante quality verification and ex post traceability systems is used to demonstrate the different functions and incentives of a traceability system. Finally, examples of private sector and regulatory traceability initiatives are discussed within the context of the ex post and ex ante models developed in the paper. EconLit citations: Q130; Q180; L150. © 2004 Wiley Periodicals, Inc. Agribusiness 20: 397–415, 2004.