Optimal Regulatory Response to Food Fraud

Food fraud refers to the deliberate substitution, addition, tampering, or misrepresentation of food for economic gains. In this context, food fraud can be divided into two broad categories: food adulteration and mislabeling. While food adulteration can be defined as the intentional substitution or addition of substances in a food product to reduce its costs of production, mislabeling refers to acts of misrepresentation of the type or quality of food products. Food fraud is motivated by economic gains and is enabled by the fact that information about the nature of credence goods is typically asymmetric – while product suppliers know the type/quality of their offering, this information is hidden to consumers even after purchase and use of the product in question. While certification and labeling can resolve the information problem faced by consumers, imperfect enforcement of labeling and/or certification requirements creates opportunities for producers to mislabel or adulterate food products