Effects of input capacity constraints on food quality and regulation mechanism design for food safety management

Abstract

Input capacity constraints means a firm cannot make its output decision based on the first - order optimal condition of profit maximization because it does not have enough inputs. Input capacity constraints have a significant effect on production quality and firm competition, especially on food safety management. This paper tries to provide a new perspective for quality operation in supply chain management. It also designs a new mechanism for quality regulation. After distinguishing between quantity-sensitive input capacity constraints and quality-sensitive input capacity constraints, this paper demonstrates a theoretical analysis about the impact of input capacity constraints on food quality and quality regulation by game theory. The results show that both kinds of capacity input constraints lead to a lower level of output, quality and consumer surplus, but a higher level of prices. In this study, we design a quality regulation to stimulate the growth of high quality food products. More importantly, this paper proves that reward is more effective in food quality guarantee programs than punishment or fine based programs. The conclusions are helpful for addressing food safety problems for both the supervisors and firms.