Equilibrium Analysis of Food Safety Liability Insurance and Government Supervision in China

Abstract

Food safety liability has required consideration around the world. It is realistic to establish a system of food safety liability insurance. However, the existing difficulties include members’ behavior decisions, influential factors, and the responsibility as well as obligations between the players. We build an evolutionary game model to discuss the behavior of food firms and the government in the context of food safety liability and identify evolutionary stability strategy of the participants in the game. Then, we simulate the stable evolution trend of the interaction between food firms and the government using MATLAB software. The results indicate that the initial probabilities of two-party game strategies affect the time length and convergence speed of system evolution but not the overall trend and final result of the evolution. Furthermore, decisions on purchasing food safety liability insurance be affected by the returns of food firms and government supervision. The more severe the punishment for food safety issues, the stronger the sense of crisis among food firms, and the higher probability they will purchase food safety liability insurance. The governance cost of food safety risks plays a role in affecting the strategic decision of the government. The ideal stable equilibrium state of the government and food firms cannot be achieved through spontaneous circulation. Suggestions are given from the perspective of government supervision and punishment to motivate food firms to insure actively.