These characteristics determine the company's and the chain's profit margin. The profit margin determines the profitability of health and safety measures. The profit margin and health and safety efforts are high when the price elasticity of demand is low, industry concentration is high and returns to scale are increasing. We expect product health and safety to be high in links and chains satisfying these conditions. Policy makers should be aware that health and safety efforts are low when industries and chains are competitive, especially when perceived quality depends on the general quality level in an industry.
Coordination is necessary in competitive industries and less so in concentrated industries.
The usual antitrust considerations apply to the latter industries. Food industry managers should realise that they may manipulate the incentives to invest in health and safety in other links by coordination devices such as franchise agreements. They may also decide to finance the necessary investments themselves. The above summary and the adjoined paper show that important improvements in health and safety may be expected when vertical coordination is intensified. The monitoring system may also be used by vertically related firms if further monitoring is necessary.