||The certification system solves the problem of asymmetric information. If there are defects in the certification mark system, it would not be eased on adverse selection, but the certification mark system could be used by one of the transactions for maximizing profits, resulting in loss of social welfare. Food safety issues occur frequently, the certification mark makes an important factor for the failure. Moreover, the punishment mechanism failed, it would let unscrupulous vendors emboldened reap ill-gotten gains.|
This paper concentrates on the conversion of consumer trust, and using Hotelling model to research different behavior choices among a government, firms and consumers. Finally, to improve punishment mechanism, it suggests amend the penalties under the concept of fixed fines plus the return of improper profits, so that unscrupulous firms to increase the cost of risk, helping improve the ratio of honesty, and the higher product pricing is, the lower optimum inspection rate of government inspection agency is. In this mechanism, it reflects that if firms’ cheating events are found and punished successfully, ultimately leaving bankruptcy.