ABSTRACT
The public compensation scheme for animal disease does not cover consequential losses such as losing customers, and it can be justified by a simple static game-theory model combining adverse selection and moral hazards. From the model analysis, it can also be inferred that lower cost-effectiveness of preventive measures against animal disease, as is the case for avian influenza, even reduces compensation. Under these situations, a cooperative egg marketing agreement among large industrialized egg producers was formed to cover for each other’s egg shortage in order to keep their customers in the case of avian influenza. This private agreement was performed well in the case of “quality eggs”, which otherwise would have lost much value in the case of avian influenza outbreak. Private–public complementary loss management seems to be the key to ensure compliance with the disease eradication programme.
