These recent events of H1N1 flu outbreak illustrate the potential ramifications of infectious diseases on modern society and how society responds to these threats. This thesis addresses the specific case of avian influenza in U.S. poultry production. By building an expected utility maximization model for integrators contracting with growers of varying bio-secure levels, one can investigate the relationship between the bio-secure choice of the poultry industry and their production performance. The model is empiricized using the Phoon, Quek, and Huang (PQH) simulation technique to conduct numerical analysis. The model selects the optimal percentage of bio-secure farms for the integrators to contract, output price reductions due to disease outbreak, and different probabilities of disease outbreak. Results allow the examination of whether alternative USDA/APHIS indemnification rules can sufficiently influence integrators willingness to improve their bio-security level.