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Welfare Impact of Information with Experiments: The Crucial Role of the Price Elasticity of Demand

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Author Info

  • Stéphan Marette

    ()
    (INRA UMR Economie Publique)

  • Jayson L. Lusk

    ()
    (Oklahoma State University)

  • Jutta Roosen

    ()
    (Technische Universitaet Muenchen)

Abstract

This paper focuses on the welfare effects of information computed from experimental methods eliciting willingness-to-pay. First, a theoretical model shows that the size of the welfare variation is related to the elasticity of the demand under the absence of information about a characteristic. Second, our estimates indicate that consumer demand from a laboratory auction is more price-elastic than time-series demand for similar products. As a result, the welfare change directly derived from individual willingness-to-pay is overestimated compared to the welfare change linked to an approach combining time-series demand with the mean willingness-to-pay premium.

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File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I2-P145.pdf
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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 30 (2010)
Issue (Month): 2 ()
Pages: 1585-1593

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Handle: RePEc:ebl:ecbull:eb-10-00223

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Related research

Keywords: Experiment; Welfare; Consumers; Information; Demand;

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References

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  1. Matthew C. Rousu & Wallace E. Huffman & Jason F. Shogren & Abebayehu Tegene, 2004. "Estimating the Public Value of Conflicting Information: The Case of Genetically Modified Foods," Land Economics, University of Wisconsin Press, vol. 80(1), pages 125-135.
  2. Jutta Roosen & Stephan Marette & Sandrine Blanchemanche, 2010. "Value Elicitation using BDM and a Discrete Choice Mechanism," Economics Bulletin, AccessEcon, vol. 30(2), pages 1554-1563.
  3. Marette, Stéphan & Roosen, Jutta & Blanchemanche, Sandrine, 2008. "Health information and substitution between fish: Lessons from laboratory and field experiments," Food Policy, Elsevier, vol. 33(3), pages 197-208, June.
  4. Huffman, Wallace E. & Rousu, Matthew & Shogren, Jason F. & Tegene, Abebayehu, 2007. "The effects of prior beliefs and learning on consumers' acceptance of genetically modified foods," Journal of Economic Behavior & Organization, Elsevier, vol. 63(1), pages 193-206, May.
  5. William A. Masters & Diakalia Sanogo, 2002. "Welfare Gains from Quality Certification of Infant Foods: Results from a Market Experiment in Mali," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(4), pages 974-989.
  6. Wallace E. Huffman & Matthew Rousu & Jason F. Shogren & Abebayehu Tegene, 2003. "The Public Good Value of Information from Agribusinesses on Genetically Modified Foods," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(5), pages 1309-1315.
  7. Foster, William & Just, Richard E., 1989. "Measuring welfare effects of product contamination with consumer uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 17(3), pages 266-283, November.
  8. Matthew Rousu & Wallace E. Huffman & Jason F. Shogren & Abebayehu Tegene, 2007. "Effects And Value Of Verifiable Information In A Controversial Market: Evidence From Lab Auctions Of Genetically Modified Food," Economic Inquiry, Western Economic Association International, vol. 45(3), pages 409-432, 07.
  9. Stéphan Marette & Jutta Roosen & Sandrine Blanchemanche, 2008. "Taxes and subsidies to change eating habits when information is not enough: an application to fish consumption," Journal of Regulatory Economics, Springer, vol. 34(2), pages 119-143, October.
  10. Lusk Jayson L & Schroeder Ted C., 2006. "Auction Bids and Shopping Choices," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 6(1), pages 1-39, August.
  11. Lusk, Jayson L. & House, Lisa O. & Valli, Carlotta & Jaeger, Sara R. & Moore, Melissa & Morrow, Bert & Traill, W. Bruce, 2005. "Consumer welfare effects of introducing and labeling genetically modified food," Economics Letters, Elsevier, vol. 88(3), pages 382-388, September.
  12. Bouamra-Mechemache, Zohra & Réquillart, Vincent & Soregaroli, Claudio & Trévisiol, Audrey, 2008. "Demand for dairy products in the EU," Food Policy, Elsevier, vol. 33(6), pages 644-656, December.
  13. Marette, Stephan & Roosen, Jutta & Blanchemanche, Sandrine & Verger, Philippe, 2008. "The Choice of Fish Species: An Experiment Measuring the Impact of Risk and Benefit Information," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 33(01), April.
  14. Lusk,Jayson L. & Shogren,Jason F., 2007. "Experimental Auctions," Cambridge Books, Cambridge University Press, number 9780521671248, December.
  15. Jayson L. Lusk & Stéphan Marette, 2010. "Welfare Effects of Food Labels and Bans with Alternative Willingness to Pay Measures," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 32(2), pages 319-337.
  16. Marette, Stéphan & Roosen, Jutta & Blanchemanche, Sandrine & Feinblatt-Mélèze, Eve, 2010. "Functional food, uncertainty and consumers' choices: A lab experiment with enriched yoghurts for lowering cholesterol," Food Policy, Elsevier, vol. 35(5), pages 419-428, October.
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Cited by:
  1. Marette Stéphan & Roosen Jutta & Blanchemanche Sandrine, 2011. "The Combination of Lab and Field Experiments for Benefit-Cost Analysis," Journal of Benefit-Cost Analysis, De Gruyter, vol. 2(3), pages 1-36, August.

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