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Consumer and Market Responses to Mad Cow Disease

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  • Wolfram Schlenker
  • Sofia B. Villas-Boas

Abstract

We examine how consumers and financial markets in the United States reacted to two health warnings about mad cow disease: the first discovery of an infected cow in December 2003 and an Oprah Winfrey show that aired seven years earlier on the potentially harmful effects of mad cow disease. We find a pronounced and significant reduction in beef sales following the first discovery of an infected cow in a product-level scanner data set of a national grocery chain. Cattle futures show a pattern of abnormal price drops comparable to the scanner data. Contracts with longer maturity show smaller drops, suggesting that the market anticipated the impact to be transitory. Cattle futures show abnormal price drops after the Oprah Winfrey show that are more than 50% of the drop following the 2003 discovery of an infected cow. Copyright 2009, Oxford University Press.

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File URL: http://hdl.handle.net/10.1111/j.1467-8276.2009.01315.x
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Bibliographic Info

Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 91 (2009)
Issue (Month): 4 ()
Pages: 1140-1152

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Handle: RePEc:oup:ajagec:v:91:y:2009:i:4:p:1140-1152

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Cited by:
  1. Colin-Castillo, Sergio & Capps, Oral, Jr. & Hernandez, Manuel A., 2012. "Do Marketing Margins Change with Food Scares? Examining the Effects of Food Recalls and Disease Outbreaks in the U.S. Red Meat Industry," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124966, Agricultural and Applied Economics Association.
  2. Mykel R. Taylor, 2009. "Does Food Safety Information Affect Consumers' Decision to Purchase Mean and Poultry? Evidence from U.S. Household Level Data," Working Papers 2009-11, School of Economic Sciences, Washington State University.
  3. Maria De Paola & Vincenzo Scoppa, 2013. "Consumers’ Reactions to Negative Information on Product Quality: Evidence from Scanner Data," Review of Industrial Organization, Springer, vol. 42(3), pages 235-280, May.
  4. Hagerman, Amy D. & Jin, Yanhong H., 2009. "The Buzz In The Pits: Livestock Futures' Response To A Rumor Of Foreign Animal Disease," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49493, Agricultural and Applied Economics Association.
  5. Taylor, Mykel R. & Klaiber, H. Allen & Kuchler, Fred, 2013. "Structural Change in U.S. Consumer Response to Food Safety Recalls," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149819, Agricultural and Applied Economics Association.
  6. Craig L. Garthwaite, 2012. "You Get a Book! Demand Spillovers, Combative Advertising, and Celebrity Endorsements," NBER Working Papers 17915, National Bureau of Economic Research, Inc.
  7. Joshua Graff Zivin & Matthew Neidell & Wolfram Schlenker, 2011. "Water Quality Violations and Avoidance Behavior: Evidence from Bottled Water Consumption," NBER Working Papers 16695, National Bureau of Economic Research, Inc.
  8. Shimshack, Jay P. & Ward, Michael B., 2010. "Mercury advisories and household health trade-offs," Journal of Health Economics, Elsevier, vol. 29(5), pages 674-685, September.
  9. Pozo, Veronica F. & Schroeder, Ted C., 2013. "Effects of Meat Recalls on Firms' Stock Prices," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 151287, Agricultural and Applied Economics Association.
  10. repec:ags:jrapmc:122316 is not listed on IDEAS
  11. Zhen, Chen, 2009. "Long-Run Effects From Consumer Reaction To The Spread Of Foodborne Pathogens: The Case Of E. Coli Contamination Of Beef At Jack In The Box Restaurants," 2009 Conference, August 16-22, 2009, Beijing, China 51341, International Association of Agricultural Economists.
  12. Valentina G. Bruno & Bahattin Buyuksahin & Michel A. Robe, 2013. "The Financialization of Food?," Working Papers 13-39, Bank of Canada.
  13. Schnellenbach, Jan, 2012. "Nudges and norms: On the political economy of soft paternalism," European Journal of Political Economy, Elsevier, vol. 28(2), pages 266-277.
  14. Erdem, Seda & Rigby, Dan, 2011. "Using Best Worst Scaling To Investigate Perceptions Of Control & Concern Over Food And Non-Food Risks," 85th Annual Conference, April 18-20, 2011, Warwick University, Coventry, UK 108790, Agricultural Economics Society.
  15. Youn, Hyungho & Lim, Byung In & Jin, Hyun Joung, 2012. "Differential effects of negative publicity on beef consumption according to household characteristics in South Korea," Health Policy, Elsevier, vol. 106(2), pages 138-148.
  16. Park, Moon-Soo & Jin, Yanhong H. & Bessler, David A., 2008. "The Impacts of Animal Disease Crises on the Korean Meat Market," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6365, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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