Benefit Evaluation of the Country of Origin Labeling in Taiwan: Results from Auction Experiment
AbstractThis research is aimed at investigating the consumer’s preference for food produced in Taiwan and the economic benefits for the country of origin labeling. The study uses both experimental auction and contingent valuation method (CVM) to investigate factors that affect the consumer’s willingness to pay (WTP) for products under country-of-origin labeling (COOL). Experimental auctions of Taiwan and China preserved olives as well as Taiwan, China and Vietnam oolong teas were conducted using the Vickrey’s second price sealed bid auction. For CVM, the study used the double-bounded dichotomous choice method in which we started assuming the same base price for all products in the first question and then varied the prices in the second CV question. The products not chosen in the first question were offered with a discount in a range from 10% to 50% in the following question. Based on auction data, the Tobit model shows that the estimated premiums are 58.1%, 78.15% and 98.13% for Taiwan products over their alternatives of China olives, China oolong tea, and Vietnam oolong tea, respectively. Based on the CVM, the estimated premiums for Taiwan over China olives from a Logit model is 67%, and the premiums for Taiwan produced oolong tea should lie between 50% to an unknown upper bound over China and Vietnam alternatives as the Multinomial Logit model cannot be successfully estimated due to too few choice switches with discounted prices. The study thus demonstrates the superiority of the experimental auction over the CVM in eliciting the WTP for foods produced in Taiwan. The study concludes that enacting a COOL law would increase economic benefits to consumers in Taiwan, and at the same time, placing the imported products in the level playing field.
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Bibliographic InfoPaper provided by Agricultural and Applied Economics Association in its series 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin with number 49215.
Date of creation: May 2009
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country-of-origin labeling; experimental auction; Tobit model; contingent valuation method; logit model; multinomial logit model; willingness to pay; Agricultural and Food Policy; Consumer/Household Economics; Demand and Price Analysis; Food Consumption/Nutrition/Food Safety; Q13; D12.;
Find related papers by JEL classification:
- Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
This paper has been announced in the following NEP Reports:
- NEP-AGR-2009-05-16 (Agricultural Economics)
- NEP-ALL-2009-05-16 (All new papers)
- NEP-DCM-2009-05-16 (Discrete Choice Models)
- NEP-EXP-2009-05-16 (Experimental Economics)
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