IDEAS home Printed from https://ideas.repec.org/a/bla/jageco/v71y2020i2p581-600.html
   My bibliography  Save this article

Economic Loss Due to Reputation Damage: A New Model and Its Application to Fukushima Peaches

Author

Listed:
  • Shigeru Matsumoto
  • Viet‐Ngu Hoang

Abstract

Consumers have responded negatively to agricultural products originating from the Fukushima prefecture after the 2011 Fukushima Daiichi nuclear power plant incident. These consumers’ behavioural changes have caused substantial economic losses for the producers located in contaminated regions through reductions in market prices, consumption quantities and market shares. Remarkably, these losses are observed also for uncontaminated products, posing an opportunity for research in reputation damage. However, existing literature is very rare on empirical modeling of such losses. We utilise the Dixit–Stiglitz demand framework to derive a simple but efficient empirical model that uses market data to quantify reputation damage. This model estimates changes in the perceived quality of a product originating in contaminated regions in relation to those products originating from other competing regions. The model also measures subsequent loss in market share for those products grown in contaminated regions. In our application to Fukushima, results suggest that consumers’ valuation of peaches from Fukushima decreased dramatically (between 22.5% and 23.6%) in the year the nuclear accident occurred, but rapidly recovered in the following years. The results also show that the degree of impact varies across wholesale markets. Fukushima farmers lost about 13.1–18.9% of sales due to reputation damage. Estimates from our proposed models deliver meaningful information in the context of policy interventions such as transfer programmes financed by gainers to compensate reputation losses.

Suggested Citation

  • Shigeru Matsumoto & Viet‐Ngu Hoang, 2020. "Economic Loss Due to Reputation Damage: A New Model and Its Application to Fukushima Peaches," Journal of Agricultural Economics, Wiley Blackwell, vol. 71(2), pages 581-600, June.
  • Handle: RePEc:bla:jageco:v:71:y:2020:i:2:p:581-600
    DOI: 10.1111/1477-9552.12366
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1477-9552.12366
    Download Restriction: no

    File URL: https://libkey.io/10.1111/1477-9552.12366?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Li, Yarui & Wailes, Eric J. & McKenzie, Andrew & Thomsen, Michael, 2010. "LL601 Contamination and Its Impact on U.S. Rice Prices," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 42(1), pages 31-38, February.
    2. Matsumoto Shigeru, 2011. "Impact of Country-of-Origin Labeling on Bovine Meat Trade," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 9(1), pages 1-21, May.
    3. Ujiie, Kiyokazu, 2013. "Transition of Consumer's Evaluation on Radioactive Contamination of Agricultural Products in Japan," Journal of Rural Economics, Agricultural Economics Society of Japan, vol. 85(3), pages 1-9, December.
    4. Bakhtavoryan, Rafael & Capps, Oral & Salin, Victoria, 2014. "The Impact of Food Safety Incidents Across Brands: The Case of the Peter Pan Peanut Butter Recall," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 46(4), pages 559-573, November.
    5. Aruga, Kentaka, 2015. "Consumer responses to food products produced near the Fukushima nuclear plant," MPRA Paper 66153, University Library of Munich, Germany.
    6. Li, Yarui & Wailes, Eric J. & McKenzie, Andrew M. & Thomsen, Michael R., 2010. "LL601 Contamination and Its Impact on U.S. Rice Prices," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 42(1), pages 1-8, February.
    7. Kikuchi, Masaya, 2013. "The Extent of Damage from the Nuclear Accident on Agricultural Produce from Fukushima Prefecture: A View from the Wholesale Market Trends," Journal of Rural Economics, Agricultural Economics Society of Japan, vol. 85(3), pages 1-11, December.
    8. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    9. Peter R. Tozer & Thomas. L. Marsh & Evgeniy V. Perevodchikov, 2015. "Economic Welfare Impacts of Foot-and-Mouth Disease in the Canadian Beef Cattle Sector," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 63(2), pages 163-184, June.
    10. Kentaka Aruga, 2017. "Consumer Reaction, Food Production and the Fukushima Disaster," Springer Books, Springer, number 978-3-319-59849-9, September.
    11. Tajima, Kayo & Yamamoto, Masashi & Ichinose, Daisuke, 2016. "How do agricultural markets respond to radiation risk? Evidence from the 2011 disaster in Japan," Regional Science and Urban Economics, Elsevier, vol. 60(C), pages 20-30.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mulvaney, Dustin & Krupnik, Timothy J., 2014. "Zero-tolerance for genetic pollution: Rice farming, pharm rice, and the risks of coexistence in California," Food Policy, Elsevier, vol. 45(C), pages 125-131.
    2. Kalaitzandonakes, Nicholas & Kaufman, James & Miller, Douglas, 2014. "Potential economic impacts of zero thresholds for unapproved GMOs: The EU case," Food Policy, Elsevier, vol. 45(C), pages 146-157.
    3. de Faria, Rosane Nunes & Wieck, Christine, 2015. "Empirical evidence on the trade impact of asynchronous regulatory approval of new GMO events," Food Policy, Elsevier, vol. 53(C), pages 22-32.
    4. Tajima, Kayo & Yamamoto, Masashi & Ichinose, Daisuke, 2016. "How do agricultural markets respond to radiation risk? Evidence from the 2011 disaster in Japan," Regional Science and Urban Economics, Elsevier, vol. 60(C), pages 20-30.
    5. Yuichi Ishimura & Kenji Takeuchi & Fredrik Carlsson, 2021. "Why do municipalities accept disaster waste? Evidence from the great east Japan earthquake," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 23(2), pages 275-308, April.
    6. de Faria, Rosane Nunes & Wieck, Christine, 2014. "Measuring The Extent Of Gmo Asynchronous Approval Using Regulatory Dissimilarity Indices: The Case Of Maize And Soybean," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182796, European Association of Agricultural Economists.
    7. Smyth, Stuart & Kerr, William A. & Phillips, Peter, 2010. "The Incompatibility of Science and Trade at the International Level," 14th ICABR Conference, June 16-18, 2010, Ravello, Italy 188113, International Consortium on Applied Bioeconomy Research (ICABR).
    8. Shigeru Matsumoto & Viet Ngu Hoang, 2018. "How is internal radiation exposure risk evaluated at the markets? Perceived quality degradation of Fukushima peach," Working Papers e122, Tokyo Center for Economic Research.
    9. Adnan Haider Bukhari & Safdar Ullah Khan, 2008. "A Small Open Economy DSGE Model for Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 47(4), pages 963-1008.
    10. Hoang, Trung Xuan & Le, Duong Trung & Nguyen, Ha Minh & Vuong, Nguyen Dinh Tuan, 2020. "Labor market impacts and responses: The economic consequences of a marine environmental disaster," Journal of Development Economics, Elsevier, vol. 147(C).
    11. Croce, M.M. & Nguyen, Thien T. & Raymond, S. & Schmid, L., 2019. "Government debt and the returns to innovation," Journal of Financial Economics, Elsevier, vol. 132(3), pages 205-225.
    12. Nahuis, Richard & Smulders, Sjak, 2002. "The Skill Premium, Technological Change and Appropriability," Journal of Economic Growth, Springer, vol. 7(2), pages 137-156, June.
    13. Paolo Epifani & Gino Gancia, 2008. "The Skill Bias of World Trade," Economic Journal, Royal Economic Society, vol. 118(530), pages 927-960, July.
    14. Cukierman, Alex & Lippi, Francesco, 2001. "Labour Markets and Monetary Union: A Strategic Analysis," Economic Journal, Royal Economic Society, vol. 111(473), pages 541-565, July.
    15. Miguel Casares & Luca Deidda & Jose E. Galdon-Sanchez, 2013. "Business cycle and monetary policy analysis with market rigidities and financial frictions," Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra 1304, Departamento de Economía - Universidad Pública de Navarra.
    16. Lutz Arnold & Christian Bauer, 2009. "On the growth and welfare effects of monopolistic distortions," Journal of Economics, Springer, vol. 97(1), pages 19-40, May.
    17. Karyne B. Charbonneau & Anthony Landry, 2018. "Estimating the Impacts of Tariff Changes: Two Illustrative Scenarios," Staff Analytical Notes 2018-29, Bank of Canada.
    18. Charlot, Sylvie & Duranton, Gilles, 2004. "Communication externalities in cities," Journal of Urban Economics, Elsevier, vol. 56(3), pages 581-613, November.
    19. Gordeev, Roman, 2020. "Comparative advantages of Russian forest products on the global market," Forest Policy and Economics, Elsevier, vol. 119(C).
    20. Alexandre Janiak & Paulo Santos Monteiro, 2011. "Inflation and Welfare in Long‐Run Equilibrium with Firm Dynamics," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(5), pages 795-834, August.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jageco:v:71:y:2020:i:2:p:581-600. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0021-857X .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0021-857X .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.