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Estimating the Welfare Loss to Consumers When Food Labels Do Not Adequately Inform: An Application to Fair Trade Certification

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  • Rousu Matthew C.

    (Susquehanna University)

  • Corrigan Jay R.

    (Kenyon College)

Abstract

Government officials and other policymakers often face difficult decisions determining what information must be provided to consumers in the limited space available on food labels. An ideal label will cause consumers to make the same purchase that they would make if they had all relevant information, while an inferior label will induce a consumer to purchase a product he would not purchase if more information were available or to forgo purchasing a product that would have yielded positive consumer surplus. We present the design and results of an experimental auction that allows researchers to compare several alternative labels in order to determine the welfare loss from labels that do not adequately inform consumers. Further, we compare a set of candidate labels to assess whether one of the labels is better or worse at informing consumers.

Suggested Citation

  • Rousu Matthew C. & Corrigan Jay R., 2008. "Estimating the Welfare Loss to Consumers When Food Labels Do Not Adequately Inform: An Application to Fair Trade Certification," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 6(1), pages 1-26, May.
  • Handle: RePEc:bpj:bjafio:v:6:y:2008:i:1:n:3
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    References listed on IDEAS

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    1. Shogren, Jason F. & Seung Y. Shin & Dermot J. Hayes & James B. Kliebenstein, 1994. "Resolving Differences in Willingness to Pay and Willingness to Accept," American Economic Review, American Economic Association, vol. 84(1), pages 255-270, March.
    2. Noussair, Charles & Robin, Stephane & Ruffieux, Bernard, 2002. "Do consumers not care about biotech foods or do they just not read the labels?," Economics Letters, Elsevier, vol. 75(1), pages 47-53, March.
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    Citations

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    Cited by:

    1. Wendler, Cordula & Liebe, Ulf & Ihle, Rico & von Cramon-Taubadel, Stephan, 2012. "The Willingness to Pay of European Consumers for Jointly Produced Israeli – Palestinian Products," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126727, International Association of Agricultural Economists.
    2. 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.
    3. Veronika Andorfer & Ulf Liebe, 2012. "Research on Fair Trade Consumption—A Review," Journal of Business Ethics, Springer, vol. 106(4), pages 415-435, April.
    4. Anne-Célia Disdier & Stéphan Marette, 2012. "Taxes, minimum-quality standards and/or product labeling to improve environmental quality and welfare: Experiments can provide answers," Journal of Regulatory Economics, Springer, vol. 41(3), pages 337-357, June.
    5. Laurent Muller & Bernard Ruffieux, 2011. "Do price-tags influence consumers’ willingness to pay? On the external validity of using auctions for measuring value," Experimental Economics, Springer;Economic Science Association, vol. 14(2), pages 181-202, May.
    6. Thuriane Mahé, 2010. "Are Stated Preferences Confirmed by Purchasing Behaviours? The Case of Fair Trade-Certified Bananas in Switzerland," Journal of Business Ethics, Springer, vol. 92(2), pages 301-315, April.
    7. Akaichi, Faical & Grauw, Steven de & Darmon, Paul, 2015. "Are Fair Trade, Carbon Footprint and Organic Attributes competing? Some Evidences from Scotland, Netherland and France," 2015 Conference, August 9-14, 2015, Milan, Italy 210940, International Association of Agricultural Economists.
    8. Rousu, Matthew C. & Marette, Stéphan & Thrasher, James F. & Lusk, Jayson L., 2014. "The economic value to smokers of graphic warning labels on cigarettes: Evidence from combining market and experimental auction data," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 123-134.
    9. Skuza, Nathan & McCracken, Vicki & Ellis, Joan, 3. "Compensation Fees And Willingness To Pay: A Field Experiment On Organic Apples," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 3(3).
    10. Vlaeminck, Pieter & Vranken, Liesbet, 2015. "Do labels capture consumers’ actual willingness to pay for Fair Trade characteristics?," Working Papers 206438, Katholieke Universiteit Leuven, Centre for Agricultural and Food Economics.

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