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Consumer perceptions and the effects of country of origin labeling on purchasing decisions and welfare

  • Awada, Lana
  • Yiannaka, Amalia
Registered author(s):

    The study develops a general analytical framework of heterogeneous consumer preferences to examine the effects of country of origin labeling (COOL) regulation on consumer purchasing decisions and welfare. We show that while differences in consumer perceptions about COOL information, namely, whether it is viewed as an attribute that differentiates products vertically or horizontally, do not alter the nature of the market and consumer welfare effects of mandatory COOL, the relative strength of consumer preferences for COOL are shown to be important in determining the magnitude of these effects. In addition, our results show that the benchmark used (a no COOL versus a voluntary COOL regime) is critical in evaluating the effects of the policy. We show that, under both horizontal and vertical product differentiation, a change from a no COOL to a mandatory COOL regime decreases (increases) the welfare of consumers with weak (strong) preference for COOL while a change from a voluntary to a mandatory COOL regime leads to an unambiguous loss in consumer welfare.

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    Article provided by Elsevier in its journal Food Policy.

    Volume (Year): 37 (2012)
    Issue (Month): 1 ()
    Pages: 21-30

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    Handle: RePEc:eee:jfpoli:v:37:y:2012:i:1:p:21-30
    Contact details of provider: Web page: http://www.elsevier.com/locate/foodpol

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    7. Konstantinos Giannakas & Amalia Yiannaka, 2008. "Market and Welfare Effects of Second-Generation, Consumer-Oriented GM Products," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(1), pages 152-171.
    8. Schmitz, Andrew & Moss, Charles B. & Schmitz, Troy G., 2005. "A Differential Examination of the Effect of Mandatory Country of Origin of Labeling on the Beef Sector," 2005 Annual meeting, July 24-27, Providence, RI 19158, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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    16. Hanselka, Daniel D. & Davis, Ernest E. & Anderson, David P. & Capps, Oral, Jr., 2004. "Demand Shifts in Beef Associated with Country-of-Origin Labeling to Minimize Losses in Social Welfare," Choices, Agricultural and Applied Economics Association, vol. 19(4).
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