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What is an Unregulated and Potentially Misleading Label Worth? The case of “Natural”-Labelled Groceries

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  • Julianna M. Butler

    () (University of Delaware)

  • Christian A. Vossler

    () (University of Tennessee)

Abstract

Motivated by a multitude of lawsuits and considerable public policy debate in the U.S., this study provides insight on the demand effects for an unregulated and potentially misleading phrase found on many grocery labels: “all natural”, and its common variations. Using a targeted sample of adult grocery shoppers, we employ an incentive-compatible approach to elicit the willingness to pay for a variety of “natural”-labelled food products, along with their counterfactual, standard-labelled counterparts. We find that consumers are willing to pay 20% more on average for “natural” products. Using elicited information on consumer beliefs, we find that this premium decreases when “natural” signals no artificial flavors or preservatives, and increases when consumers believe that “natural” means GMO-free. Interestingly, for those indicating that the “natural” designation is meaningless, they are willing to pay about one-third less for products labelled this way.

Suggested Citation

  • Julianna M. Butler & Christian A. Vossler, 2018. "What is an Unregulated and Potentially Misleading Label Worth? The case of “Natural”-Labelled Groceries," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 70(2), pages 545-564, June.
  • Handle: RePEc:kap:enreec:v:70:y:2018:i:2:d:10.1007_s10640-017-0132-9
    DOI: 10.1007/s10640-017-0132-9
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Felgendreher, Simon, 2018. "Do consumers choose to stay ignorant? The role of information in the purchase of ethically certified products," Working Papers in Economics 717, University of Gothenburg, Department of Economics.
    2. F. Kuchler & M. Bowman & M. Sweitzer & C. Greene, 2020. "Evidence from Retail Food Markets That Consumers Are Confused by Natural and Organic Food Labels," Journal of Consumer Policy, Springer, vol. 43(2), pages 379-395, June.
    3. Timothy N. Cason & Steven Y. Wu, 2019. "Subject Pools and Deception in Agricultural and Resource Economics Experiments," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(3), pages 743-758, July.
    4. Christian A. Vossler & Dong Yan, 2019. "An Experimental Investigation of Updating under Ambiguity," Working Papers 2019-02, University of Tennessee, Department of Economics.

    More about this item

    Keywords

    Natural food labels; Genetically modified organisms; Consumer fraud protection; Framed field experiment;

    JEL classification:

    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy

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