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Consumer and Market Responses to Mad Cow Disease

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  • Wolfram Schlenker
  • Sofia B. Villas-Boas

Abstract

We examine how consumers and financial markets in the United States reacted to two health warnings about mad cow disease: the first discovery of an infected cow in December 2003 and an Oprah Winfrey show that aired seven years earlier on the potentially harmful effects of mad cow disease. We find a pronounced and significant reduction in beef sales following the first discovery of an infected cow in a product-level scanner data set of a national grocery chain. Cattle futures show a pattern of abnormal price drops comparable to the scanner data. Contracts with longer maturity show smaller drops, suggesting that the market anticipated the impact to be transitory. Cattle futures show abnormal price drops after the Oprah Winfrey show that are more than 50% of the drop following the 2003 discovery of an infected cow. Copyright 2009, Oxford University Press.

Suggested Citation

  • Wolfram Schlenker & Sofia B. Villas-Boas, 2009. "Consumer and Market Responses to Mad Cow Disease," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(4), pages 1140-1152.
  • Handle: RePEc:oup:ajagec:v:91:y:2009:i:4:p:1140-1152
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    File URL: http://hdl.handle.net/10.1111/j.1467-8276.2009.01315.x
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    References listed on IDEAS

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    1. Caswell, Julie A., 1998. "How Labeling of Safety and Process Attributes Affects Markets for Food," Agricultural and Resource Economics Review, Cambridge University Press, vol. 27(02), pages 151-158, October.
    2. Deborah J. Brown & Lee F. Schrader, 1990. "Cholesterol Information and Shell Egg Consumption," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(3), pages 548-555.
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