Safe or Not? Consumer Responses to Recalls with Traceability

Product traceability is advocated as a way to target non-compliant products in recalls and protect the sales of compliant products. Using a large scanner-level dataset from a national grocery chain and a difference-in-differences approach, we test whether consumers in California reduced egg purchases after three consecutive egg recalls during the 2010 Salmonella outbreak. In a setting where contaminated eggs could be traced to the box level, leaving no contaminated eggs in stores, we find a 7% to 9% reduction in egg sales following the recalls. The effect lasted at least three months. We find no evidence of overall substitution toward “greener” types of eggs, such as organic eggs. Finally, although the national grocery chain had contaminated eggs only in Northern California, we find reductions in egg sales in Southern Californian stores as well. Our results show that, even with traceability, consumers’ responses to recalls can negatively affect the sales of compliant products.