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Market Response to a Food Safety Shock: The 2006 Foodborne Illness Outbreak of E. coli O157:H7 Linked to Spinach

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  • Arnade, Carlos Anthony
  • Calvin, Linda
  • Kuchler, Fred

Abstract

In 2006 FDA announced that consumers should not eat fresh spinach in the wake of a large foodborne illness outbreak of E. coli O157:H7. This paper investigates response of consumers to the announcement. We use an AIDS demand model with 5 food safety shock variables and retail scanner data to analyze market response. Even fifteen months after the outbreak, predicted sales of spinach in bags were still down 10 percent from what they would have been in the absense of the food safety shock. After the outbreak, consumers shifted to other leafy greens such as bulk iceberg lettuce, other bulk lettuce, and bagged salads without spinach.

Suggested Citation

  • Arnade, Carlos Anthony & Calvin, Linda & Kuchler, Fred, 2008. "Market Response to a Food Safety Shock: The 2006 Foodborne Illness Outbreak of E. coli O157:H7 Linked to Spinach," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6448, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea08:6448
    DOI: 10.22004/ag.econ.6448
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    1. Arnade, Carlos & Pick, Daniel, 1998. "Seasonality and unit roots: the demand for fruits," Agricultural Economics, Blackwell, vol. 18(1), pages 53-62, January.
    2. Kuchler, Fred & Tegene, Abebayehu, 2006. "Did Bse Announcements Reduce Beef Purchases?," Economic Research Report 7251, United States Department of Agriculture, Economic Research Service.
    3. Richards, Timothy J. & Patterson, Paul M., 1999. "The Economic Value Of Public Relations Expenditures: Food Safety And The Strawberry Case," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 24(2), pages 1-23, December.
    4. Richard Green & Julian M. Alston, 1990. "Elasticities in AIDS Models," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(2), pages 442-445.
    5. Calvin, Linda, 2007. "Outbreak Linked to Spinach Forces Reassessment of Food Safety Practices," Amber Waves:The Economics of Food, Farming, Natural Resources, and Rural America, United States Department of Agriculture, Economic Research Service, pages 1-8, June.
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    Cited by:

    1. Ferrier, Peyton M. & Zhen, Chen & Bovay, John, 2023. "Price and Welfare Effects of the Food Safety Modernization Act Produce Safety Rule," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 48(1), January.
    2. Chantal Toledo & Sofia Berto Villas-Boas, 2019. "Safe or Not? Consumer Responses to Recalls with Traceability," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 41(3), pages 519-541, September.
    3. Yuqing Zheng & Chen Zhen & Daniel Dench & James M. Nonnemaker, 2017. "U.S. Demand for Tobacco Products in a System Framework," Health Economics, John Wiley & Sons, Ltd., vol. 26(8), pages 1067-1086, August.
    4. Bakhtavoryan, Rafael & Capps, Oral, Jr. & Salin, Victoria, 2012. "Impact of Food Contamination on Brands: A Demand Systems Estimation of Peanut Butter," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 41(3), pages 1-13, December.
    5. Bakhtavoryan, Rafael & Capps, Oral & Salin, Victoria, 2014. "The Impact of Food Safety Incidents Across Brands: The Case of the Peter Pan Peanut Butter Recall," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 46(4), pages 559-573, November.
    6. Rejesus, Roderick M. & Safley, Charles D. & Strik, Bernadine C, 2014. "Demand and Welfare Impacts of a Potential Food Safety Event in the Blackberry Industry," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 169452, Agricultural and Applied Economics Association.
    7. Bovay, John & Ferrier, Peyton & Zhen, Chen, 2018. "Estimated Costs for Fruit and Vegetable Producers To Comply With the Food Safety Modernization Act’s Produce Rule," Economic Information Bulletin 276220, United States Department of Agriculture, Economic Research Service.
    8. Zarebanadkoki, Samane & Zheng, Yuqing & Woods, Timothy & Buck, Steven, 2016. "Examining the Effect of Food Recalls on Demand: The Case of Ground Beef in the U.S," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236112, Agricultural and Applied Economics Association.
    9. repec:oup:apecpp:v:40:y:2018:i:3:p:402-420. is not listed on IDEAS
    10. Bitsch, Vera & Koković, Nevena & Rombach, Meike, 2014. "Risk Communication and Market Effects during Foodborne Illnesses: A Comparative Case Study of Bacterial Outbreaks in the U.S. and in Germany," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 17(3), pages 1-18, September.
    11. Oh, Miyoung & Hennessy, David A., 2014. "Upstream and Downstream Strategic Food Safety Interactions," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 174105, Agricultural and Applied Economics Association.
    12. Holderieath, Jason, 2016. "Spatiotemporal management under heterogeneous damage and uncertain parameters. An agent-based approach," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235850, Agricultural and Applied Economics Association.
    13. Rudi, Jeta & Çakir, Metin, 2015. "Demand Spillovers of Food Recalls in Differentiated Product Markets," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205313, Agricultural and Applied Economics Association.
    14. Tselepidakis, Elina, 2015. "Food Safety and the Demand for Leafy Greens," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205583, Agricultural and Applied Economics Association.
    15. Arnade, Carlos Anthony & Calvin, Linda & Kuchler, Fred, 2009. "Food Safety and Spinach Demand: A Shock Correction Model," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49208, Agricultural and Applied Economics Association.
    16. Pouliot, Sebastien, 2011. "The FDA Food Safety and Modernization Act and the Exemption for Small Firms," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103885, Agricultural and Applied Economics Association.
    17. Adalja, Aaron & Lichtenberg, Erik, 2016. "Foodborne Illness Outbreaks, Collective Reputation, and Voluntary Adoption of Industry-wide Food Safety Protocols by Fruit and Vegetable Growers," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235865, Agricultural and Applied Economics Association.
    18. Maria Aguiar Fontes & Eric Giraud-Héraud & Alexandra Seabra Pinto, 2013. "Consumers' behaviour towards food safety: A litterature review," Working Papers hal-00912476, HAL.

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    Keywords

    Food Consumption/Nutrition/Food Safety;

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