GCOE Discussion Paper Series
Global COE Program

Human Behavior and Socioeconomic Dynamics
Discussion Paper No.152

Analysis of Country of Origin Labeling for Food Products in Taiwan
using Auction Experiment

Wen S. Chern and Huei-Ching Lin

September 2010

GCOE Secretariat
Graduate School of Economics

OSAKA UNIVERSITY

1-7 Machikaneyama, Toyonaka, Osaka, 560-0043, Japan

Analysis of Country of Origin Labeling for Food Products in Taiwan
using Auction Experiment
Wen S. Chern*
Huei-Ching Lin
Abstract
The purpose of this study is to evaluate the economic benefits of country of origin labeling(COOL) regulation by estimating the consumer’s willingness to pay (WTP) for Taiwan products
vs. other imported products if clearly labeled with their countries of origin. We employ the
Vickrey second-price sealed bid auction and conducted auctions in three major cities in Taiwan in
2009. Charcoal-smoked plums from Taiwan and China and oolong teas from Taiwan, China, andVietnam are auctioned products. One important feature of our experimental design is toinvestigate the impacts of product tasting on bidding behavior. We estimated Tobit bid models
and the OLS premium functions. The regression results show that product tasting affected theparticipants’ WTP positively or negatively depending on products. Specifically, tasting raised
bids for Taiwan and China teas, but lowered bids for Vietnam tea. The econometric results show
very high premiums for Taiwan products, ranging from 83% to 109% for tea and 55% to 66% forcharcoal-smoked plum. These findings clearly show strong preference of Taiwanese consumers
over food and agricultural products produced domestically. It is very important to have rigorous
COOL regulation in Taiwan. If all foods and agricultural products are clearly labeled with theircountries of origin, Taiwanese consumers and food producers stand to benefit greatly with COOL.
The COOL would be one of the best instruments to reduce the negative impacts of agricultural
trade liberalization under WTO or ECFA.
Key Words: Auction Experiment, Country of Origin Labeling, Tobit, Willingness to Pay, Bid
Premium, Taiwan, China, Vietnam, Tea, Plum, Import, Food.
JEL Classifications: Q13, D12.
Acknowledgements: This study was sponsored by the National Science Council (NSC) in
Taiwan. This draft was completed when Wen S. Chern was Visiting Foreign Scholar at theInstitute of Social and Economic Research, Osaka University, Japan. The authors would like tothank Charles Horioka and other members of the Institute for their helpful comments when thepaper was presented at the Institute on July 14, 2010.

___________________*Corresponding author: Department of Economics, National Chung Cheng University, 168
University Road, Ming-Hsiung, Chia-Yi 621 Taiwan (chern.1@ccu.edu.tw).
1

Introduction
The objective of this study is to evaluate the economic benefit of enforcing the countryof origin labeling (COOL) regulation for food products in Taiwan. Specifically we use an
auction experiment to quantify the willingness to pay (WTP) for food products produced in
Taiwan vs. those imported from other countries. Our experimental auction design includes a
special feature on product tasting. The study is motivated by two observations. First, many
agricultural products imported or smuggled from China and other Southeast Asian countries
are sold as though they are locally produced in Taiwan. For example, more than 70% ofpreserved fruits consumed in Taiwan are imported from other countries. Unfortunately mostof retailers would never mention truthfully the country of origin for the products from China
and other Southeast Asian countries. In the case of oolong teas imported from China andVietnam, they are sold almost entirely with the name of Taiwan oolong tea in the market
place. Merchants of those imported products gain unfair profits from not telling the consumer
about the country of origin. Consumers are, of course, the losers in this market situation
because they purchase fake products and in many cases they are harmful products. One
reason why many consumers would not purchase agricultural products from China and other
Southeast Asian countries is due to food safety concerns. The China milk power (melamine)scare happened in September 2008 has instilled fear in consuming foods from China.
The second observation is that Taiwanese consumers have reached the same level as
those in Japan, Australia and the United States with a strong preference for food products
produced domestically. Therefore, the economic benefits from COOL can be expected fordomestically produced food products. But the question is how much the benefit would be?
The COOL is one approach to eliminate the asymmetry of information between thesellers and buyers of food products. This is particularly important due to the growing
concerns on food safety. Knowing the true country of origin for food products, the consumer
can decide on whether or not to purchase without such uncertainty. In order to protect the2consumer, many developed countries have enforced mandatory COOL regulation. Japan has
one of the most comprehensive COOL regulations, covering both fresh and processed foodproducts. Japanese government requires for domestically produced products, particularly sea
food products to label the place of origin as well. In addition, for processed products, theCOOL is also required for the main ingredients used in the processed foods. The UnitedStates enacted its first mandatory COOL in the 2002 Farm Bill and began enforcing its COOL
law for sea food products in 2005. By September, 2008, all meats, fresh and frozen fruits andvegetables had to have COOL. Today, if you go to the supermarkets in the U.S., Japan,
Australia and New Zealand, you will find all fresh fruits and vegetables have clear and visible
country of origin labels. All the meats and seafood products are packed with a clear COOL as
well.
In Taiwan, the government enacted the first COOL regulation for packaged foods inJanuary 2008. However, this requirement is waived if the package label already contains the
manufacturer’s address which shows sufficient information on the country of origin. This
COOL regulation was further expanded to cover the imported bulk food products in 2010.
There seems not much enforcement to these COOL laws in Taiwan as no cases of violation
have been reported. The consumer still does not know the country of origin for many
products they purchase in Taiwan. This study attempts to demonstrate that Taiwanese
consumers incur economic loss if the government’s COOL regulation goes without strict
enforcement. The results from this study would provide tangible estimates of the economic
benefits from forcefully implementing the COOL regulation in Taiwan.

Literature Review
Since the legislation of the COOL regulation in the 2002 Farm Bill in the U.S., there
have been several studies on the impacts of the mandatory COOL on consumers andproducers of various agricultural products. Earlier Schupp and Gillespie (2001) conducted a3

telephone survey of food handlers and restaurants to investigate the consumer’s attitude
toward COOL. Their results show that 80% of respondents supported a mandatory COOL,
but there was no indication about whether consumers were willing to pay for the additionalcost. Loureiro and Umberger (2003) used data from a survey on the COOL for beef of foodshoppers in grocery stores in Colorado, United States. Using a five-point Likert scale, theyfound that the most important attributes for beef are freshness (4.74), food safety (4.61), andhigh quality (4.4). Their Logit model showed that consumers were willing to pay an averageof 38% and 58% premium for the “U.S. Certified Steak” and “U.S. Certified Hamburger,”
respectively, over those without the COOL.
Umberger et al. (2003) used a forth-price sealed bid auction experiment and a contingent
valuation (CV) survey to estimate the WTP premiums for steaks with COOL. Their results
show that the U.S. consumers were willing to pay a 19% premium for the steak labeled with
“USA guaranteed, born and raised in the U.S.” compared with those without COOL which
was higher than the 11% premium estimated from the CV data. There was particular attention
on meat products in the U.S. because of the debates on American consumers’ preferences on
domestic vs. imported meats, especially beef before the Congress passed the law toimplement COOL for meat products in 2007.
The COOL not only affects the consumer, but also the supply side. The implementationof COOL requires a rigorous traceability system of food products through the entire
marketing channel. This requires record keeping and auditing which would incur additionalcosts. The Agricultural Marketing Service of the U.S. Department of Agriculture estimatedthe record-keeping costs for all the affected sectors associated with COOL to be about $2
billion (in U.S. dollars). VanSickle et al. (2003) argued that mandatory record-keeping at the
producer level is not required and estimated the costs for record keeping for the rest of the
supply chain to be between $70 to $193 million (in U.S. dollars). Hayes and Meyer (2003)
estimated the cost of implementing COOL for the U.S. pork industry to be just over $1 billion
4

(in U.S. dollars), based on the trace-back systems used in the European Union. Focusing on
the impacts of COOL on producers, Brester et al. (2004) found that with COOL, the retailprices of the U.S. produced beef and pork would increase by 4.05% and 4.45%, respectively.
Lusk and Anderson (2004) took the cost of COOL into account and analyzed its impact on
producer and consumer welfare. Because of substitution effect, the poultry sector in the U.S.
which COOL requirements are not applied to will be the only beneficiary if the producers ofmeat products have to bear half or more of the cost. However, the COOL would likely raisethe demand for domestic products due to consumer preference. Their results show that anincrease in aggregate consumer demand of 2% to 3% for American beef and pork is likely
sufficient to offset any lost producer welfare due to the increased COOL costs.
Implementation of COOL regulation in one country may affect the demand and supply
situations in another country. In a study conducted in Canada, Rude et al. (2006) showed that
COOL will do little to help U.S. consumers, producers or processors. This is because U.S.
packers are unlikely to slaughter pigs of Canadian origin due to segregation costs. However,Canadian producers stand to suffer significant losses under COOL, but Canadian consumers
gain modest benefits through lower pork prices. Of course, under any public policy such as
COOL, there are likely losers and winners. In the case of Canadian pork, there may not be
strong preference for American pork over Canadian pork by U.S. consumers. Therefore, there
will not be significant gains for American consumers under COOL. However, the situation isdifferent in Taiwan where the preference differential between domestically produced foodproducts and those imported form China and other Southeast Asian countries is apparent. Our
study will not address the supply side or cost issues. However, the high price premiums for
Taiwan produced products demonstrated in this study would make the resulting cost increase
relatively trivial.
This study employs an auction experiment to estimate the willingness to pay (WTP)
premiums for food products produced in Taiwan vs. those imported from other countries. As
5mentioned before, since many imported food products have been sold in Taiwan as though
they were domestically produced, the clearly labeled products with COOL are not available
in the market place. Thus we have to use the methods of valuation similar to those used fornon-market goods. Food safety is a non-market good because you can not purchase foodsafety alone. Labeling for country of origin (COOL) or genetically modified (GM) foods is
related to food safety. The two most widely used methods for valuating the economic benefitsof food safety is contingent valuation method (CVM) and auction experiment. The CVM isbased on hypothetical market created in a consumer survey questionnaire (Mitchell andCarson, 1989; Habb and McConnell, 2002). It has the advantage of collecting a large
representative sample, but has been criticized for the likelihood of overestimation of WTP
resulting from hypothetical bias. Auction experiment has gained its popularity in recent years
as an alternative to the CVM in non-market good valuation. The most widely recognizedadvantage of the auction experiment is its close resemblance of a real market, rather than ahypothetical market. With auction, the winner of the auction has to buy the auctioned goodsin the experiment. This method has been widely applied to the valuation of geneticallymodified (GM) foods (Huffman et al., 2003) and quality differentiated products (Umberger
and Feuz, 2004).
There are several auction mechanisms used for experimental auctions (Lusk andShogren, 2007). The most popular method is the Vickrey second-price sealed-bid auction.
Vickrey (1961) suggested this method since it is easy to implement and it is a weakly
dominant strategy for the participants to reveal their true valuations. Under this method, thehighest bidder wins the product, but pays only the second highest bid. It has been shown thatusing this second-price auction, there is absolutely no advantage to bid anything other thanyour true WTP value. However, it has been observed that in the second-price auction, lowbidders may feel inconsequential and thus become non-participatory bidders. Therefore thelow bidders may not care about how they bid, affecting the accuracy of the auction results. In
6order to correct this problem, the uses of 4th price, fifth price and nth price auction have beensuggested (Shogren et al., 2001, Hoffman et al., 1993). These auction formats are of course
more cumbersome to conduct and sometimes create confusion among the participants. Notethat this study focuses on the impact of tasting in our experimental design. The tasting not
only adds complexity in the design of experiment, but also requires additional time in theexperiment. Therefore, we adopt the Vickrey’s second-price sealed-bid auction for this study.
Another important issue for doing auction experiment is about the repeated trials.
Researchers often conducted repeated trials with one binding trial chosen randomly after all
trials completed. With repeated trials one can gain additional observations. Since the sample
size is often small relative to other CV surveys, we can attain more samples from repeating
several rounds of auction in the experiment. The usual justification is for participants toreceive market experience in order to understand that sincere bidding is a weakly dominant
strategy (Coppinger et al., 1980) and to gain familiarity for valuating unfamiliar products(Shogren et al., 2000). Furthermore, we often announce auction results such as the ID of thehighest bidder and the second highest bid after each trial. This practice helps participants toform a more accurate bidding price for the auctioned product.

List and Shogren (1999)

found that posting second price had some effect on bidding prices but by a small percentage
and it does not affect the behavior of experienced bidders or the bidders of familiar products.
They further found that anticipated strategic behavior wanes after two trials. Corrigan andRousu (2006) found that there exits affiliation between trials when posting second price ineach trial. Thus, they recommend valuation of bid premium to be more accurate than WTP.
We adopt the use of repeated trials because there is no decisive evidence that repeated trials
are not consistent with the demand revealing property.

Experimental Auction Design
A sound experimental auction design is extremely important for the success of an7

auction experiment. This task includes product choice, selection of auction mechanism,
design of the step-by-step auction instruction, and development of survey questionnaire tocollect important information about personal and demographic data, the participant’s foodpurchasing behavior and risk perception. Since this study focuses on the impact of producttasting, it is important to develop a procedure on how and when to offer tasting during theexperiment. Also it is important to decide on the locations of the experiment and how to
recruit participants.
First task is about product choice. We selected two products for the experiment:
charcoal-smoked plum and oolong tea. The reason for choosing these products was becauseof the recognition by Taiwanese consumers about the common practice of selling theimported preserved fruits and tea as Taiwan products in the market place over the years. We
conducted a search on the United Daily News databank and found that there were 87 news
articles reporting contaminated tea from Vietnam during January 2005 to August 2008. Muchof these Vietnam teas actually came from China. Note that one important attribute for theauctioned product originated from different countries is that they have to look very similar. Ifthey do not look alike, then it would be difficult to separate the effect of COOL on WTP fromother product attributes such as color or shape. We used charcoal-smoked plums from Taiwan
and China because they looked very similar. Due to time constraint, we dropped candy bar
auction as a learning session in this experiment.
We maintain one very important principle for conducting auction experiment and that is
we must use authentic products unlike other studies which used fake products. It would be
unethical to auction the same product and then lie to the participants by labeling it with
Taiwan and China untruthfully. We run into some difficulty to obtain plum and tea from
China and Vietnam because almost all merchants would not admit that their stores sell plumor any other preserved fruits from China or oolong tea from China or Vietnam. With efforts
and persuasion, we were able to convince one wholesaler of preserved fruits and one tea
8retailer to help us obtain the authentic products. They claimed that they asked friends fromother stores to provide these products.
Note also that tea is a relatively expensive good. The extremely good oolong tea may
cost several thousands of New Taiwan (NT) dollars per Gin (600 grams) a unit used forpurchasing food products in Taiwan. In order to prevent the situation of insufficient budget
for participants, we auctioned both plums and teas for only 150 grams or 1/4 Gin. Since
participants were given $1,000 (in NT dollars, or equivalently US$32), they would haveample budget to bid on the auctioned goods.
Regarding the choice of auction mechanism, we conducted preliminary experiments
to compare the second price and the 5th price auctions, using student subjects from the
National Chung Cheng University. These experiments showed very similar results. Therefore,
we decided to use the second- price sealed-bid auction for this study.
Our next design task is about the repeated trials and product tasting. In order to provide
participants with learning experience, we decided to have three trials of auction before
product tasting and another three trials after tasting. We auctioned two products in the same
experiment. In order to avoid telling people before hand about tasting, we first had three trials
for charcoal smoked plum and then auctioned oolong tea for three trials. Then we hadparticipants tasting the three oolong teas. After tasting, we had three trials of tea auction.
Then we let participants tasting two plums and finishing the last three trials of plum auction.
In this way, participants would not know there will be product tasting during the first three
trials for both plum and tea.
In order to gain representativeness of this study, we conducted our experiments in threemajor cities in Taiwan: Taipei, Taichung and Kaoshiung. Due to research budget constraint,
we recruited only 40 participants in each city. Two sessions were conducted in each location.
Since after each auction we had to manually collect the bidding cards and sort out all the bids
from the highest to the lowest, it was time-consuming. Therefore, 20 participants in each9

session seemed an optimal number. For recruiting, we posted the advertisement in many
websites including the most visited BBS and other job search websites. In the advertisement,
we indicated the date/time of the auction, and the number of participants in each categories
specified by sex, age and education level according to Taiwan’s recent demographic data
(Ministry of Interior, Taiwan, 2009).

Of course, those who saw the advertisement wereyoung internet users and mostly ineligible for our experiment. However, they recruited for us
their family and friends.

Even though our sample is not truly random, but they reflect thecurrent population mix. With $1,000 cash payment, there were many people registered for theexperiments. In fact we selected 40 persons from 121 registered for Taipei sessions, 142
persons for Taichung sessions and 208 for Kaoshiung sessions, representing acceptance rates
of 33%, 28% and 19.2 %, respectively.
The final section of the instruction is a questionnaire to collect data on theparticipant’s food purchasing behavior, risk perception, food safety concerns, personal anddemographic data. For example in the questionnaire, we asked participants to rank therelative importance between freshness and safety, between price and safety and between priceand COOL when doing food purchase. The complete instruction for our auction experiment isavailable upon request.

Auction Results
The auction was conducted first in Taipei on February 27, 2009, then in Taichung on
March 9 and Kaoshiung on March 13. Before these sessions, we also conducted a test auction
at National Chung Cheng University for the focus group of nine food shoppers (not students)
on February 25, 2009. Furthermore, we also conducted six sessions of the auction of candy
bars and charcoal-smoked plums with student subjects in December 2008. In this study weused only the data collected from the public auctions. We had totally 116 participated in thesample from public auctions.
10

Table 1 shows average bids by trial before and after tasting for charcoal-smoked plums
from Taiwan and China. Note that we told the participants about where these plums camefrom in the beginning of the auction. Therefore, Trials 1-3 reflect the participant’s valuationof their WTP knowing the country of origin while Trials 4-6 reflect their valuations after they
had a chance to taste the products. Clearly the participants valued Taiwan plum higher thanChina plum as the average bid was $ 52.16 per 150 grams for Taiwan plum and $ 29.78 for
China plum before tasting. Interestingly after tasting, the average bid for China plumincreased to $41.32 while the average bid for Taiwan plum also increased to $58.9. Before
tasting, the bid premium for Taiwan plum over China plum was $22.38 while after tasting,this premium reduced to $17.58. Clearly Taiwan plum was much preferred by the participants
over China plum. Furthermore, product tasting did affect the participants’ valuation of their
WTP.
It was noted that China plum tasted more juicy than Taiwan plum. As part of thequestionnaire, we asked participants about what kind of plum they like after tasting. With
total sample, 47% liked Taiwan plum the best, 45% liked China plum, 7% indicated nodifference between the two while 1% giving no opinion. Despite many participants liked thetaste of China’s plum, they still had lower WTP for China’s plum than Taiwan plum. One
may wonder whether the posting of second price have affected the bidding behavior. Thishypothesis will be formally tested later. But if we just use the bidding results from the firsttrial, the average premium for Taiwan plum was calculated to be $22.03 which is very close
to the estimate of $22.38 from the first three trials.
Table 2 presents the average bids by trial and country before and after tasting for oolongtea. Before tasting, the average bids are $209, 113 and 111 for oolong teas from Taiwan,
China and Vietnam, respectively. Taiwan tea’s premiums are $96 and $98 (or 85% and 88%),
respectively over China and Vietnam tea. After tasting, the average bids increased to $237
and $133 for Taiwan and China tea, respectively, but decreased slightly to $110 for Vietnam
11

tea. These results show that the bid premiums for Taiwan tea decreased to $90 from $96 over
China tea, but increased to $113 over Vietnam tea after tasting. These findings indicate thattasting did affect participants’ WTP for various teas, but not as dramatic as the case forcharcoal-smoked plums. In the experiment, we asked respondents what kind of tea they liked
the best after tasting. The responses show that 72% of the participants liked Taiwan tea thebest, 21% liked China tea, 3% liked Vietnam tea the best, 3% saying no differences among
the three, and 1% giving no opinion. Therefore, tasting raised the bids for Taiwan and China
teas, but lowering the bids for Vietnam tea.
Overall, these auction results clearly show stronger preferences by Taiwanese consumers
for Taiwan oolong tea over those from China or Vietnam. This finding is further substantiatedby the number of zero bids. For the first trial, 26.7% of participants bid zero for China plumand only 2.6% did the same for Taiwan plum. After tasting the percentage of zero bids for
China plum decreased to 14% and for Taiwan plum the percentage increased to 5% after
tasting. Still, the number of participants who did not want to pay anything for China plum
was much higher than those for Taiwan plum. In the case of oolong tea, the percentages ofzero bids in the first trial were 2.6%, 16%, and 11% for Taiwan, China and Vietnam,
respectively. After tasting, these percentages changed to 0.9%, 10% and 9%, respectively for
Taiwan, China and Vietnam teas. There were many more participants refusing to bid on China
and Vietnam teas than Taiwan tea. Those bidding zero for Taiwan tea did so because they did
not drink tea, and thus did not want to buy it.
After auctions, we had participants filling out a questionnaire collecting data onpurchasing behavior, personal and demographic information. The descriptive statistics for all
variables used in our econometric estimation will be detailed later. Here we will highlightsome interesting results. Table 3 presents the responses on factors affecting the participant’s
food purchase. Results show that the most important factors affecting their food purchase are
freshness and safety as more than 93% of the respondents ranked them as “very important”.
12

Also more than 92% of the respondents ranked COOL as either somewhat or very important.
Certification label is also highly ranked. Note that only 47% of the respondents ranked“price” as very important. Overall, Taiwanese consumers ranked safety and its related factors
such COOL or certification more important than price. Table 4 shows that safety is either
slightly or much more important than freshness if they are the only two factors being
considered and compared.
Figure 1 shows the distribution of frequency on food label checking by the participantsin three different cities. Results show majority of participants often or always check foodlabels. In Kaoshiung, 59% of participants always checked food labels. In Taipei, 84% ofparticipants checked food labels either often or always. Figure 2 shows that Taiwanese
consumers are not very happy with the government handing food safety as 55% ofparticipants were unsatisfied and 9.5% were very unsatisfied with the government’s handlingof food safety matters.
We also asked about the country of origin for the imported food they ever purchased.
The percentages of ever purchasing food items from Japan and the U.S. are 72% and 57%,
respectively. Interestingly only 25% and 18% of participants indicated that they havepurchased food from China and Southeast Asia in the past. It is no wonder without COOL,
the percentage of Taiwanese consumers knowing they ever purchased food from China is solow. Our survey also shows that 75% of respondents were willing to pay for the cost of
COOL if its implementation would increase food price by 1-5%.

Econometric Analysis
Test of Affiliations
In order to understand whether the posted second price would affect the bids in the
successive trials, we investigate the possibility of the affiliation. It is possible that participants
might adjust their bid after seeing the posted price which is the second highest bid.
13

Specifically, they may increase their bids if the posted price is higher than their last bids.
Otherwise, they may decrease the bids. However, if there is no affiliation, there is nocorrelation between the bid adjustment and the price difference between the posted price andprevious bids. For testing affiliation, we specify the following regression model:Bi ,t   0   1 Pi ,t 1   2 t   i ,twhere Bi ,t indicates the bid in trial t minus the bid in trial t-1 and Pi ,t 1 denotes theposted price in trial t-1 minus the participant i’s bids in trial t-1. Subscript i and t
represent individual and trial. The trial variable t is observed with 2, …, 6 because we had six
trials in each experiment.
Table 5 shows that the posted price in trial t-1 has a significant and positive effect onparticipant’s bid in trial t. That is, participants would increase their bids for both plum and tea
if the previously posted price was higher than their previous bids. Since participants would
adjust their bids during the repeated trials, the dummy variables for trials should be includedin the bid regression equation auctions. According to Corrigan and Rousu (2006), in order toavoid the effect of affiliation, it is better to compute the price premium than the WTP for
auctioned products. Therefore, we will conduct our econometric estimations for both WTP
and premium in the next session.

Estimation of Bid and Premium Functions
We next attempt to investigate factors affecting the participant’s bidding behavior. Since
there are zero bids, the dependent variables have values of zero. Therefore, one appropriate
model is Tobit model. We specify participants’ bids are function of demographic variables,
purchasing behavior and attitudes, information and risk perception and other experimental
design variables such as trials and tasting. We will also estimate Taiwan product premium
functions defined as the difference between bids for Taiwan product and those imported from14

China or Vietnam. Since the premium may be positive or negative, the ordinary least squares(OLS) is appropriate for this estimation.
Table 6 presents the definitions of all dependent and independent variables used in these
two econometric models – bid and premium functions. Table 6 also shows the mean andstandard deviation of each variable from the total sample of 116 participants. The descriptive
statistics show that the mean bid of Taiwan charcoal plum from all six trials is $55 dollars
which is much higher than $36 for China plum. The mean bids for Taiwan, China andVietnam oolong teas are $223, 123, and 110, respectively. The average age of the participants
is 38.67 and males accounts for 51% of the sample. Note that the age distribution and sex
were controlled by our experimental design. Family size of the participants is 3.84 while 52%of participants had household income in 2008 greater than $600,000.
Mean statistics also show that 44% of participants mostly or always purchased foodfrom traditional markets. Many Taiwanese consumers still prefer traditional markets due totheir preference for freshness. These markets present huge challenge for enforcing the COOL
regulations in Taiwan. Table 6 also shows that 80% of participants often or always checkedfood labels. Among the participants, 10% indicated that they received most information frompackages. With respect to factors affecting participants’ food purchasing, 94% said price issomewhat or very important while 98% indicating freshness and safety are somewhat or very
important. Results also show that 68% of participants were worried about the safety ofimported foods and only 16% of them were satisfied with the government handling foodsafety matters.
After excluding the participants not filling out the survey questionnaire completely andcarefully, the samples used for Tobit and OLS regressions include 113 participants forcharcoal-smoked plums and 114 for oolong teas. Since there are six trials, we have sample
sizes of 678 and 684 for plums and teas, respectively.
Table 7 shows the regression results on bids and bid premiums. For charcoal-smoked15

plum, the positive sign of BUYIM means that participants with experiences of buying
imported food bid more for Taiwan plum. The reason might be that these participants think
Taiwan produced plum are better than those imported. Negative signs for PRICE imply that a
participant bid more for China plum if he/she thinks price is an important factor affecting
their food purchase.
The variable GOVFS shows that respondents will bid more for Taiwan plum if they aresatisfied with the government’s handling on food safety matters. Moreover, females bid
higher for Taiwan plum as the signs for SEX are negative. Because most of main foodshoppers in Taiwanese households are females, they are more concerned about the issues offood safety and family health than male shoppers. FE has negative signs indicating thatparticipants who spend more on food are less likely to bid more for Taiwan plum. Positive
signs for TINC imply that wealthier people tend to bid higher for Taiwan plum.
Consider next the Tobit bid equation for China plum; variables PRFR, AGE and TASTE
are significant. These variables are also significant in the OLS results of the bid premiums for
Taiwan plum over China plum. These results show that the respondents who think price ismore important than freshness are less likely to bid high for Taiwan plum. Elder people bid
higher for China plum (AGE). Elder people should care about their health, but they may be
more concerned about the attributes of the food products instead of the country of origin. On
the other hand, young people care more about the country of origin, so they are willing to bid
higher premium for Taiwan plum. We can also see such result in the premium equation for
AGE.
One of our objectives is to examine the impact of product tasting on auction results.
Positive sign for TASTE in the Tobit China plum equation implies that participants tend tobid higher for China plum after tasting. Moreover, tasting put negative effects on the bid
difference between Taiwan and China plums.
The variables, BUYSP, INFOF, LACOST, MAR and ZONE3 all have the same sign in
16both bid equations. Positive signs for BUYSP imply that participants who have experience ofbuying charcoal-smoked plum are willingness to bid more on both plums. Positive signs for
INFOF imply participants whose food information is mostly from the package tend to bid
higher on plum. Positive signs for LACOST show that participants who are willing to pay 1%
to 5% additional cost for implementing the country of origin labeling tend to bid more.
Moreover, participants who are married bid higher as MAR has positive signs. Nevertheless,the positive effect on bids of China plum is more significant. Positive signs for ZONE3 imply
that Kaohsiung participants tend to bid higher than those in other cities. Although ZONE3 issignificant and positive on the bids for both Taiwan and China plum, the effect on the Taiwan
plum is more in magnitude. Additionally, positive signs for MARKET, FRSA and RISK showthat the participants who mostly or always purchase food in the traditional market, viewfreshness as a more important factor for buying food than safety and think contaminatedimported food is the food safety issue they care about the most tend to bid more on bothplums.
Besides, FRESH and PRSA are significant and have positive signs for the bid premiums
for Taiwan plum over China plum. Participants who thinks freshness is an important factor of
making decision on food buying bid more for Taiwan plum relative to China plum.
Participants who view price as a more important factor than safety tend to bid higher for
Taiwan plum.
Let us examine the Tobit and OLS results for oolong tea.

Premium1 is the bid

premium for Taiwan tea over China tea and Premium2 in the bid premium for Taiwan tea
over Vietnam tea. The variables RISK, EDU1, EDU3, FAM10 and FE are all significant forthe bids of Taiwan tea and the bid premiums of Taiwan tea over China tea. Participants who
think contaminated imported food as the most important food safety issue (RISK) are willingto pay more for Taiwan tea relative to China tea. Both EDU1 and EDU3 have a positive sign,
but EDU3 has more significant effect on bids. Such results are different from the results of17

plum and Loureiro and Umberger (2005). The reason might be that there have been so many
negative reports about tea in recent years. Hence, higher educated participants become
willing to pay more premiums for Taiwan tea, and the result is the same as Chang (2008).
Positive signs for FAM10 imply that participants who have children aged less than ten years
old tend to bid higher for Taiwan tea. Negative signs for FE are the same as the results forplum, suggesting that participants with higher food expenditure will bid less for Taiwan tea.
Furthermore, EDU1, EDU3, FAM10, FE, TRAIL1 and TASTE are significant for bids of
Taiwan tea and the bid premiums of Taiwan tea over Vietnam tea. The explanations for EDU1,
EDU3, FAM10 and FE are similar to those provided previously regarding China tea.
Negative signs for TRAIL1 show that bids and bid premiums are lower in the first trail.
As to the variable TASTE, the participants tend to bid higher after tasting for both
Taiwan and China teas, but lower for Vietnam tea although it is not statistically significant.
As a result, tasting did not affect bid premium over China tea, but significantly higher for thepremium over Vietnam tea. These results are different from those found for plums. Therefore,
tasting affects bidding behavior, but the results depend on products. It is important to add
product tasting for food products such as preserved plums or tea.
There are some other variables which have significant effects on bids of oolong tea. The
variable FRSA shows if respondents place more importance on freshness relative to safety,
then they will bid less for Taiwan tea relative to China or Vietnam tea. INFOF has asignificant and positive sign for three teas; that is, participants whose food information isfrom the package bid higher for three teas. Furthermore, respondent who have experience ofbuying tea (BUYTEA) tend to bid lower and those with experience of buying imported food(BUYIM) tend to bid higher. Also, respondents who view price more important thanfreshness (PRFR) bid more for China and Vietnam teas.

Positive signs for TINC and

ZONE3 imply that wealthier people bid more for every tea and the participants living in
Kaohsiung tend to bid higher for all three teas.
18

Regarding GOVFS, respondents who are more satisfied with the government’s handlingof food safety tend to bid higher for Taiwan tea. Older people (AGE) have less willingness tobid higher premiums for Taiwan tea as there are positive signs for the bids of China andVietnam teas and negative sign for bid premium for Taiwan tea over China tea. Participants
like China and Vietnam teas more if they consider price is a very important factor for making
decision on food purchase (PRICE). Positive signs for MAR show that married people tend tobid more for tea.
Table 8 shows the marginal effects of the variables with estimated significant
coefficients from Tobit regressions. For a continuous variable, the marginal effect can becomputed from the Tobit regression results directly (See Wooldridge 2006). For a dummy
variable,we

cancomputethedifference

betweenE ( y i y i  0, x j  1)

and E ( y i y i  0, x j  0) . For AGE, one additional year will raise the WTP by $0.15 for
Taiwan plum and $0.81 for China plum. As to oolong tea, each additional year of age willraise the WTP by $0.93, $2.44 and $1.58 for teas from Taiwan, China and Vietnam,
respectively. The results for TASTE indicate that after tasting, the bids raise by $4.74 for
Taiwan plum, $11.54 for China plum, $28.22 for Taiwan tea, and $20.39 for China tea, but
lower by $1.96 for Vietnam tea. The marginal effects for other dummy variables can beinterpreted similarly.
We also run the same regressions using auction results before and after tasting, i.e.,
Trials 1-3 and Trials 4-6, respectively. We found that the regression results are very similar interms of sign to those using the entire six trials reported in Table 7. Of course the coefficientmagnitudes changed somewhat with some smaller while others larger. There are fewer
numbers of significant variables in both regressions. Specifically in Table 7, the total numberof significant variables excluding TASTE is 104 while there are only 94 and 85 significant
variables in before tasting and after tasting regressions, respectively. In order to save space
19these regression results are not presented here.
As mentioned previously, in order to avoid the effect of affiliation, it is better to estimate
the premium rather than the WTP. We compare the estimated bid equations and the premium
function and find that there are more significant variables in the estimated premium functions
than the individual bid equations. While there are 17 significant variables in the premium
equation for plum, only 13 and 12 significant variables for the bid functions for Taiwan and
China plum, respectively. For teas, the Premium 1 equation (Taiwan vs. China) has 16
significant variables which are more than 13 significant variables in the bid equations for all
three teas as well as the Premium 2 equation for Taiwan vs. Vietnam. These results suggestthat the regression performance for the premium equations is better than those bid functions.
Table 9 presents the estimated WTP by products and estimated premiums for Taiwan
products over those from either China or Vietnam. We present the computation results for all
trials using Tobit and OLS regressions in Table 7 and the regression results using data before
and after tasting separately (but not reported in the paper). When computing the % premiumfrom the estimated premium, we used the average bid for the base product (such as China
plum) reported in Tables 1 and 2. For example, for the case of before tasting, the estimatedpremium for Taiwan plum is $24.84. Using the average bid of 29.78 for Trials 1-3 in Table 1,
we computed the % premium for Taiwan plum to be 83%. Table 9 shows there are substantial
premiums for Taiwan charcoal-smoked plum and Taiwan tea. The estimated premiums for
Taiwan oolong tea ranges from 83% - 109% while the estimated premiums for Taiwan
charcoal-smoked plum ranges from 55% to 66%. These are very high premiums for Taiwan
products. The results also suggest that tasting affect auction bids. The estimated premiums
decreased after tasting for Taiwan plum and Taiwan tea over China tea, but increased for
Taiwan tea over Vietnam tea. We also note that the estimated % premiums from the premium
equations are higher than those estimated from the individual bid functions.

20Policy Implications
After accession to the World Trade Organization (WTO), Taiwan’s agriculture sector has
faced stiff foreign competition. Recently the Taiwan government has attempted to negotiatewith China to sign an Economic Cooperation Framework Agreement (ECFA). Even though
the government has claimed that this will not lift the ban on the imports of 830 agricultural
products from China. However, many banned agricultural products from China have enteredinto Taiwan market through smuggling or importing via a third country. Oolong tea is thecase in point, China tea has been imported into Taiwan through Vietnam as Vietnam tea.
Without COOL, these smuggled and imported products have been sold pretending they aredomestically produced. In order to reduce the impacts of WTO accession and ECFA, it isextremely important to enforce a rigorous traceability system and COOL regulation.
This study has demonstrated that Taiwanese consumers have a strong preference forfoods produced domestically. They prefer Taiwan products not because of their patriotism,
but because of their concerns about food safety. Taiwanese demand for food safety is very
high especially after the China milk power (melamine) event in September 2008. With highpremiums for Taiwan food products estimated in this study, many imported food products
such as preserved fruits and tea from China, Vietnam and other Southeast Asian countries ifclearly labeled with COOL will face strong competition with those produced domestically.
Almost certainly these imported or smuggled products have to reduce their price substantially
to find buyers. In many cases, Taiwanese consumers simply would not buy products from
China. Both Taiwanese consumers and food producers will gain substantially with rigorously
enforced COOL regulations in Taiwan.
Taiwan does have COOL regulations for both packaged food in 2008 and bulk imported
food and agricultural products beginning 2010. Unfortunately, these laws have not been
forcefully implemented. Food merchants have been earning unlawful profits by not telling
consumers about the true country of origin of their imported products or by mixing the21

imported products with domestically produced ones. According to the present government
COOL regulation, if China oolong tea is mixed with 1% of Taiwan oolong tea, they can besold as Taiwan tea. This type of government regulation is simply unreasonable and it should
be changed to protect both consumers and domestic producers.

Concluding Remarks
The purpose of this study is to evaluate the economic benefits of COOL regulation by
estimating the consumer’s WTP for Taiwan product vs. other imported products if clearlylabeled with their countries of origin. We employed the Vickrey second-price sealed-bid
auction and conducted auctions in three major cities in Taiwan in 2009. In each experimental
session, we conducted three repeated trials before product tasting and another three trials after
tasting. We used charcoal-smoked plums from Taiwan and China and oolong teas from
Taiwan, China, and Vietnam as auctioned products. These products represent two categories
of food and agricultural products (preserved fruits and tea) for which the problems ofdeception are most severe. We recruited 116 food shoppers to participate in these auction
experiments. In addition to auctions, we also collected information on participants’ foodsafety concerns, food purchase behavior, risk perception and demographic characteristics.
Survey results indicate that auction participants were very concerned about food safety and
COOL.
In order to investigate factors affecting bidding behavior, we estimated Tobit bid models
for each product and the OLS premium functions. The regression results show that many
demographic variables, risk perception and experimental design features were significant
factors affecting participants’ bids and thus premiums for Taiwan products. In particular,
product tasting was found to affect the participants’ WTP positively or negatively depending
on products. Specifically, tasting raised bids for Taiwan and China teas, but lowered bids for
Vietnam tea. Tasting also raised bids for both Taiwan and China plums, though with different
22magnitudes. Auction results with tasting are more credible because they reflect the realmarket situation. It is also found that the estimated OLS premium equations have moresignificant variables than the individual Tobit bid functions.
The econometric results show very high premiums for Taiwan products, ranging from
83% to 109% for tea and 55% to 66% for charcoal-smoked plum. These high premiums werecaused by food safety concerns, not simply usual quality attributes like those studied byCarter, et al. (2006). Note that production areas for preserved fruits and tea have been greatly
reduced over the last two decades due to the competition from low-price imports. With
COOL, these high price premiums will undoubtedly increase the domestic supply ofpreserved fruits and tea. However, Taiwanese consumers have such strong preferences forfood and agricultural products produced domestically. Positive premiums for Taiwan products
should be sustained in the long run. These findings clearly show that if all foods andagricultural products are clearly labeled with their countries of origin, Taiwanese consumers
and food producers stand to benefit greatly with COOL. The CCOL can promote Taiwan as abrand name, Thus it is a great marketing tool as well. The COOL would be one of the best
instruments to reduce the negative impacts of agricultural trade liberalization under WTO or
ECFA.

23

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26

Table 1. Average Bids for Charcoal-Smoked Plum
(Unit: New Taiwan Dollars per 150 Grams)
Taiwan

Trial

Mean

Trial 1
Trial 2
Trial 3
Trials 1~3

48.50
52.23
55.75
52.16

Trial 4
Trial 5
Trial 6
Trials 4~6
Trials 1~6

55.06
57.28
58.35
58.90
54.53

China

(MAX, MIN)

Mean(230 ,0)26.47(170,0)29.54(170,0)33.32(230,0)29.78
After Tasting(180,0)39.51(180,0)41.32(180,0)43.12(180,0)41.32(230,0)35.55

N(MAX, MIN)
(180,0)(150,0)(150,0)(180,0)(150,0)(200,0)(250,0)(250,0)(250,0)696

Table 2. Average Bids for Oolong Tea(Unit: New Taiwan Dollars per 150 Grams)
Trail

TaiwanChina

VietnamMean (MAX, MIN)

Mean (MAX, MIN)

Mean (MAX, MIN)

Trail 1
Trail 2
Trail 3
Trails 1~3

185.77216.25224.45208.82(800,0)(650,0)(530,5)(800,0)Trail 4
Trail 5Trail 6
Trails 4~6
Trails 1~6

229.28239.33242.53237.05222.93(550,0)(550,0)(530,0)(550,0)(800,0)102.42(400,0)116.99(370,0)118.66(380,0)112.69(400,0)After Tasting
130.19(425,0)133.09(390,0)135.96(365,0)133.08(425,0)122.88(425,0)

N

696

27

103.59114.92115.88111.47(400,0)(310,0)(350,0)(400,0)108.19110.31110.01109.50110.48(360,0)(320,0)(305,0)(360,0)(400,0)Table 3. Ranking of Factors Affecting Food Purchasing
Very
Somewhat
Somewhat
Very
Neutrality
Unimportant Unimportant
Important Important

Factors
Price
Brand
Freshness
SafetyCOOL
Nutrition
Convenience in
Using
Convenience in
Buying
Certification
Labels

0.00%
0.86%
1.72%
1.72%
1.72%
2.59%

2.59%
6.90%
0.00%
0.00%
1.72%
2.59%

3.45%
7.76%
0.00%
0.00%
3.45%
12.07%

47.41%
49.14%
5.17%
1.72%
40.52%
34.48%

46.55%
35.34%
93.10%
96.55%
52.59%
48.28%

1.72%

6.03%

11.21%

45.69%

35.34%

4.31%

4.31%

12.07%

42.24%

37.07%

1.72%

1.72%

5.17%

23.28%

68.10%

Table 4. Tradeoff between Freshness and Safety
Item

Number Percentage

Freshness is much more important than safety
Freshness is slightly more important than safety
Safety is slightly more important than freshness
Safety is much more important than Freshness

13
8
44
51

N

11.21%
6.90%
37.93%
43.97%
116

Table 5. Affiliation Test Results (OLS)
Variable
Constant
PtN

Charcoal-Smoked Plum

Oolong Tea

TaiwanChina

TaiwanChina

Vietnam-16.05***(3.51)
0.13***(0.02)
0.67(0.51)-5.86*(3.02)
0.08***(0.02)
0.05(0.43)-8.7(8.17)
0.11***(0.02)-3.22**(1.36)-11.25*(6.44)
0.11***(0.02)-2.17**(1.09)-19.24***(5.59)
0.14***(0.02)-1.78*(0.96)

565

565

570

570

570

Notes: N represents the number of observations. The symbols***,** and * denote that thevariables are significant at a 1%, 5% and 10% level, respectively. Numbers in parentheses are
estimated standard errors.

28

Table 6. Variable Definition and Coding
Variable

Definition and Coding

Mean

S.D.

Dependent Variables
SPt

Bids of charcoal-smoked plum produced in Taiwan (NT$)

SPc

Bids of charcoal-smoked plum imported from China (NT$).

OTt

Bids of oolong tea produced in Taiwan (NT$).

OTc

Bids of oolong tea imported from China (NT$).

OTv

Bids of oolong tea imported from Vietnam (NT$).

54.53 36.52
35.55 32.93
222.93 120.86
122.88 84.71
110.48 74.38

Trial Variables
TRIAL 1

1 if first trial; 0 otherwise.

TRIAL 2

1 if second trial; 0 otherwise.

TRIAL 3

1 if third trial; 0 otherwise.

TRIAL 4

1 if fourth trial; 0 otherwise.

TRIAL 5

1 if fifth trial; 0 otherwise.

TRIAL 6

1 if sixth trial; 0 otherwise.

TASTE

1 if auction was done after tasting; 0 otherwise.

0.17
0.17
0.17
0.17
0.17
0.17
0.50

0.37
0.37
0.37
0.37
0.37
0.37
0.50

Demographic Variables
AGE

Age of respondents as of 2009.

SEX

1 if male, 0 if female.

MAR

1 if married; 0 otherwise.

EDU1

1 if primary or secondary school; 0 otherwise.

EDU2

1 if high school; 0 otherwise.

EDU3

1 if college, university or above; 0 otherwise.

FAMSIZE Number of household members.
FAM10
FE

1 if household has children under age 10; 0 otherwise.
1 if household food expenditure per week＞3,000;

38.67 11.06
0.51 0.50
0.46 0.50
0.23 0.42
0.34 0.48
0.43 0.50
3.84 1.19
0.32 0.47
0.28 0.45

0 otherwise.
INC

1 if personal income per month＞$50,000; 0 otherwise.

TINC

1 if household income in 2008＞$600,000; 0 otherwise.

BMI

1 if BMI＜24; 0 otherwise.

ZONE1

1 if respondent is living in Taipei; 0 otherwise.

ZONE2

1 if respondent is living in Taichung; 0 otherwise.

ZONE3

1 if respondent is living in Kaohsiung; 0 otherwise.

0.10
0.52
0.61
0.33
0.32
0.34

0.31
0.50
0.49
0.47
0.47
0.48

Purchasing Behavior and Attitude
MARKET

1 if mostly or always purchasing in the traditional market; 0 otherwise.

CHECK

1 if often or always check the food labeling; 0 otherwise.

BUYIM

1 if ever buy imported food; 0 otherwise.

29

0.44 0.5000
0.80 0.40
0.94 0.24

Table 6. (Continued)
BUYSP

1 if ever buy charcoal-smoked plum; 0 otherwise.

BUYTEA

1 if ever buy oolong tea; 0 otherwise.

0.90
0.85

0.30
0.36

0.10
0.67
0.94
0.84
0.98
0.98
0.93
0.83
0.81
0.79
0.91

0.31
0.47
0.24
0.36
0.13
0.13
0.26
0.38
0.40
0.41
0.28

0.12
0.04
0.32
0.18

0.33
0.20
0.47
0.39

0.27
0.75

0.45
0.44

0.68

0.47

0.16

0.36

0.86

0.35

Information and Perception
INFOF

1 if food information is from package; 0 otherwise.

INFOC

1 if very well or somewhat informed about COOL; 0 otherwise.

PRICE

1 if price is somewhat or very important; 0 otherwise.

BRAND

1 if brand is somewhat or very important; 0 otherwise.

FRESH

1 if freshness is somewhat or very important; 0 otherwise.

SAFETY

1 if safety is somewhat or very important; 0 otherwise.

COOL

1 if COOL is somewhat or very important; 0 otherwise.

NUTRI

1 if nutrition is somewhat or very important; 0 otherwise.

USECCON 1 if convenience for using is somewhat or very important; 0 otherwise.
BUYCONCAS

1 if convenience for buying is somewhat or very important; 0 otherwise.
1 if certification label (like CAS) is somewhat or very important;
0 otherwise.

PRFR

1 if price is slightly or much more important than freshness; 0 otherwise.

PRSA

1 if price is slightly or much more important than safety; 0 otherwise.

PRCO

1 if price is slightly or much more important than COOL; 0 otherwise.

FRSA

1 if freshness is slightly or much more important than safety;
0 otherwise.

PRCAS

1 if price is slightly or much more important than CAS; 0 otherwise.

LACOST

1 if respondent is willing to pay 1%~ 5% premiums for COOL;
0 otherwise.

RISK

1 if respondent worries about safety of imported food;0 otherwise.

GOVFS

1 if respondent is satisfied with government handling on food safety;
0 otherwise.

TRACE

1 if respondent believes in the traceability of label; 0 otherwise.

30

Table 7. Regression Results on Bids and Premiums
Charcoal-Smoked Plum
Variable
Constant
BUYSP
BUYTEA
MARKET

Oolong Tea

TaiwanChina

Premium

TaiwanChina

Vietnam Premium1 Premium2(Tobit)(Tobit)(OLS)(Tobit)(Tobit)(Tobit)

(OLS)

(OLS)

-18.78-69.48***22.12**-24.14-131.07***-13.8989.35**-1.82(14.76)(15.22)(10.76)(42.77)(34.78)(29.71)(38.29)(32.47)22.40*** 30.61***

-3.89

_

_

_

_

_

(4.85)(5.08)(3.51)___

44.31***

35.31***

13.20-32.90*** -24.34***(12.02)(9.73)(8.35)(10.83)(9.19)-4.70-11.06***

3.89*

1.40

0.51

-6.41

-1.36

3.46

(3.03)(3.09)(2.21)(9.16)(7.39)(6.38)(8.27)(7.01)

28.07*** 31.25***

1.57

45.89*** 70.67***

51.52***-16.89-5.37(5.06)(5.10)(3.70)(15.42)(12.43)(10.71)(13.88)(11.78)

-1.08

-6.21

3.23

7.10

-4.51

0.92

10.82

4.41

(3.77)(3.85)(2.75)(11.40)(9.22)(7.93)(10.24)(8.68)

11.71*-8.21

20.45***

121.18*** 68.97***26.40*

50.52***

85.73***(6.73)(6.82)(4.86)(20.10)(16.13)(13.82)(17.83)(15.12)-10.91***

1.05-10.23*** -24.20***

14.23*

12.81**-33.84***-33.90***(3.08)(3.13)(2.25)(9.12)(7.36)(6.35)(8.24)(6.99)

8.00

-4.78

12.49***-65.66***-11.86-45.56***-57.72***-22.51(5.94)(6.01)(4.35)(17.97)(14.42)(12.47)(16.23)(13.76)-2.42

8.22**-7.26***-2.25

39.54***

26.74***-35.24***-26.46***(3.38)(3.47)(2.48)(10.24)(8.27)(7.12)(9.24)(7.84)

5.17

1.41

5.57**-17.18-13.00-30.80***

-3.93

10.12

(3.81)(3.88)(2.78)(11.56)(9.34)(8.07)(10.42)(8.84)

9.52***

4.33

4.50*

-2.94

3.27

-1.63

-7.40

-1.89

(3.65)(3.75)(2.67)(10.99)(8.86)(7.63)(9.93)(8.42)

1.02

15.42*** -10.39***2.01

28.82***

22.54***-20.63***-18.36***(2.96)(3.04)(2.16)(8.78)(7.12)(6.13)(7.92)(6.72)LACOST 11.38*** 16.04***

-3.25

15.48

12.13

7.59

3.14

6.97

(3.37)(3.45)(2.46)(10.15)(8.19)(7.05)(9.17)(7.78)-0.16-11.34***

7.74***

44.18***-12.2935.20***

53.73***

11.81(3.57)(3.67)(2.61)(10.81)(8.70)(7.52)(9.76)(8.28)

8.02*

4.27

5.48*

18.95

2.19

1.85

21.70*

19.80**(4.15)(4.23)(3.03)(12.59)(10.16)(8.73)(11.37)(9.64)

INFOF
CHECK
BUYIM
PRICE
FRESH
PRFR
PRSA
PRCO
FRSA

RISK
GOVFS

31

Table7. (Continued)
Charcoal-Smoked Plum
Variable
AGE
SEX
MAR
EDU1
EDU3
FAM10
FE
TINC
ZONE3

Oolong Tea

TaiwanChina

Premium

TaiwanChina

Vietnam Premium1 Premium2(Tobit)(Tobit)(OLS)(Tobit)(Tobit)(Tobit)

(OLS)

(OLS)

0.16

1.02***-0.54***

0.98

2.74***

1.75***-1.39**-0.66(0.21)(0.22)(0.15)(0.63)(0.51)(0.44)(0.57)(0.48)-10.11***

0.24-11.10***

6.30

-0.05

4.79

5.77

3.15

(3.11)(3.19)(2.26)(9.34)(7.58)(6.52)(8.44)(7.16)

9.06*

18.93***

-4.53

9.09

51.05***

18.42*-36.75***-9.32(4.64)(4.79)(3.38)(13.96)(11.34)(9.73)(12.62)(10.70)

8.20*

5.08

2.82

34.93***

9.58

7.55

22.66*

25.08**(4.41)(4.48)(3.22)(12.94)(10.42)(8.99)(11.66)(9.89)

-3.34

-1.63

-3.85

48.91***

0.17

10.44

45.62***

35.77***(3.71)(3.80)(2.71)(11.19)(9.06)(7.82)(10.11)(8.57)

3.27

5.13

0.30

22.45**

4.59

1.92

17.27**

19.75***(3.22)(3.30)(2.35)(9.58)(7.75)(6.67)(8.66)(7.35)-8.74***

1.26-8.08*** -58.75***

-5.17

-9.05

(3.34)(3.40)(2.43)(10.05)(8.12)(7.01)(9.08)(7.70)

13.97***

5.74

8.74***

55.06*** 37.43*** 19.07***17.91*

34.00**(3.45)(3.51)(2.52)(10.46)(7.29)(9.45)(8.01)

16.97*** 13.96***

3.48*

53.30*** 39.65*** 40.62***

12.28

13.18**(2.90)(2.96)(2.11)(8.60)

-5.46

-6.20

(3.91)(8.44)-52.25*** -48.75***(6.95)(5.99)(7.77)(6.59)-0.54-35.77*** -17.34*-13.39-19.12*-22.91**(4.06)(2.86)(11.80)(9.56)(8.21)(10.63)(9.02)

-2.83

-2.99

4.43E-03-11.92

-4.33

-2.24

-7.53

-9.89

(3.92)(3.96)(2.86)(11.78)(9.50)(8.20)(10.63)(9.02)

3.18

13.22*** -7.11***20.87**

18.18**

-6.22

3.73

26.23***(3.20)(3.26)(2.33)(9.62)(7.77)(6.69)(8.68)(7.36)

R-squared

0.22

0.25

0.20

0.30

0.25

0.23

0.25

0.29

N

678

678

678

684

684

684

684

684

TRIAL1
TRIAL4
TASTE

Notes: The symbols***,** and * denote that the variables are significant at a 1%, 5% and 10% level, respectively.
Numbers in parentheses are estimated standard errors. Blank space indicates that the variable is not applicable. N is
the number of observation.

32

Table 8. Marginal Effects for Charcoal-Smoked Plum and Oolong Tea
Variable

Unit ofCharcoal-Smoked Plum

Oolong Tea

Measurement

TaiwanChina

TaiwanChina

VietnamBUYSP
BUYTEA
MARKET
INFOF
CHECK
BUYIM

1 or 0
1 or 0
1 or 0
1 or 0
1 or 0
1 or 0

21.00
_
-2.26
20.12
-2.13
9.90

18.69
_
-3.07
19.50
-4.38
-5.23

_
9.64
-0.64
-18.457.09
137.75_-31.82
7.95
36.52
0.15
57.25

_
-18.44
2.76
15.42
-0.87
35.88

PRICE
FRESH
PRFR
PRSA
PRCO
FRSA
LACOST
RISK
GOVFS

1 or 0
1 or 0
1 or 0
1 or 0
1 or 0
1 or 0
1 or 0
1 or 0
1 or 0-10.29
0.05
-5.03
-0.37
8.10
0.59
8.97
-0.41
0.42

0.06
-12.84
-2.27
-1.48
7.88
4.65
10.34
-8.79
-3.42

-25.76-44.85
0.82
-6.23
2.03
8.39
10.05
48.09
-0.31

1.80
-15.81
22.35
3.90
25.04
14.27
7.12
3.94
-16.575.14-32.82
19.49
-4.33
8.56
12.27
1.64
28.50
-15.58

AGE
SEX
MAR
EDU1
EDU3
FAM10
FE
TINC
ZONE3

Years
1 or 0
1 or 0
1 or 0
1 or 0
1 or 0
1 or 0
1 or 0
1 or 0

0.15
-5.00
8.88
-5.95
0.24
2.96
1.70
8.21
17.90

0.81
1.01
7.02
-2.85
-2.91
4.07
2.20
2.01
15.16

0.93
19.64
21.26
-32.52
53.00
21.20-17.93
63.36
57.31

2.44
15.83
23.39
-24.74
22.75
4.08
8.99
29.55
45.01

1.58
13.12
17.32
-13.84
16.30
1.73
2.03
23.48
41.98

TRIAL1
TRIAL4TASTE

1 or 0
1 or 0
1 or 0

-7.23
0.64
4.74

-10.904.76
11.54-44.607.62
28.22-24.55
8.77
20.39

-8.27
-2.75
-1.96

33

Table 9. Estimated Willingness to Pay and Premiums
Trial

Item

Charcoal-Smoked Plum

Oolong Tea

Taiwan China Premium

Taiwan China Vietnam Premium1 Premium2

(TW)

(TW)

(CH) (TW-CH)

Mean
54.07 30.21(NT$)
BeforeS.D. (17.12) (15.71)
Tasting%79%
Premium
Mean
57.41 42.13
(NT$)
After
S.D. (15.96) (17.47)
Tasting%36%
Premium
Mean

55.67
36
(NT$)
All Trials S.D. (16.08) (16.20)%
55%
PremiumN(V)(TW-CH)(TW-V)

24.84

212.9 113.33 113.24

105.84105.9(8.48)(63.23) (41.40) (34.92)(44.29)(38.04)

83%

88%

88%

94%

95%

22.46

239.62 133.47 110.72

115.59133.88(10.44)(63.75) (42.82) (38.76)(41.88)(41.88)

54%

80%

116%

87%

122%

23.49

226.23 123.5

111.64112.64120.1(9.34)(63.79) (42.62) (34.87)(42.61)(41.27)

66%

83%

92%

109%

678

(CH)

103%
684

Notes: N is the number of the observations. TW, CH and V represent Taiwan, China and Vietnam.

34

Figure 1. Distribution of Frequency on Checking Food Labels

Figure 2. Distribution of Level of Satisfaction with Government on Food Safety Handling35