Dairy-borne Disease Outbreak and Milk Demand: A Study Using Outbreak Surveillance Data

We utilize the outbreak surveillance data from the Centers for Disease Control and Prevention (CDC) to examine whether consumer demand is impacted by the outbreak of food-borne disease. An additional person sickened due to the ingestion of tainted cheese products at home is found to decrease per capita milk demand in New York State by 0.13 percent (or 0.07 pound), while milkand ice cream-borne disease outbreaks, occurring at home or in public places, are found to have no impact on fluid milk demand. Our results imply the existence of word-of-mouth effects, which cannot be tested by the popular information/media index approach used to measure food-borne disease outbreaks. We also find that a 7 percent increase in generic advertising expenditures or a 10 percent increase in expenditures on non-advertising marketing activities can offset the negative influence of one ill person in cheese-borne disease outbreaks at home, while holding other demand factors constant. Key Words: Centers for Disease Control and Prevention, dairy-borne disease outbreak (DBDO), fluid milk demand, food-borne disease outbreak (FBDO), outbreak surveillance data (ProQuest: ... denotes formulae omitted.) Food-borne disease outbreak (FBDO) is defined as "the occurrence of two or more cases of a similar illness resulting from the ingestion of a common food" by the Centers for Disease Control and Prevention (CDC). A recent example is peanut butter tainted with Salmonella bacteria that sickened 453 people and may have killed five people in the United States (Larkin 2009). There is a rich literature on the impacts of FBDOs on demand and prices of associated foods [see Park, Jin, and Bessler (2008) for animal disease outbreaks in Korea; Pendell et al. (2007) for foot-and-mouth disease outbreaks in Kansas; and Mazzocchi (2006) for milk contamination, bovine spongiform encephalopathy (BSE), and Escherichia coli scares in the United States]. A FBDO can negatively affect demand and prices of associated foods by attracting mass media coverage and therefore causing food scares. Accordingly, the most commonly used quantitative measure of FBDOs in the literature of food scares is an information index (i.e., a media index) that counts the number of related newspaper articles (or TV reports). Two BSErelated examples are the media coverage index used by Verbeke and Ward (2001) and the food publicity index constructed by Lloyd et al. (2001, 2006). Other strategies for modeling demand response to a food scare include a dummy variable approach (Iraizoz, Bardaji, and Manuel 2005) and a stochastic parameter approach (Mazzocchi 2006). In this paper, we propose using an alternative to the information index approach. Unlike the aforementioned studies, we investigate the impact of FBDOs by utilizing the outbreak surveillance data from the CDC. We are motivated to do so for several reasons. First, for many diseases, physicians, other health care workers, and clinical laboratories are requested or required by state and local health departments to report cases to the local health department (CDC Annual Report 2005, p. 37). Therefore, detailed data on FBDOs by state, month, vehicle, and location (i.e., outbreak sur- veillance data) are made available but remain mainly neglected in the literature of food scares. Second, to the best of our knowledge, whether or not FBDOs affect food demand by word of mouth has not been addressed. Among the FBDOs reported to the CDC, some small-scale ones, particularly those occurring at private homes, are unlikely to be reported in the mass media. For example, it was reported to the CDC that in February 2006, two persons in New York State were sickened after consuming unpasteurized milk at home, with the confirmed etiology being Campylobacter. Such small-scale FBDOs do not appear in the media.1 The impact of FBDOs on food demand tend to be manifested by scaring people who are associated with the affected person, i. …