Conclusion and Implications - Oct. 29, 2002 Consumers’ Resistance to gm-foods: The Role of Information in an Uncertain...

Technology adoption and diffusion have dramatically increased the welfare of U.S. consumers over time. For future generations to enjoy a higher standard of living than the current generation, it is imperative that adoption of new technologies continue. Hence, discovering factors that cause the adoption or non-adoption of new products is particularly important. This paper examined the factors that increase the probability that consumers are out of the market for genetically modified foods, which could stymie the adoption of genetically modified products.
This paper reveals two key results. First, when participants receive negative information on genetically modified foods, they are more likely to be “out of the market” for GM-labeled foods, i.e. these consumers will not buy GM foods at any positive price. In Europe, where negative information from environmental groups on GM foods is more prevalent, adoption of genetically modified crops has stalled. Many have said that this is because of food safety scandals like BSE (human form of mad cow disease) or the dioxin scandal in Belgium, but this paper presents an alternative explanation for Europe’s reluctance to adopt genetically modified foods. The second result is that a third party source providing verifiable information can soften the effect of negative information and help keep consumers in the market for GM-labeled foods. This shows a benefit to verifiable information in addition to the value that it has in providing consumers with objective information.
The implications of these results are important. When technology is advancing, asymmetric information generally exists about the consequences and benefits of the products. If a group wants to stall scientific progress, they could supply negative and biased information to consumers and producers. Our results show that this will create resistance to adopting new technologies. Furthermore, welfare of society could be lowered significantly by broad non-adoption of new technologies. This presents an interesting dilemma that we will not try to answer: Should interested parties be allowed freedom of speech to disseminate negative information about new products and processes? This can happen when there are significant information asymmetries in society - as there are with the introduction of new goods into the market. Future research to examine the specific value verifiable information has in keeping consumers in the market for GM foods and therefore allowing more efficient innovations to be adopted could be quite valuable.
References
Boskin, M.J., E. R. Dulberber, R. J. Gordon, Z. Griliches, D. Jorgensen, in Getting Prices
Right: the Debate Over the Consumer Price Index, D. Baker, Ed., Armonk,NY:
M. E. Sharpe, Inc., 1998.
Carlson, Andrea, J. Kinsey, and C. Nadav, “Who Eats What, When, and From Where?
The University of Minnesota, The Retail Food Industry Center, Working Paper 98-05, 1998.
Council for Biotechnology Information. “Frequently Asked Questions.”
http://www.whybiotech.com/en/faq/default.asp?MID=10. (Retrieved October 2001).
Fitzgerald, A. “Biotech Crops Spread Worldwide,” (http://desmoinesregister.com/
news/stories/c4789013/16885943.html). (December 30, 2001).
Fox, John A., Dermot J. Hayes and Jason F. Shogren. “Consumer Preferences for Food
Irradiation: How Favorable and Unfavorable Descriptions Affect Preferences for Irradiated Pork in Experimental Auctions.” Journal of Risk and Uncertainty, 24 (January 2002): 75-95.
Greenpeace International. “Greenpeace Launches Genetech Labeling Policy as European
Commission fails to do so.” November 3, 1997 http://www.greenpeace.org/pressreleases/geneng/1997nov3.html.
Grübler, Arnulf. “Time for a Change: On the Patterns of Diffusion of Innovation.”
Daedalus 125 (Summer 1996): 19-42.
.Hausman, Jerry. “Valuation of New Goods Under Perfect and Imperfect Competition,” in
Bresnahan, T. and R.J. Gordon, Eds., The Economics of New Goods, Chicago, IL: The University of Chicago Press, 1996.
Hoban, Thomas J. “Trends in Consumer Attitudes about Agricultural Biotechnology.”
AgBioForum 1 (1998): 3-7.
Hotchkiss, Joseph H. “Lambasting Louis: Lessons from Pasteurization.” In Genetically
Modified Food and the Consumer, A. Eaglesham, S. G. Pueppke, and R.W.F. Hardy Eds. (2001) 51-68.
Kahneman, D. and A. Tversky. “Prospect Theory: An Analysis of Decision under Risk,”
Econometrica 47 (1979): 263-291.
Katsaras, Nikolaos, P. Wolfson, J. Kinsey, and B. Senauer, “Data Mining: a Segmentation
Analysis of U.S. Grocery Shoppers,” The University of Minnesota, The Retail Food Industry Center, Working Paper 01-01, 2001.
Kiesel, Kristen, David Buschena, and Vincent Smith. “Consumer Acceptance and Labeling
of Biotech in Food Products: A Study of Fluid Milk Demand.” Working paper, Montana State University (2002).
List, J.A. and J.F. Shogren, “Price Information and Bidding Behavior in Related Second-
Price Auctions," American Journal of Agricultural Economics 81 (Nov.1999):942-
49.
Lusk, J.L. and T.C. Schroeder. "An Alternative Test for the Endowment Effect." Working
Paper, Mississippi State University, Department of Agricultural Economics. May, 2002.
Lusk, Jayson L., M. Scott Daniel, Darrell Mark, and Christine L. Lusk. “Alternative
Calibration and Auction Institutions for Predicting Consumer Willingness to Pay of Nongenetically Modified Corn Chips.” Journal of Agricultural and Resource Economics 26(July 2001):40-57.
Melton, Bryan E., Wallace E. Huffman, Jason F. Shogren and John Fox. “Consumer
Preferences for Fresh Food Items with Multiple Quality Attributes: Evidence from an Experimental Auction of Pork Chops.” American Journal of Agricultural Economics 78 (November 1996): 916-23
Pirtle, T.R. History of the Dairy Industry. Mojonnier Bros. Company (1926). Purvis, Amy, William G. Boggess, Charles B. Moss, and John Holt. “Technology Adoption Decisions under Irreversibility and Uncertainty: An Ex Ante Approach.” American Journal of Agricultural Economics 77 (August 1995): 541-551. Rousu,R., W. E. Huffman, J. F. Shogren, A. Tegene. “The Value of Verifiable Information
in a Controversial Market: Evidence from Lab Auctions of Genetically Modified
Foods.” Staff Working Paper, Iowa State University, Department of Economics
Series, Paper #2003, February 2002. Ames, IA.
Ruttan, Vernon V. Technology, Growth, and Development. Oxford University Press 2001.
Shogren, Jason F. “Experimental Methods and Valuation,” in K.-G. Maler and J. Vincent,
Eds., Amsterdam, The Netherlands: Eslevier 2002.
Shogren, Jason F., Seung Y. Shin, Dermot J. Hayes and James B. Kliebenstein. “Resolving
Differences in Willingness to Pay and Willingness to Accept.” The American Economic Review 84, No. 1 (March 1994): 255-270.
Shogren, Jason F., M Margolis, C Koo, John A. List, “A Random nth-Price Auction.”
Journal of Economic Behavior and Organization 46 (December 2001): 409-421.
Smith, V.L. “Experimental Economics: Induced Value Theory.” American Economic Review,
Papers and Proceedings, 1976: 274-279.
U.S. Census Bureau. http://www.census.gov/ (Retrieved June 21, 2002)
Viscusi, Kip W. “Alarmist Decisions with Divergent Risk Information.” The Economic
Journal 107 (November 1997): 1657-1670
Wooldridge, Jeffrey M. Econometric Analysis of Cross Section and Panel Data. MIT Press.
(2001).
Figure 1: Steps in the experiment
Step 1 Step 2 Step 3
Fills consent form and questionnaire, receives $40 and I.D. number
Nth-price auction is explained
Candy Bar Auction
|