CONSUMER'S PERCEPTIONS OF ENVIRONMENTAL RISKS AND THE DEMAND FOR FOOD SAFETY

Public concern regarding food safety has emerged as a major policy issue. Chemicals and biotechnological processes are perceived as risks of food safety despite their contribution to an efficient, low cost agriculture and food industry. Increases in uses of biotechnological processes for foods are expected to be a major potential source of productivity improvements for Alberta and Canadian agriculture in future years. However, the demand for food safety involves increasing awareness and concern by consumers of chemical inputs and biotechnological processes in the agriculture and food industries. Nonetheless, there is a lack of basic economic and agricultural economic theory and methodology to analyze these issues and a need for policy, socioeconomics and marketing research on biotechnology and other environmental risk situations in the agricultural and food industry. This project was directed at developing and applying economic theory and methodology to help fill this gap. A major contribution of the project is the identification and verification of methodologies of stated choice to analyse tradeoffs arising from food safety perceptions of concerns by consumers. One component of the research project involved assessment of Alberta consumers' stated preferences and purchase behaviour for foods exhibiting a range of environmental risks, including perceptions of pesticide residues and hormonal treatments derived from biotechnological processes. The results of this survey indicated that Albertans were more concerned about pesticide use in food production than about the use of hormones. In contingent valuation questions developed for the study, more Albertans wish to restrict pesticide use (relative to a base case of not restricting either hormones or pesticides). They tended to persist in these choices in the face of potential increases in food costs, reflecting a higher level of concern with pesticides than hormones. Increasing education increased this concern. Increasing food cost decreased the probability of choosing to restrict pesticide or hormone use. Women appeared to perceive pesticide use in food production as a greater food safety risk than was perceived by men. The inferred average willingness to pay to restrict pesticide and growth hormone use in food production amounted to about 25% and 13% respectively of the average Albertan's food expenditures respectively. In the second survey of consumers' food/environmental risk perceptions undertaken relative to this project, the responses of a random sample of consumers to the use of recombinant bovine somatotrophin (rBST) in milk production were elicited using a stated preference methodology. A conditional logit model of consumer choice was developed and tested to analyse consumers' choices of milk with varying characteristics of fat content, price, freshness and rBST treatment. Awareness of rBST presence or otherwise is implied by labelling. The approach attempts to simulate market conditions with and without rBST labelled milk and to predict consumers' responses to variations in these conditions. Welfare calculations for a representative consumer indicate welfare losses with the introduction of rBST. These were slightly less for a male than a female household food purchaser and were less for food purchasers with higher levels of income and education. There was a small welfare gain when the representative food purchaser was offered a full range of "rBST" and "non-rBST" milks. The results suggest that making appropriately labelled "rBST-free" milk available to consumers could decrease consumer welfare losses associated with any introduction of rBST. The outcomes from application of these methodologies were related to the evidence of consumers' purchasing behaviour after licensing of the technology of rBST for use in the United States; this introduction did not require labelling. The assessment suggests a critical impact of product labelling policies and strategies on potential market impacts. An assessment is also made of Canada's food safety regulatory framework. The need for increased transparency and greater public participation in regulatory processes as means to increase public confidence in such food safety regulatory processes, specifically relating to biotechnology, is also identified.Food Consumption/Nutrition/Food Safety,

GENETICALLY MODIFIED FOODS: CONSUMERS' ATTITUDES AND LABELING ISSUES

Consumers' attitudes to genetically modified (GM) food ingredients and their reactions to and preferences for labeling of GM food are topical issues for Canadian food policy and are the subjects of this study. This project included several components. The first of these was an assessment of public attitudes to biotechnology and to GM food based on evidence from polls and other studies. These show increasing awareness and some increase in wariness of GM food, in Canada and elsewhere. In the second component of the project, analysis of survey data on Alberta consumers' preferences for different policy approaches to GM food was undertaken. This analysis indicates a preference by Alberta residents for GM food policy to emphasize the provision of more information to consumers, through labeling, over a policy that would provide for more rigorous inspection; even so, more inspection was favored by many respondents. More regulation that would restrict biotechnology was the least favoured of the three options that were presented to Alberta respondents. In a third component of the project, a case study on individual's attitudes to and preferences for GM ingredients in two selected food items (one of which was a nacho chip and the other of which was bread) was pursued through focus groups that were conducted in Edmonton, Alberta in 2002. This indicated highly varied attitudes and responses to GM food in general and to the selected products in particular. Attitudes to and preferences for environmental and health benefits that might be introduced through biotechnology were explored in these groups. Some 50 percent of focus group respondents indicated a willingness to buy the identified GM products, at a price discount. The fourth and final component of the project involved two sections of a Canada- wide survey, conducted in early 2003. These components queried respondents' assessments of the importance of various food safety risks and various environmental issues associated with food and agriculture, as well as attitudes to labelling policy. Overall, Canadians tended to see agricultural biotechnology as more of an environmental risk than a food risk and numbers of other food and environmental issues were seen to be more risky by many respondents. However the use of genetic modification/engineering in food production was seen as a very high risk issue by about one-fifth of respondents. Respondents also indicated a strong desire for public involvement in biotechnology policy, voted strongly for mandatory labeling and disagreed that labeling is not needed if the product's quality remains unchanged. An appreciable majority of respondents expressed a degree of skepticism concerning the use of voluntary labeling. The findings of this project have served as a basis for subsequent more extensive and detailed assessment of Canadian consumers' risk preferences and trade-offs in the context of specific product GM labelling policies.Demand and Price Analysis, Research and Development/Tech Change/Emerging Technologies,

The Role of Economic Instruments to Resolve Water Quantity Problems

Resource /Energy Economics and Policy,

Bayesian Analysis of Consumer Choices with Taste, Context, Reference Point and Individual Scale Effects

This paper adopts an approach based on the concepts of random utility maximization and builds on the general theoretical framework of Lancaster and on the conceptual and econometric innovations of McFadden. Recent research in this area explores models that account for context effects, as well as methods for characterizing heterogeneity, response variability and decision strategy selection by consumers. This makes it possible to construct much richer empirical models of individual consumer behavior. A Bayesian approach provides a useful way to estimate and interpret models that are difficult to accomplish by conventional maximization/minimization algorithms. The application reported in the paper involves analysis of reference dependence and product labeling as context effects and the assessment of heterogeneity and response variability.Consumer/Household Economics,

BSE and the Dynamics of Beef Consumption: Influences of Habit and Trust

This study relates habit persistence and trust to recurring food safety incidents in the context of a series of three BSE incidents in Canada. We examined the dynamics of monthly beef expenditure shares of a sample of Canadian households for monthly time periods during year 2002 through 2005 using micro level panel data which followed meat expenditures by Canadian households before and after the first three BSE cases which were discovered in 2003 and 2005. Our results suggest that households’ reactions to the first three BSE events followed a similar general pattern: households reduced beef purchase expenditures following the discovery of BSE but these expenditures subsequently recovered, suggesting that concern diminished over time. Following the first BSE event, we identified an immediate negative impact on beef expenditures. However, in the case of the second and third BSE events, this negative impact was not evident until two months after these BSE announcements. In each of the three cases, the negative impact of BSE on beef purchase expenditures was limited to no more than four months. Assessment of how habit persistence affected beef expenditures indicates that this influence limited households reductions of beef purchases following the BSE events, but the effects of habit diminished subsequent to the initial event. Regarding the role of trust in shaping households’ reactions to BSE, we found that households’ respondents whose answers to standardized questions suggest that they are not “trusting” individuals were more sensitive to the food risks identified by the BSE events.BSE, habit, and trust, Demand and Price Analysis, Food Consumption/Nutrition/Food Safety,

Risk Perceptions, Social Interactions and the Influence of Information on Social Attitudes to Agricultural Biotechnology

We assess Canadian’s risk perceptions for genetically modified (GM) food and probe influences of socio-economic, demographic and other factors impinging on these perceptions. An internet-administered questionnaire with two stated choice split-sample experiments that approximate market choices of individual grocery shoppers is applied to elicit purchase behavior from 882 respondents across Canada. Data are collected to assess the influence on respondents’ choices for a specific food product (bread) of 1) product information which varies in content and by source and 2) information provided through labeling. These data also enable: a) analysis of trade-offs made by consumers between possible risks associated with GM ingredients and potential health or environment benefits in food and b) assessment of influences on respondents’ search for/access of product information. We rigorously document the extent and type of variation in Canadian consumers’ attitudes and risk perceptions for a selected GM food. This is pursued in analysis of experiment 1) data using a latent class model to analyze 445 consumers’ choices for bread products. We identify four distinct groups of Canadian consumers: 51% (value seekers) valued additional health or environmental benefits and were indifferent to GM content; traditional consumers (14 %) preferred their normally-purchased food; fringe consumers (4%) valued the health attribute and could defer consumption. Another 32 % (anti-GM) strongly opposed GM ingredients in food irrespective of introduced attributes. Thus there is a dichotomy in Canadian attitudes to GM content in food: a small majority of the sample (55 per cent) perceive little or no risk from GM food, but this is strongly opposed by 46% of respondents. Differences in gender, number of children in the household, education, and age are associated with the likelihood of segment membership. We also report on the search for information on characteristics of the GM food by a sample of 445 respondents with opportunity for voluntary access to related information through hyperlinks in the survey. Slightly less than half actually sought such information. Gender, employment status, rural or urban residency and the number of children in the household all affected the probability that respondents would access information. A further research component examines product choices made in the context of two common GM labeling policies: mandatory and voluntary labeling. We find these two types of strategies to have distinctive impacts on consumers and on measures of social welfare. Knowledge of these may help policy makers to make more informed analyses of the alternative labeling policies. Specific findings also provide base-line measures of Canadians’ attitudes to risks of GM technology in the context of food and environmental risks, as well as documenting the importance of context influences and reference points on consumers’ preferences for GM food. We also develop methodological improvements for accurately estimating the value of information on a negative attribute. The project built upon initial findings from a previous AARI project (#AARI Project #2000D037) and is complemented by research supported through a Genome Prairie GE3LS (Genetics, Ethics, Environment, Economics, Law and Society) project: “Commercialization and society: its policy and strategic implications.”Research and Development/Tech Change/Emerging Technologies,

Influence of generalized trust on Canadian consumers’ reactions to the perceived food risk of three recurring BSE cases

Interest in the influence of trust on consumers’ responses to food risk perceptions associated with Canadian instances of BSE motivates this study, in which Canadian households’ expenditures on fresh meat are assessed in the context of the first three recurring risk events in which bovine spongiform encephalopathy (BSE) was found to have affected Canadian cows. Engel Curve analysis focusing on the dynamics of the monthly meat expenditure shares for a selected sample of 437 Canadian households for 2002 through 2005 is applied based on data on household expenditures for meat purchased by a national sample of Canadian households from the Nielsen Homescan® Canadian panel, supplemented by survey responses on BSE risk perceptions and measures of trust. Two sets of models are estimated: Engel curves in differences with instruments in levels and Engel curves in levels with instruments in differences. It is found that habit persistence limited households’ reductions of beef purchases following the first BSE event and that that trust limited households’ reduction in beef expenditure shares following the subsequent two BSE cases. Significant seasonal effects and a significant negative influence on beef expenditure shares are also found, consistent with the trend of declining consumption of beef in Canada since the late 1990s.BSE, Generalized Method of Moments (GMM), trust, Consumer/Household Economics, D12, C29,

THE INFLUENCE OF ATTRIBUTE CUTOFFS ON CONSUMERS’ CHOICES OF A FUNCTIONAL FOOD

This study investigates evidence of non-compensatory preferences by incorporating attribute cutoffs into the modeling of consumer choices in the context of food with health-related attributes (omega-3 content) that may be associated with fortification or may result from genetic modification (GM). Data for this study were collected through a nation-wide internet-based survey drawn from a representative panel of Canadian households maintained by a major North American marketing firm. In addition to querying respondents on their perceptions and attitudes regarding food and health, choices of canola oils are elicited using a stated choice experiment in which product alternatives are identified based on attributes of price, country of origin, omega-3 content and GM/non-GM derivation. Consumers’ choices for functional canola oil products are examined in three steps. Initially, a conditional logit (CL) model is estimated assuming that no cutoffs apply in decisions on canola oil choices. Respondent’s self-reported cutoffs are then incorporated into the CL model and a random parameters logit (RPL) model, applying a utility model which penalizes rather than eliminates a desired alternative when a cutoff violation occurs. In the third step, the problem of endogeneity associated with attribute cutoffs is examined by linking respondents’ self-reported cutoffs to their demographic characteristics. Results from estimations of models with/without cutoffs show that consumers value omega-3 content in canola oils but dislike GM-derived ingredients in canola oil products. These Canadian respondents prefer canola oils produced in Canada to those produced in the United States. Regarding attribute cutoffs, it is found that consumers suffer a utility loss when violating their self-reported attribute cutoffs. Comparisons between models with/without attribute cutoffs suggest that incorporating cutoffs into the compensatory utility model significantly improves the model fit. Cutoff endogeneity is examined by predicting cutoffs based on respondents’ demographic characteristics. Using predicted cutoffs as instruments for self-reported cutoffs, this study provides some evidence that self-reported cutoffs may be endogenous and that researchers should consider using approaches that account for the potential endogeneity.decision strategy, attribute cutoff, functional food, Agricultural and Food Policy, Consumer/Household Economics, Demand and Price Analysis, Food Consumption/Nutrition/Food Safety, Food Security and Poverty, Health Economics and Policy, C25, C93, D1,

Consumers' Preferences for GM Food and Voluntary Information Acquisition: A Simultaneous Choice Analysis

Previous research studies directed at the influence of information on consumers' preferences and choices of food in the context of genetically modified (GM) food assume that information is exogenous, in that this is provided to consumers from external sources. Information made available to consumers is also typically treated as being received and processed. Other literature and observation suggests that these two features tend not to apply in practice. Using data from a choice experiment on consumers' choices for genetically modified food in which respondents were able to voluntarily access information, this study allows information to be endogenous; consumers' product choices and information access decisions are examined within a simultaneous choice framework. We find that these two types of decisions are related, but not entirely as might be expected from the existing agricultural economics literature since those with more negative attitudes toward GM food were most likely to access information made available. Our results are consistent with research findings in the social psychology literature. There is heterogeneity across consumers in the relationship between information access and consumer choices which may reflect differentiation in attitudes to GM food.Genetically modified food, information search, multinomial logit models, simultaneous modeling., Food Consumption/Nutrition/Food Safety, Research and Development/Tech Change/Emerging Technologies, Q13, Q18, C8,

Consumers' Responses to the Potential Use of Bovine Somatotrophin in Canadian Dairy Production

The responses of a random sample of consumers to the use of bovine somatotrophin (BST) in milk production were elicited using a stated preference methodology. A multinomial logit model of consumer choice was developed and tested to analyse consumers' choices of milk with varying characteristics of fat content, price, freshness and BST treatment. Welfare calculations for a representative consumer indicate welfare losses with the introduction of BST which are not fully offset by preferred milk attributes such as reduced price or increased freshness levels. Welfare losses were slightly less for a male than a female consumer and were less for consumers with higher levels of income and education. Losses were greatest when a representative consumer was denied the option of choosing not to purchase milk. There was a small welfare gain when the representative consumer was offered a full range of "BST" and "non-BST" milks. The results suggest that making appropriately labelled "BST-free" milk available to consumers could decrease consumer welfare losses associated with the introduction of BST in Canada.Consumer/Household Economics, Livestock Production/Industries,