Bocker, Andreas

Herrmann, Roland

English

Research Papers in Economics

Agrarwirtschaft 53 (2004), Heft 8 
  301
Food quality, imperfect information and the role  
of markets and the state 
Andreas Böcker and Roland Herrmann 
Justus-Liebig-Universität Gießen 
 
Measures of agricultural and food policy in industrialized 
countries are increasingly targeted at food quality. Regula-
tion by governments to guarantee food safety are at the 
heart of the public debate. Public instruments of quality 
assurance are introduced on markets via certification and 
labelling. Public support for organic production or guaran-
teed regional origin shall provide quality signals for con-
sumers. Arguments for consumer protection, such as the 
Precautionary Principle, are stressed but they may serve as 
a rationale for non-tariff barriers to agricultural and food 
trade, too. In addition to the public activities a large number 
of private initiatives for quality assurance does exist in the 
food industry. 
So far, a comprehensive economic evaluation of the policy 
measures directed at food quality, the private-sector quality 
assurance initiatives, and their interaction is not available. 
Such an analysis has to account for consumers’ incomplete 
information, uncertainty about food quality as well as con-
sumers’ information behaviour. 
Given this background, this special issue shall contribute  
to a well-founded economic evaluation of the role of mar-
kets and the state in assuring food quality. The following 
collection of papers covers a variety of important issues 
relating to food quality, consumer behaviour and the role  
of markets and the government as regards food safety. Case 
studies refer to a number of industrialized countries, namely 
the European Union, the US, Japan and New Zealand.   
Despite the variety of topics and case studies discussed, it is 
a common feature of all papers that they have a metho-
dological focus – either in theoretical or quantitative analy-
sis or both. In that sense, the authors show convincingly 
that analytical economic research can be applied fruitfully 
to food-quality and food-safety issues in the future, as it  
has to price analysis and agricultural market policy in the 
past.  
The first paper, by Charles B. Moss, Troy G. Schmitz and 
Andrew Schmitz, is titled “The brave new world: imperfect 
information, segregation costs, and genetically modified 
organisms”. It deals with genetically modified (GM) foods 
where consumer resistance has been particularly high, es-
pecially in Europe. In a microeconomic framework, the 
authors argue that consumers' willingness to pay for GM-
free products will lead to a market segregation between GM 
and non-GM foods. Simulations with their model indicate 
that segregation costs and the magnitude of the supply shift 
are crucial for the economic impacts of market segregation. 
Moss, Schmitz and Schmitz elaborate those combinations 
of market segregation costs and increased supply due to the 
new technology under which the society’s welfare remains 
unchanged or improves. 
Adequate responses to food safety concerns among con-
sumers are increasingly important for political and business 
strategies targeted at consumer information. The next two 
contributions investigate survey and experimental data 
which can provide valuable insights for designing such 
strategies. First, Jochen Hartl and John Fox address the 
issue of consumer acceptance of new technologies in “Es-
timating the demand for risk reduction from foodborne 
pathogens through food irradiation”. Applying a double-
bounded dichotomous choice model to data from a mail 
survey in eight US states, they investigate consumers’ will-
ingness to pay (WTP) for reduced risk from foodborne 
pathogens. They find that the median WTP exceeds the 
additional cost of irradiation, but that the “embedding ef-
fect” is also present so that WTP only partially reflects the 
extent of risk reduction. In their analysis they also test for 
isolated and combined impacts of further individual charac-
teristics and design factors, providing insight in various 
topical and methodological issues related to the demand for 
risk reduction in foods. So, despite the fairly restricted use 
of food irradiation in the EU, the European audience re-
ceives information that will be relevant for further deve- 
lopments and research. 
Second, Michele Graffeo, Lucia Savadori, Luigi Lombardi, 
Katya Tentori, Nicolao Bonini and Rino Rumiati present 
results from an experimental study in their paper on “Trust 
and attitude in consumer food choices under risk”. With 
this contribution, the European experience of declining 
consumer trust due to various food safety crises is taken 
into consideration. The authors test with a structural-
equation model for different hypothesized causal linkages 
between specific elements of attitude, antecedents of trust 
in the food chain system, and food choice as the dependent 
variable. Their analysis identifies two affect-based elements 
of trust and attitude, respectively, i.e. perceived shared 
values and food consumption as a positive experience, as 
key factors determining food choice in the context of a food 
scare. However, overall trust in the food chain system does 
not have a significant impact on participants’ choices, thus 
questioning attempts in the EU to generally regain con-
sumer trust. 
“Relating diet, demographics and lifestyle to increasing US 
obesity rates” is the contribution of Christiane Schroeter. 
Obesity is linked to the quality and quantity of foods con-
sumed and it has become a major threat to human health in 
industrialized countries. Schroeter analyzes data from the Agrarwirtschaft 53 (2004), Heft 8 
  302
U.S. National Health and Nutrition Examination Survey 
(NHANES) within a multivariate analysis to investigate 
how obesity can be explained with these cross-sectional 
data. A major result is that a number of dietary, demo-
graphic and lifestyle variables affect the body-mass index. 
The author cannot confirm, however, the causality often 
postulated between fast-food consumption and obesity. 
An interesting Californian case study is then presented by 
Henrich Brunke, Julian M. Alston, Richard S. Gray and 
Daniel M. Sumner: “Industry-mandated testing to improve 
food safety: the new US marketing order for pistachios”. 
Food safety events in pistachios have occurred on several 
occasions since 1997 and in various countries, when afla-
toxin levels were too high. Established as a US federal 
marketing order by the Californian pistachio industry, the 
new US marketing order for pistachios is a form of collec-
tive action. The marketing order contains standards and 
controls to reduce the likelihood of dangerous pistachios 
and further food safety events. The authors present simula-
tions with a pistachio market model indicating that the net 
welfare effect of the new marketing order is in all cases 
positive. The marketing order, according to Brunke et al., 
raises the benefits of consumers and producers by guaran-
teeing a safer product. 
The following paper by Sayed H. Saghaian and Michael R. 
Reed analyses the “Demand for quality-differentiated beef 
in Japan“, a country where consumers have very discrimi-
nating tastes and are willing to pay very high prices for 
high-quality food. This is clearly shown by  large price 
differences between four origins, two domestic beef types 
plus imports from Australia and the US, reported by the 
authors for four different beef cuts. Based on a model of 
vertical product differentiation, Saghaian and Reed estimate 
an inverse demand system for each beef cut, which allows 
to capture non-price quality competition. Their analysis 
shows that Japanese consumers prefer domestically pro-
duced beef to imported beef and that quality-related substi-
tution effects exist among the various origins. This paper 
clearly stresses the need for market analyses based on more 
detailed data, in particular for marketing applications.
The final paper, by Mohammed Khaled, Vhari McWha and 
Ralph Lattimore, is titled “Fragmenting markets and quality 
change in New Zealand foods: empirical analysis with a 
Rotterdam model”. The authors estimate a demand system, 
present a comprehensive set of food price and expenditure 
elasticities and analyze structural changes in New Zealand’s 
food demand over the last two decades. Various trends, like 
the increasing household consumption of fruits and vegeta-
bles, poultry and food away from home, are related to 
changes in consumers’ perspectives of food quality. Addi-
tionally, Khaled, McWha and Lattimore show that the con-
sumption of major foods like fish, poultry, and meat or 
meals away from home have become more price elastic 
compared to earlier studies. The authors address this to 
increasing market fragmentation, i.e. the development of 
increasingly heterogeneous markets as a consequence of 
more differentiated consumer preferences.  
In general, the set of articles in this special issue covers 
many interesting topics and raises new questions. There-
fore, we hope that the methodological approaches and the 
issues covered here will stimulate future economic research 
on food quality and food safety.  
Authors: 
DR. ANDREAS BÖCKER 
PROF. DR. ROLAND HERRMANN 
Justus-Liebig-Universität Gießen,  
Institut für Agrarpolitik und Marktforschung,  
Senckenbergstr. 3, 35390 Gießen 
phone: 06 41-99 37 021, fax: 06 41-99 37 029 
E-Mail:  Roland.Herrmann@agrar.uni-giessen.de  
 Andreas.Boecker@agrar.uni-giessen.de 
 

Food quality, imperfect information and the role of markets and the state

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics