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Food labels play an important role in communicating information. Labels provide information about production techniques, nutrition and ingredient information, and quality of a product (i.e. federal grade standards for eggs, U.S.D.A. quality grades on beef and pork). These are some of the key product attributes that consumers seek while making purchasing decisions. However, labels can be confusing and misleading and at times consumers simply ignore them. Research on the placement and effectiveness of labels conducted over the past few decades have found that information on the label influences buying habits. Food manufacturers could strategically use or place such attributes of labels to signal quality, shroud information or to influence the overall demand for the products.
Recent legislation on mandatory labeling of foods containing genetically modified (GM) ingredients provides information about GM ingredients through the Internet or toll-free telephone numbers. However, accessing information through such mediums could increase search costs for consumers and allows firms to hide information about GM products. This goes against the original stated motivation for mandatory GM labeling—to provide transparency in food labels.
In this research an experimental auction was conducted to determine consumers’ willingness to pay (WTP) for GM foods by placing GM information either on the front or the back label of food products to determine whether the position of the information affected consumer choices. Participants stated their WTP for twelve food items in a total of six rounds; within each round they examined and bid on two similar products, one containing GM ingredients and the other free of GM ingredients.
No significant differences in WTP were found between front and back labeled products. Also, we analyzed participants’ characteristics to measure the effect on WTP, and we found several of the participant characteristics to have significant impacts on WTP.
Advisor: Kathleen Brooks and Christopher Gustafson