food scares, information and markets: are consumers and ... · model s v t 1 - s tocas tic s hift 0...

Food scares, information and markets:

Are consumers and media rational?

Mario Mazzocchi

Dipartimento di Scienze Statistiche,Università di Bologna

Key elements

• Background:

Food safety, consumers & the market(s)

• Risk perception during quiet times

• Food scares & consumer response

• Does the «market for information» work?

Background

The economics of food safety

Supply

Demand (Willingness-to-Pay)

p*

q*

Three markets

1) The food2) The level of food safety3) Information on food safety

Do markets work?

A few issues with food safety…

Negative externalities:the effects of producing/selling unsafe foods are not reflected by consumer prices

Asymmetric information & moral hazardDo you know the “market for lemons”?

Risk perception (& consumer tradeoffs)

Are consumers rational?

Lichtenstein et al. (1978)

Schmidt (2004)

Consumers & food scares

• “Irrational consumers”?

• Price fall, demand also

• Changes in risk perceptions and attitudes

• Changes in consumption patterns

• Short term → Emotional

• Long term → Structural

• Changes in the demand for food safety information (BSE, traceability…)

Media & social amplification of risk

(Beardsworth and Keil, 1996)

Multiple meat scares & demand

.25

.30

.35

.40

.45

.50

.55

88 90 92 94 96 98 00 02

Beef

BSE1

Dioxin

BSE2

.12

.13

.14

.15

.16

.17

.18

.19

88 90 92 94 96 98 00 02

Chicken

BSE1

Dioxin

BSE2

Mazzocchi et al. (2006)

Oahu milk contamination & news

-5

-4

-3

-2

-1

0

82:04 82:07 82:10 83:01 83:04

Model SVT1 - stocastic shift

0

20

40

60

80

100

120

140

82:04 82:07 82:10 83:01 83:04

Negative media index

0

40

80

120

160

200

240

82:04 82:07 82:10 83:01 83:04

Total media index

There is no such thing as “positive news” after a scare

“No news is good news” (Mazzocchi, 2006)

Impact on consumption of the Oahu (Hawaii) milk contamination, 1982

The market for news

The market for news

The demand driven bias:

• Consumers demand news that confirm their beliefs/expectations

• Media are biased towards confirming beliefs.

• Competition does not guarantees accuracy

• Political heterogeneity vs. pessimistic biases

Mullainathan and Shleifer (2005); Gentzkow and Shapiro (2006)

A complex scheme (conclusions)

www.unibo.it

Mario Mazzocchi

Department of statistical Sciences

m.mazzocchi@unibo.it