Citizens,consumers and farm animal welfare: A meta-analysis of willingness-to-pay studies

The sustainable intensification of animal production systems is increasing as a consequence of increased demand for foods originating from animals. Production diseases are particularly endemic in intensive production systems, and can negatively impact upon farm animal welfare. There is an increasing need to develop policies regarding animal production diseases, sustainable intensification, and animal welfare which incorporate consumer priorities as well as technical assessments of farm animal welfare. Consumers and/or citizens may have concerns about intensive production systems, and whether animal production disease represent a barrier to consumer acceptance of their increased use. There is a considerable body of research focused on consumer willingness-to-pay (WTP) for improved animal welfare. It is not clear how this relates specifically to a preference for reduced animal production disease incidence in animal production systems. A systematic review and meta-analysis were conducted to establish the publics’ WTP for farm animal welfare, with a focus on production diseases which arise in intensive systems. Systematic review methodology combined with data synthesis was applied to integrate existing knowledge regarding consumer WTP for animal welfare, and reduced incidence of animal production diseases. Multiple databases were searched to identify relevant studies. A screening process, using a set of pre-determined inclusion criteria, identified 54 studies, with the strength of evidence and uncertainty for each study being assessed. A random effects meta-analysis was used to explore heterogeneity in relation to a number of factors, with a cumulative meta-analysis conducted to establish changes in WTP over time. The results indicated a small, positive WTP (0.63 standard deviations) for farm animal welfare varying in relation to a number of factors including animal type and region. Socio-demographic characteristics explained the most variation in the data. An evidence gap was highlighted in relation to reduced WTP for specific production diseases associated with the intensification of production, with only 4 of the 54 studies identified being related to this. A combination of market and government based policy solutions appears to be the best solution for improving farm animal welfare standards in the future, enabling the diverse public preferences to be taken into consideration.     

Welfare Changes in the Cournot Setting with an Empirical Application to the Telecommunications Industry

I characterize the efficiency of the Cournot equilibrium and provide bounds for the loss in consumer surplus, producer surplus and welfare when the number of firms in the market changes. I only assume that demand is decreasing in price and costs increasing in the quantity produced as long as equilibrium exists. I show how price, demand and average cost, before and after the number of firms in the market changes, can be used to compute these bounds. I apply these bounds to the Portuguese wireline market and conclude that welfare increased significantly when the monopolist was split in 2007.     

Who are the producers and consumers? Value chains and food policy effects in the wheat sector in Pakistan

We develop a disaggregated Nominal Rate of Assistance (NRA) methodology to disentangle the welfare impacts of policies for various interest groups along the value chain (to disaggregate effects within the “producer” and “consumer” umbrellas). We apply our value chain NRA methodology to the case of Pakistan’s wheat price and trade policy. We analyze the welfare implications for various agents in the wheat-flour value chain from 2000 to 2013, a period characterized by major global price volatility and by regular adjustments of domestic policies. We find that the wheat policy has generally benefitted flour consumers and wheat traders at the expense of wheat farmers, with limited effects on flour millers. Our findings illustrate that the welfare implications of policies can be quite different within the “producer” and “consumer” umbrellas, which has potentially important implications for economic and political economy analyses and for the design of policies that aim to target the poorest groups along value chains.     

Switching costs in the US seed industry: Technology adoption and welfare impacts

We evaluate the role of brand and technology switching costs in the US soybean seed industry using a unique dataset of actual seed purchases by about 28,000 farmers from 1996 to 2016. Using a random coefficients logit model of demand, we estimate brand and technology switching costs, characterize the distributions of buyers’ willingness to pay for seed brands and the glyphosate tolerance (GT) trait, and assess the implications of brand and technology switching costs for farmers’ welfare, technology adoption, firm profits, and firm market shares. We find that farmers are willing to pay large premiums for brand labels, and even larger premiums for the GT trait, although there is considerable heterogeneity in these values. Switching costs play an important role in the soybean seed industry. Eliminating these costs would significantly increase buyers’ welfare, reduce seed prices and firm profits, decrease adoption of the GT trait, and impact industry consolidation by expanding smaller firms’ market shares.     

Reconsidering the political economy of farm animal welfare: An anatomy of market failure

Animal welfare is often cited as a classic public good, which implies market failure and, thus, that government intervention is required. However, the current literature does not provide an accessible account of how governed markets are supposed to cope with the issues of animal welfare. This paper seeks to fill this gap by re-considering the political economy of animal welfare. Conceptual analysis shows that the major cause of market failure in the case of farm animal welfare is a problem of consumption externalities. It is the specific regulation of animal welfare conditions which is a public good (or bad). Two important conclusions follow from this analysis, which are largely unexplored in the literature on animal welfare. First, measurement of potential market failure, through identifying actual willingness to pay (WTP) for animal welfare friendly products, is potentially misleading. The difference between citizen votes and consumer WTP for animal welfare is not prima facie evidence for either market failure or a gap in the market. Second, conventional arguments in favour of subsidies and assistance to producers for better animal welfare are misconceived and potentially counterproductive. A more rational policy is to subsidise the consumption of animal welfare friendly products.     

The Welfare Effect of Advertising Restrictions in the U.S. Cigarette Industry

The welfare effect of advertisingrestrictions in the U.S. cigarette industry dependsupon the impact of advertising on consumer and producer surplus, the transfer to consumers for being exposed to utility-reducing advertising, and smoking externalities. We estimate a demand equation and a supply relation simultaneously and use the parameter estimates to generate predictions of the impact of advertising restrictions on social welfare. Our results show that advertising restrictions benefit producers by limiting competition and generating higher industry profits, and such restrictions lower social welfare if the external cost of cigarette smoking is sufficiently low.     

The impact on broadband access to the Internet of the dual ownership of telephone and cable networks

In Portugal, until recently, the telecommunications incumbent offered broadband access to the Internet, both through digital subscriber line and cable modem. We estimate the impact on broadband access to the Internet of the structural separation of these two businesses. Using a panel of consumer level data and a random effects mixed logit model, we estimate the price elasticities of demand and the marginal costs of broadband access to the Internet. Based on these estimates, we simulate the effect of structural separation on prices and social welfare. Our estimates indicate that structural separation would cause a substantial welfare increase. These results raise questions about the policy of some countries of allowing the dual ownership of telephone and cable networks.     

Traceability adoption at the farm level: An empirical analysis of the Portuguese pear industry

Traceability is becoming a condition to operate in European food markets. Retailers impose more stringent standards than what is mandatory. An example is EurepGAP, a quality standard for good agricultural practices that imposes traceability as a main obligation. This research investigates the choice of traceability at the farm level in the Portuguese pear industry. Results suggest that in this industry farm-level adoption of EurepGAP traceability is best explained by the choice to sell to the United Kingdom (UK). For farmers selling to the UK, the odds of choosing the EurepGAP traceability level are significantly linked to membership in particular producer organizations, farm productivity, producing products under a protected designation of origin (PDO), and farmer’s age. While retailers and farmer organizations seem to drive traceability, policy adjustments may be required to reduce adoption costs upstream and extend compliance among producers that sell directly to consumers and market independently.     

Measuring the consumer benefits of improving farm animal welfare to inform welfare labelling

Policy makers in the European Union are envisioning the introduction of a community farm animal welfare label which would allow consumers to align their consumption habits with their farm animal welfare preferences. For welfare labelling to be viable the market for livestock products produced to higher welfare standards has to be sufficiently segmented with consumers having sufficiently distinct and behaviourally consistent preferences. The present study investigates consumers’ preferences for meat produced to different welfare standards using a hypothetical welfare score. Data is obtained from a contingent valuation study carried out in Britain. The ordered probit model was estimated using Bayesian inference to obtain mean willingness to pay. We find decreasing marginal WTP as animal welfare levels increase and that people’s preferences for different levels of farm animal welfare are sufficiently differentiated making the introduction of a labelling scheme in the form of a certified rating system appear feasible.     

Land constraints and agricultural intensification in Ethiopia: A village-level analysis of high-potential areas

Highland Ethiopia is one of the most densely populated regions of Africa and has long been associated with both Malthusian disasters and Boserupian agricultural intensification. This paper explores the race between these two countervailing forces, with the goal of inform two important policy questions. First, how do rural Ethiopians adapt to land constraints? And second, do land constraints significantly influence welfare outcomes in rural Ethiopia? To answer these questions we use a recent household survey of high-potential areas. We first show that farm sizes are generally very small in the Ethiopian highlands and declining over time, with young rural households facing particularly severe land constraints. We then ask whether smaller and declining farm sizes are inducing agricultural intensification, and if so, how. We find strong evidence in favor of the Boserupian hypothesis that land-constrained villages typically use significantly more purchased input costs per hectare and more family labor, and achieve higher maize and teff yields and higher gross income per hectare. However, although these higher inputs raise gross revenue, we find no substantial impact of greater land constraints on net farm income per hectare once family labor costs are accounted for. Moreover, farm sizes are strongly positively correlated with net farm income, suggesting that land constraints are an important cause of rural poverty. We conclude with some broad policy implications of our results.     

Pharmaceutical followers

We estimate a model of drug demand and supply that incorporates insurance, advertising, and competition between branded and generic drugs within and across therapeutic classes. We use data on antiulcer drugs from 1991 to 2010. Our simulations show that generics and “me-too” drugs each increased consumer welfare more than $100 million in 2010, holding insurance premiums constant. However, insurance payments in 2010 fell by nearly $1 billion due to generics and rose by over $7 billion due to me-too antiulcer drugs.     

How does income inequality affect market outcomes in vertically differentiated markets?

The distribution of consumer incomes is a key factor in determining the structure of a vertically differentiated industry when consumer's willingness to pay depends on her income. This paper computes the Shaked and Sutton (1982) model for a lognormal distribution of consumer incomes to investigate the effect of inequality on firms' entry, product quality, and pricing decisions. The main findings are that greater inequality in consumer incomes leads to the entry of more firms and results in more intense quality competition among the entrants. More intense quality competition raises the average quality of products in the market as firms compete for the shrinking share of higher-income consumers. With zero costs of quality improvements and an upper bound on the top quality or when costs of quality are fixed and rise sufficiently fast, greater heterogeneity of consumer incomes also reduces firms' incentives to differentiate their products. Competition between more similar products tends to reduce their prices. However, when income inequality is very high, the top quality producer chooses to serve only the rich segment of the market and charges a higher price. The conclusion is that income inequality has important implications for the degree of product differentiation, price level, industry concentration, and consumer welfare.     

Elasticity of demand and behaviour-based price discrimination

Behaviour-based price discrimination (BBPD) is typically analysed in a framework characterised by perfectly inelastic demand. This paper provides a first assessment of the role of demand elasticity on the profit, consumer and welfare effects of BBPD. We show that the demand expansion effect, that is obviously overlooked by the standard framework with unit demand, plays a relevant role. In comparison to uniform pricing, we show that firms are worse off under BBPD, however, as demand elasticity increases the negative impact of BBPD on profits gets smaller. Despite a possible slight increase in the average prices charged over the two periods in comparison to uniform pricing, we show that BBPD boosts consumer surplus and that this benefit is independent of elasticity. In contrast to the welfare results derived under the unit demand assumption, where BBPD is always bad for welfare, the paper shows that BBPD can be welfare enhancing if demand elasticity is sufficiently high.     

Measuring Welfare from Ambulatory Surgery Centers: A Spatial Analysis of Demand for Healthcare Facilities

This paper studies competition between healthcare facilities, particularly between hospitals and ambulatory surgery centers (ASC's), in the market for outpatient surgery. The goal is to answer questions about the existence and magnitude of welfare gains earned from the use of ASC's. These questions are relevant to current policy debates about the usefulness of ASC's. I calculate welfare by specifying a multinomial logit model of consumer demand for healthcare facilities, and estimating structural elements of demand functions. Total elimination of ASC's results in between 10.2 and 28.1 minutes of welfare loss per patient surgery.     

Introduction to the special section on organic certification systems: Policy issues and research topics

This article introduces a special section in Food Policy that discusses organic certification systems. Among the various issues in this field, the three articles in this special section address (i) the determinants of farmers’ decisions regarding whether to utilise organic production practices and whether to apply for organic certification; (ii) consumer preferences for different organic labels; and (iii) how to organise effective risk-based inspections. Key policy recommendations derived from this special section include continuously striving to reduce the transaction costs of all actors in the organic certification process, implementing a risk-based inspection system based on the collection of adequate farm data by certification bodies and harmonising the supervision of the certification system within the EU.     

Attention Platforms,the Value of Content,and Public Policy

This paper shows that two related aspects of attention platforms are important for the sound economic analysis of public policy including antitrust: first, attention platforms generate valuable content. Even though people often don’t pay for content, we know from revealed preference that content is valuable because people spend a considerable amount of time—which has an opportunity cost—consuming it. Second, demand for advertising and the supply of content are interdependent. A decrease in the demand for advertising reduces the returns to supplying content and therefore the amount of content that is provided. Accounting for the value of content and these positive feedbacks cannot determine optimal interventions; but failing to do so can result in policies that reduce consumer—as well as advertiser—welfare. The paper then considers the implications of these considerations for public policy: particularly privacy regulation and antitrust enforcement. From the standpoint of promoting consumer welfare, the failure to account for the value of content and the ad-content interdependencies increases the chances that authorities do not intervene when they should and do intervene when they should not.

     

Consumer perceptions and the effects of country of origin labeling on purchasing decisions and welfare

The study develops a general analytical framework of heterogeneous consumer preferences to examine the effects of country of origin labeling (COOL) regulation on consumer purchasing decisions and welfare. We show that while differences in consumer perceptions about COOL information, namely, whether it is viewed as an attribute that differentiates products vertically or horizontally, do not alter the nature of the market and consumer welfare effects of mandatory COOL, the relative strength of consumer preferences for COOL are shown to be important in determining the magnitude of these effects. In addition, our results show that the benchmark used (a no COOL versus a voluntary COOL regime) is critical in evaluating the effects of the policy. We show that, under both horizontal and vertical product differentiation, a change from a no COOL to a mandatory COOL regime decreases (increases) the welfare of consumers with weak (strong) preference for COOL while a change from a voluntary to a mandatory COOL regime leads to an unambiguous loss in consumer welfare.     

Multiproduct retailing and consumer shopping behavior: The role of shopping costs

We empirically examine the role of shopping costs in consumer shopping behavior in a context of competing differentiated supermarkets that supply similar product lines. We develop and estimate a model of demand in which consumers can purchase multiple products from multiple stores in the same week, and incur transaction costs of dealing with supermarkets. We show that a similar model without shopping costs predicts a larger proportion of multistop shoppers and overestimates own-price elasticities and product markups. Further, we use our model along with a model of competition between supermarkets to study two practices that are commonly used by supermarkets: product delisting and loss-leader pricing. We show that the presence of shopping costs makes product delisting less profitable whereas it makes loss-leader pricing more profitable compared to a context in which consumers do not incur shopping costs.     

Identifying use and non-use values of animal welfare: Evidence from Swedish dairy agriculture

In this study, we sought to identify the use and non-use values that underlie farmers’ decision making with respect to animal welfare, based on in-depth interviews with 50 dairy farmers in Sweden. We identified use values related to: being able to continue the business, earning a living from the business, not being tied to the farm (i.e. having time available for other things), product quality, and work environment. We also identified non-use values related to avoidance of suffering, being able to further improve the welfare of dairy cows, the dairy farmer feeling good him/herself, ethical considerations, a feeling of doing the right thing, and animals eating properly (i.e. functioning as dairy cows should). Understanding the values underlying dairy farmers’ decision making with respect to animal welfare is an important step in understanding why these farmers work with animal welfare. The results are useful in improving communications from authorities and farm advisors to farmers, as a strategy to gain better acceptance for improved animal welfare standards; in designing product certification schemes in the food industry; and in communicating to the public the values influencing production of dairy products.