Willingness-to-pay for natural,organic, and conventional foods: The effects of information and meaningful labels

Vague food labels and distorted product claims have persisted in the “natural” food industry, while organic claims can be certified by the U.S. Department of Agriculture (USDA). Using experimental methods and a sample of randomly selected subjects, we test food label and information treatment effects on subjects' willingness-to-pay (WTP) for organic, “natural,” and conventional foods. Random nth-price auctions are used to elicit WTP after subjects received one of five randomly assigned information treatments. We find large information effects, including asymmetric cross-market effects for natural and organic foods. Perhaps surprising is that organic premiums increase in response to subjects seeing the “natural” foods industry's perspective on its products. Demographics effects are also important. The results have practical implications for natural and organic food marketing and valuing products where there are vague claims about their attributes.     

Alternative Lending Channels and the Crisis in U.S. Housing Markets

To what degree has the development of alternative mortgage funding channels promoted the recent boom and bust in U.S. housing markets? Past research examined whether Alt‐A and subprime market shares are correlated with the housing bubble. This article expands the analysis to include the share of specific “alternative” lending terms and finds that the shares of interest‐only and negative amortization loans are important factors in explaining the housing bubble. This result suggests that research on the housing market bubble should focus on the impacts of loan contract terms rather than loan channel.     

Spatial Linkages in Returns and Volatilities among U.S. Regional Housing Markets

This article investigates spatial linkages in returns, idiosyncratic risks and volatilities across 19 U.S. regional housing markets. Using Case & Shiller housing price indices from 1995 through 2009, we find that interconnections across markets can be “wider” and “stronger” than would normally be expected. They are “wider” because, in addition to geographic closeness, economic proximity is also an important source of influence; they are “stronger” because of the significant contagion effects during the 2007–2009 subprime and financial crises. The increased comovement and interdependence, especially among more geographically diverse regions with similar economic conditions, may help explain the failure of geographic portfolio diversification strategies.     

Consumer preferences before and after a food safety scare: An experimental analysis of the 2010 egg recall

In August 2010, more than half a billion eggs were recalled in the U.S. because of a Salmonella outbreak. This study examines the effect of the recall with a unique pair of auction experiments investigating willingness to pay (WTP) for conventional and organic eggs, one conducted shortly before and one right after the recall with the same participants. In addition to the before and after bids, participants bid again after a negative information or balanced information treatment about the event. Accompanying surveys showed consumers had a high level of awareness of the recall but less knowledge of specific details, and viewed information on egg farm conditions as very important in their WTP. While there were no significant before and after differences, WTP for organic eggs significantly increased in the negative information treatment, and balanced information had a positive effect on consumer WTP for conventional eggs.     

Information Costs and the Organization of the Real Estate Brokerage Industry in the U.S. and Great Britain

This paper examines the differing organizations of the residential real estate brokerage industry in the U.S. and Great Britain, and argues that they may be interpreted as alternative solutions to a common set of informational problems. Of particular interest is why the multiple listing service — an arrangement whereby brokers share market information in an effort to exploit the public-good nature of information — is so pervasive in the United States, but is largely absent in Great Britain. Some possible reasons are found in the differing histories of the parent housing markets, as well as other institutional differences.     

Price asymmetries and the path dependence of market power: Evidence from the U.S. airline industry

This paper uncovers price asymmetries across oligopolistic and monopolistic markets that are seemingly identical in structure but different in competitive history. This is done by identifying “quiet life” markets that have not (yet) experienced a change in structure, and “non-quiet life” markets that have been disrupted by firm entry and/or exit. Using a long panel dataset from the U.S. airline industry, we find that quiet life duopolies price significantly higher than duopolies that come about by entry in monopoly, and that quiet life monopolies price significantly lower than monopolies that come about by exit in duopoly. We show that the path towards a particular market structure matters for the determination of prices and explore several mechanisms that likely explain the price asymmetries, including engagement in anticompetitive behaviour, adjustment behaviour to market structure changes, and the cost heterogeneity of competing firms.     

Alternatives to the U.S. Antitrust Agency approach to market definition

Shortcomings of the U.S. Antitrust Agency Guidelines method of market definition include failure to focus on competition, the need for cost data, and discontinuities. Two alternative approaches are presented which avoid these problems and the Guidelines' inclusion of substitutes on an all-or-nothing basis. One alternative focuses on the size of a change in capacity of a substitute that would be needed to have the same effects as a unit change in capacity of an initial item. The second proposed alternative offers a simple operational method of giving practical content to the “reasonable interchangeability” concept which is a prominent feature of U.S. Supreme Court decisions. The alternative approaches are evaluated in comparison to that of the Guidelines and some modified versions of the latter.     

Restructuring the U.S. Electric Power Sector: A Review of Recent Studies

The restructuring of the U.S. electric power industry has been described as “one of the largest single industrial reorganizations in the history of the world.” As with deregulation and reform of other industries, electricity restructuring was intended to produce cost efficiencies and price benefits to consumers. Whether it has achieved its stated objective is the focus of a number of recent studies that are examined in this review. The studies differ in numerous important ways – most importantly, in their methodologies and their conclusions. The focus of this review is on the strengths and limitations of their specific methodologies and, hence, on the confidence one might place in their conclusions. The article begins by setting out the basic methodological approaches employed in public policy evaluation. It then illustrates these points with examples from methodologies employed in several studies of electricity restructuring, concluding that several methodological deficiencies call into question the study results. In particular, despite much advocacy, there is little reliable and convincing evidence that consumers are better off as a result of the restructuring of the U.S. electric power industry.     

The evolving 5G case study in spectrum management and industrial policy

Even before the International Telecommunication Union (“ITU”) reaches consensus on spectrum allocations for fifth generation wireless technologies (“5G”), commercial ventures scramble to offer new equipment and services. Expediting 5G wireless service can benefit consumers and businesses at the risk of stressing the traditional process of spectrum planning that combines study, dialogue and consensus building at ITU conferences.This paper explains why most nations refused to endorse key United States 5G spectrum allocation proposals at the ITU’s, 2015 World Radio Conference. U.S. representatives underestimated the time needed for consensus building, despite increasing demand for wireless video and the evolving Internet of Things. Other contributing factors include U.S. support for treating spectrum like property, use of “incentive auctions” to clear broadcast television spectrum with unprecedented speed and enough existing wireless spectrum allocations in most nations.The paper concludes that the U.S. cannot expect faster frequency reallocations, particularly when it and other nations pursue matters having little to do with spectrum optimization. The paper offers recommendations on best practices for improving the consensus building process.     

Weak links and the management of reputational interdependencies

This paper builds on a growing literature that takes into account the fact that firms in an industry may be interdependent with regard to their corporate reputations, thus sharing a “reputation commons.” We argue that the theory of public goods can help us to understand the interdependencies that link corporate reputations and to frame the contexts and requirements for collective action that they induce. In particular, we suggest that more and more frequently these interdependencies make industry reputation a “weak link” public good. We show that this raises new challenges for the strategic management of industry reputation by communities of firms. The discussion of these challenges is based on the case study of the collective action of the European chlorine companies towards restoring their reputation after being accused of not being safe, and on a model of the production of reputation by companies. Copyright © 2013 John Wiley & Sons, Ltd.     

Do U.S. Firms Invest Less in Human Resources?: Training in the World Auto Industry

We investigate the common assertion that U.S. firms invest less in human resources than key international competitors, testing four alternative explanations for differences in training effort found in survey data from an international sample of fifty-seven automobile assembly plants. We find the strongest support for the view that the level of training is derived from the requirements of the business/production strategy and the overall “bundle” of human resource policies—beyond training—adopted by the firm.     

Regulating the use of facial recognition technology across borders: A comparative case analysis of the European Union,the United States,and China

Regulating the use of facial recognition technology (FRT) presents a Collingridge dilemma regarding the great demand for common legal principles to mediate the practical conflicts between privacy and efficiency, autonomy and authority, and safety and accountability. This study compares the enforcement by legitimate authorities in the European Union, the United States, and China of the laws and regulations applied in practical FRT cases and explores the fundamental principles and values manifested in these judgments and their results. The findings presented here indicate that (1) the E.U. regulations tend to move from downstream to upstream based on the notions of “privacy by design” and “privacy by default,” (2) the U.S. regulations are not limited to private contexts but tend also to target the (semi-)public sector, and (3) the Chinese regulations have been shifting from a practice represented by the phrase “nine dragons playing with a pearl” to a practice of “learning by doing”. Specifically, with respect to the determination of violations, the E.U. jurisprudence endorses deontological ethics and the U.S. jurisprudence a kind of universal egoism while the core FRT legislation in China valorizes utilitarianism. Overall, a top-down regulatory framework relating to FRT usage was apparent in the E.U. countries, a self-regulatory approach was observed in the United States, and a “presumption of fault” principle was manifested in China's process of assessing damages.     

THE EFFECTS OF CAPACITY ON SALES UNDER ALTERNATIVE VERTICAL CONTRACTS*

Retailer capacity decisions can impact sales for products by affecting, for example, availability and visibility. Using data from the U.S. video rental industry, we report estimates of the effect of capacity on sales under alternative vertical contracts. New monitoring technologies facilitated new supply contracts in this industry, reducing upfront costs of capacity but requiring minimum capacity purchases, strongly impacting stocking decisions. We find that larger capacity (more tapes) for a given title can substantially increase rentals of that title; and that alternative vertical contractual forms for distributing tapes from studios to retailers strongly impacts the relationship between capacity and rentals.     

Quantum Artificial Intelligence: A “precautionary” U.S. approach?

Quantum Computing (QC) and Quantum Artificial Intelligence (QAI) are two powerful new technologies whose potential impacts are just starting to be appreciated. As important as they are likely to be, their implications are still little known. This article's purpose is an attempt to provide a policy space within which to begin fill that void.It presents a non-technical introduction to the concept of quantum mechanics in general, to the unique characteristics of sub-atomic particles, to quantum applications, and to QC and QAI in particular. The development of fully functioning quantum information technologies is in its early stages, but is being pursued aggressively. One of the most salient of these is Quantum Artificial Intelligence (QAI) – a fusion of QC and AI -- which some see as potentially threatening. There is little in established telecommunications or information policies to inform our approach to its capabilities.The article notes some of the challenges to development of quantum-based information technologies and considers the scope of global competition to the U.S. in this field, especially from China. It reviews the treatment of “Quantum Information Science” in U.S. policy. It describes the current policy environment and the range of new measures which might be available, if needed, to incorporate QAI into an overall information policy regime.In conclusion the article reviews the debate over adoption of the “precautionary principle” for QAI, an approach to policy when it must deal with weakly understood causes of potentially catastrophic or irreversible events. It sets out the arguments pro and con, and in the absence of an immediate resolution proposes adoption of a policy space in which stakeholders can address their salient concerns, without materially impairing technological progress and commercial viability.     

Diffusion and Performance of Modular Production in the U.S. Apparel Industry

This article examines the determinants of the diffusion of team production systems (modular assembly) and the impact of these systems on firm performance relative to traditional assembly systems in the apparel industry. The article draws on an extensive survey providing detailed information on a wide range of manufacturing practices and retail relationships in the U.S. apparel industry. We find that recent diffusion of modular practices is driven primarily by the product market. We also show that modular systems affect business-unit performance (particularly operating profits) where they are combined with complementary investments in information systems linking apparel suppliers with retail customers.     

Habit spillovers or induced awareness: Willingness to pay for eco-labels of rice in China

The willingness to pay (WTP) for eco-labeled rice is investigated for Chinese consumers using choice experiments with information interventions. The mixed logit model shows preference heterogeneities, and the latent class model unveils two sources: pro-environmental behaviors with spillover effects, which are defined as “catalyst behaviors”, and the awareness about imperatives of ecological farming, which is defined as “induced awareness”. Classification results identify that using BP bags and sorting waste are “catalyst behaviors”. As the multivariate ordered probit model implies, consumers with higher educational attainment and family income levels are more likely to adopt these behaviors. Instead of creating the preference for eco-labels, the “induced awareness” is only found to strengthen preferences that already exist. The results of this study provide policy implications for the design of proper strategies to develop the eco-labeled food market, especially in developing economies.     

Mandating front-of-package food labels in the U.S. – What are the First Amendment obstacles?

Front-of-package (FOP) food labels are symbols, schemes, or systems designed to communicate concise and useful nutrition-related information to consumers to facilitate healthier food choices. FOP label policies have been implemented internationally that could serve as policy models for the U.S. However, the First Amendment poses a potential obstacle to U.S. government-mandated FOP requirements. We systematically reviewed existing international and major U.S.-based nutrition-related FOP labels to consider potential U.S. policy options and conducted legal research to evaluate the feasibility of mandating a FOP label in the U.S. We identified 24 international and 6 U.S.-based FOP labeling schemes. FOP labels which only disclosed nutrient-specific data would likely meet First Amendment requirements. Certain interpretive FOP labels which provide factual information with colors or designs to assist consumers interpret the information could similarly withstand First Amendment scrutiny, but questions remain regarding whether certain colors or shapes would qualify as controversial and not constitutional. Labels that provide no nutrient information and only an image or icon to characterize the entire product would not likely withstand First Amendment scrutiny.     

U.S. Multinational Activity Abroad and U.S. Jobs: Substitutes or Complements?

Critics of globalization claim that firms are being driven by the prospects of cheaper labor and lower labor standards to shift employment abroad. Yet the evidence, beyond anecdotes, is slim. This paper reports stylized facts on the activities of U.S. multinationals at home and abroad for the years 1977 to 1999. We focus on firms in manufacturing and services, two sectors that have received extensive media attention for supposedly exporting jobs. Using firm‐level data collected by the Bureau of Economic Analysis (BEA) in Washington, D.C., we report correlations between U.S. multinational employment at home and abroad. Preliminary evidence based on the operations of these multinationals suggests that the sign of the correlation depends on the crucial distinction between affiliates in high‐income and low‐income countries. For affiliates in high‐income countries there is a positive correlation between jobs at home and abroad, suggesting that foreign employment of U.S. multinationals is complementary to domestic employment. For firms that operate in developing countries, employment has been cut in the United States, and affiliate employment has increased. To account for firm size, substitution across firms and entry and exit, we aggregate our data to the industry level. This exercise reveals that the observed “complementarity” between U.S. and foreign jobs has been driven largely by a contraction across all manufacturing sectors. It also reveals that foreign employment in developing countries has substituted for U.S. employment in several highly visible industries, including computers, electronics, and transportation. The fact that there were U.S. jobs lost to foreign affiliates in key sectors, despite broad complementarity in hiring and firing decisions between U.S. parents and their affiliates, helps explain why economists view the impact of globalization on U.S. jobs as benign despite negative news coverage for declining industries.     

Synthesizing R&D planning and business strategy: some preliminary findings

The need for firms to compete in the longer run by offering superior products at competitive prices requires better integration of R&D, and technology in general, into business strategy development. A survey based on personal interviews of 40 respondents from “Fortune 500” U. S. industrial firms reveals that their shift in emphasis toward new product/process R&D is providing the impetus for placing R&D in a strategic context. However, R&D has not been fully integrated into the strategic planning process of many organizations. The results of the survey reveal that certain communication channels can be more fully utilized to meld R&D planning into business strategy. Specific suggestions to facilitate information exchange, dissemination of planning data, and integration of various R&D plans into a cohesive technology strategy are given.     

Consumer valuation of information about food safety achieved using biotechnology: Evidence from new potato products

This study focuses on the role of food labels and information for affecting consumers’ valuation of food safety achieved through application of biotechnological (biotech) methods. In 2002, potato products cooked to a high temperature were first reported to contain the human carcinogen acrylamide. Research discoveries using genetic engineering can substantially reduce carcinogenic-forming potential, and thereby increase food safety of potato products. Adult consumers from three distant regions of the U.S. were the subjects in lab auctions of potato products. They engaged in distinct rounds of bidding, first without packaged information and again after receiving information about the food safety risks and benefits of new biotech potato products. The study finds that willingness-to-pay (WTP) for these new potato products are not significantly different from conventional potato products under no information. However, exposure to a scientific perspective and scientific plus industry perspectives increases participants’ willingness-to-pay for the new potato products and reduces willingness-to-pay for conventional products. Exposure to the negative perspective on the new technology significantly reduces willingness-to-pay. Consumer valuation of the new potato products is affected by food labels, information, and consumer attributes. A consumer information program could be needed to gain consumer acceptance of these potato products or other foods that have been genetically modified to increase certain food safety dimensions.