Do they always say no? German consumers and second‐generation GM foods

European consumers and, in particular, German consumers are known to be very critical toward the introduction of genetically modified (GM) foods. It is analyzed here whether German consumers do reject second-generation GM foods, too. Whereas first-generation GM crops induced producer-related benefits, second-generation GM crops are associated with consumer-oriented benefits like an improvement of nutritional quality. The determinants of demand for second-generation GM rapeseed oil are investigated within an online survey of 1,556 German consumers. It is elaborated how two functional properties of the product matter; that is, long-chain omega-3 fatty acids and the cholesterol-lowering effect of phytosterols. It turns out that GM rapeseed oil is neglected by 74% of all respondents. Output traits, however, will increase the probability of purchases of GM rapeseed oil. This is more the case for long-chain omega-3 fatty acids than for phytosterols.     

Grading, Minimum Quality Standards, and the Labeling of Genetically Modified Products

We relate the labeling of genetically modified (GM) products to the theory of grading and minimum quality standards. The model represents three stages in the supply chain, assumes a vertical product differentiation framework, allows for the accidental commingling of non-GM products, and treats regulation as a purity threshold for non-GM products. We find that a non-GM purity level that is too strict leads to the disappearance of the non-GM product, and that some quality standard benefits farmers. Indeed, the standard that is optimal from the perspective of producers is stricter than what is optimal for consumers and for societal welfare.     

Economic Effects of the Consumer‐oriented Genetically Modified Products in Markets with a Labelling Regime

This paper builds on the literature on the economic effects of the second‐generation, consumer‐oriented genetically modified products (GMPs). It analyses the market and welfare impacts of the introduction of these new products in markets, like the EU, that mandate the segregation and labelling of the first‐generation, producer‐oriented GMPs. Developing an empirically relevant model of heterogeneous consumers and producers, the study determines the effects of the consumer‐oriented GMPs on the markets of conventional, GM and organic products, and the welfare of consumers and agricultural producers. Analytical results indicate that the market effects of the new GMPs are case specific and depend on: (i) the consumer valuation of the quality‐enhancing attribute of the new GMP; (ii) the level of consumer aversion to GMOs; (iii) the strength of consumer preference for organic products; and (iv) the production costs and marketing margins in the different supply channels. The policy on the labelling of the first‐generation GMPs does not affect the impacts of the second‐generation GMPs on the quantities and market shares of the different products. However, it does affect their price effects and welfare implications. The introduction of consumer‐oriented GMPs under a mandatory labelling regime can result in losses for some GM consumers and all producers of the conventional product.     

Consumption effects of genetic modification: what if consumers are right?⋆

This paper develops a model of differentiated consumers to examine the consumption effects of genetic modification (GM) under alternative labelling regimes and segregation enforcement scenarios. Analytical results show that if consumers perceive GM products as being different than their traditional counterparts, GM affects consumer welfare and, thus, consumption decisions. When the existence of market imperfections in one or more stages of the supply chain prevents the transmission of cost savings associated with the new technology to consumers, GM results in welfare losses for consumers. The analysis shows that the relative welfare ranking of the ‘no labelling’ and ‘mandatory labelling’ regimes depends on: (i) the level of consumer aversion to GM products; (ii) the size of marketing and segregation costs under mandatory labelling; (iii) the share of the GM product in total production; and (iv) the extent to which GM products are incorrectly labelled as non‐GM products.     

Canadian consumer acceptance of gene-edited versus genetically modified potatoes: A choice experiment approach

In 2016, second-generation genetically modified (GM) potatoes were approved for production and sale in Canada. In this study, we analyze how consumer acceptance of GM potatoes may be affected by various factors, including the trait introduced (i.e., the product benefits), the type of breeding technology used, and the developer of the potato using any technology. We conduct an online survey and use a stated choice experiment to collect data on consumer acceptance of GM and other potatoes in Canada. Random utility models are used to analyze the economic value consumers place on the various attributes of the potatoes. Our results show that consumers are willing to pay more for a health attribute (reduced acrylamide produced when potatoes are fried) and an environmental attribute. Respondents in general need to face discounted prices to buy potatoes created by either gene editing or GM (either transgenic or cisgenic/intragenic) technologies. However, consumers are in general more accepting of the gene editing technology than the GM technologies. Our results also show that government is the most preferred developer of the potatoes, regardless of technology. Results from this study can help guide public and private management of the introduction of new foods when the products are developed with unpopular technologies.     

Genetically Modified Crops: Their Market and Welfare Impacts

A framework is developed for examining price and welfare effects of the introduction of genetically modified (GM) products. In the short run, non-GM grain generally becomes another identity-preserved product. However, more profound market effects are observed under some reasonable parameterizations. When calibrated to reflect the U.S. corn market, introducing GM technology increases aggregate welfare over a wide range of scenarios, unless the corresponding production cost savings are small and consumers are seriously concerned about GM products. The possibility that GM technology may reduce aggregate welfare is interesting because the model assumes rational agents and does not include regulatory constraints.     

Innovation and Trade with Endogenous Market Failure: The Case of Genetically Modified Products

A partial-equilibrium, two-country model is developed to analyze implications from the introduction of genetically modified (GM) products. In the model, innovators hold proprietary rights, farmers are (competitive) adopters, some consumers deem GM food to be inferior in quality to traditional food, and the mere introduction of GM crops affects the costs of non-GM food (because of costly identity preservation). Among the results derived, it is shown that, although GM innovations have the potential to improve efficiency, some groups can be made worse off. Indeed, it is even possible that the costs induced by GM innovations outweigh the efficiency gains.     

EU and US Regulations for Handling and Transporting Genetically Modified Grains: Are Both Positions Correct?

Differences in the way GM grains are treated in the US and the EU motivate the question of whether there is a single correct policy towards identification of such products. This issue is addressed here, based on a mathematical model that assumes that the cost of maintaining identity on non-GM markets is borne by the non-GM industry. The economic welfare impacts of introducing GM technology depend on the levels of consumer concern and production cost savings, and the cost of maintaining non-GM grain identity. The introduction of a new cost-reducing GM technology often increases total welfare as one might expect. However, society loses when GM production cost-savings are small and consumers are highly concerned about GM grain because introducing GM technology creates a need to preserve the identity of non-GM grain. Taken together, the results suggest that the US may have maximized welfare by not requiring labeling of GM corn and soybeans, and that the recently approved EU legislation enforcing labeling of GM crops also makes sense in the EU. The reason for this is that consumer concern in the EU appears to be greater than in the US, and fewer EU producers stand to benefit from cost savings in GM corn and soybean production.     

Does Production Labeling Stigmatize Conventional Milk?

Production labeling is a common approach for differentiating otherwise similar products in the marketplace. While these labels may convey positive messages to consumers about the new product, they may simultaneously stigmatize the conventionally produced product by highlighting perceived problems. The net economic result for producers can be negative since consumers may decrease their willingness to pay for the conventional product that dominates the market, while the new product has a relatively small market share. This experimental research identifies this stigma effect in the case of milk, where the introduction of rBST-free and organic milk reduces consumers' willingness to purchase conventional milk.     

Inserting GM Products into the Food Chain: The Market and Welfare Effects of Different Labeling and Regulatory Regimes

The purpose of this article is to examine the system-wide effects of the introduction of genetically modified (GM) products with and without labeling and to compare these two regimes to a third regime where GM products are not present either because they have not yet been developed or because they have been banned. For each regime, the decisions and welfare of consumers, producers, and life science companies are examined. The article explicitly incorporates the consumer response to the introduction of GM technology and considers different market structures of the life science sector.     

Consumers’ Appreciation of Regional Certification Labels: A Pan‐European Study

Successful regional products, such as Florida oranges, Idaho potatoes and Parma ham, often have to compete against products passing themselves off as the authentic product using the exact same name. This unfair competition misleads consumers, discourages small‐ and medium‐sized enterprises (SMEs) from marketing products based on their region of origin, and may end up hurting rural economies. To protect consumers, and support SMEs and rural economies, many countries around the world have introduced regulations enabling SMEs to legally protect the names of their regional products. The success of these regulations largely depends on consumers’ appreciation of regional certification labels that inform consumers that the name of the regional product is protected and that it denotes the authentic product. To gain an understanding about consumers’ appreciation of regional certification labels, this paper investigates consumers’ image of these labels and proposes a model that relates this image to consumers’ willingness to buy and pay for protected regional products. The model is tested based on Regulation No. 2081/92 that was introduced by the EEC allowing European SMEs to protect their regional products and market their products with a protected‐designation‐of‐origin (PDO) label. Structural equation modelling results suggest that consumers’ image of regional certification labels consists of a quality warranty dimension and an economic support dimension, which positively relate to consumers’ willingness to buy and pay for the protected regional product. Protecting regional products and marketing them with regional certification labels may be beneficial for SMEs producing and marketing regional products. Policy and managerial implications are discussed.     

Product Differentiation and Cost Pass‐Through

The present paper extends the existing literature on vertical price transmission and cost pass‐through by investigating the impact of product differentiation. We apply distance‐measures of product differentiation to a specific product market (yoghurt) within one country (Germany). Results from a panel‐error‐correction model for 30 products sold in 432 stores over a period of 312 weeks suggest that product differentiation explains a significant share of differences in cost pass‐through rates: more differentiated products command higher prices and are characterised by lower equilibrium cost pass‐through rates as well as more sluggish price adjustment.     

Geographical Indications and the Competitive Provision of Quality in Agricultural Markets

The economics of geographical indications (GIs) is assessed within a vertical product differentiation framework that is consistent with the competitive structure of agriculture. It is assumed that certification costs are needed for GIs to serve as (collective) credible quality certification devices, and production of high-quality product is endogenously determined. We find that GIs can support a competitive provision of quality and lead to clear welfare gains, although they fall short of delivering the (constrained) first best. The main beneficiaries are consumers. Producers may also accrue some benefit if production of the high-quality products draws on scarce factors that they own.     

On the Segregation of Genetically Modified,Conventional and Organic Products in European Agriculture: A Multi‐market Equilibrium Analysis

Evaluating the possible benefits of the introduction of genetically modified (GM) crops must address the issue of consumer resistance as well as the complex regulation that has ensued. In the European Union (EU), this regulation envisions the co‐existence of GM food with conventional and quality‐enhanced products, mandates the labelling and traceability of GM products and allows only a stringent adventitious presence of GM content in other products. All these elements are brought together within a partial equilibrium model of the EU agricultural food sector. The model comprises conventional, GM and organic food. Demand is modelled in a novel fashion, whereby organic and conventional products are treated as horizontally differentiated but GM products are vertically differentiated (weakly inferior) relative to conventional ones. Supply accounts explicitly for the land constraint at the sector level and for the need for additional resources to produce organic food. Model calibration and simulation allow insights into the qualitative and quantitative effects of the large‐scale introduction of GM products in the EU market. We find that the introduction of GM food reduces overall EU welfare, mostly because of the associated need for costly segregation of non‐GM products, but the producers of quality‐enhanced products actually benefit.     

Mandatory versus voluntary labelling of genetically modified food: evidence from an economic experiment

Opponents of the voluntary labelling scheme for genetically modified (GM) food products often argue that consumers have the “right to know” and therefore advocate mandatory labelling. In this article, we argue against this line of reasoning. Using experimental auctions we show that the quality of the signal generated by a mandatory labelling scheme is affected by the number of labels in the market. If there are two labels, one for GM products and one for non‐GM products, mandatory and voluntary labelling schemes generate a similar degree of uncertainty about the quality of products that do not carry a label.     

A latent class approach to investigating demand for genetically modified banana in Uganda

This study explores consumer acceptance and valuation of a genetically modified (GM) staple food crop in a developing country prior to its commercialization. We focus on the hypothetical introduction of a disease‐resistant GM banana variety in Uganda, where bananas are among the most important staple crops. A choice experiment is used to investigate consumer preferences for various attributes related to the banana (such as bunch size, technology, producer benefit, and price) and examine their opinions on GM foodstuff. Choice data come from 421 banana‐consuming households randomly selected from three regions of Uganda. A latent class model is used to investigate the heterogeneity in consumers’ preferences for selected attributes related to the banana and to profile consumers who are more or less likely to accept GM bananas. Our results reveal that there is significant heterogeneity in consumer preferences across our sample. GM bananas are valued the most by poorer households located in the rural areas of the Eastern region. These food‐insecure households would experience the highest benefits (i.e., welfare gains) from the commercial release of GM bananas. In contrast, urban consumers are less accepting of GM bananas, and they would experience significant welfare losses if GM banana is released. According to our welfare estimates, both the total welfare benefits acquired by the gainers and the total welfare losses borne by the losers of this technology are significant and large. These results suggest the need for further investigation of the overall welfare effects of the introduction of GM bananas on the Ugandan society as a whole.     

Pricing-to-Market: Price Discrimination or Product Differentiation?

We employ a vertical differentiation model to examine the potential bias in pricing-to-market results when using export unit values aggregating differentiated products. Our results show that: (i) false evidence of pricing-to-market is always found when using unit values, whether the law of one price holds or not; and (ii) the size of the bias increases with the level of product differentiation. Our simulation results support those conceptual findings. Thus, some of the positive pricing-to-market results in the literature could be an artifact of the product heterogeneity embodied in unit values rather than evidence of imperfect competition.     

Labelling Genetically Modified Food: Heterogeneous Consumer Preferences and the Value of Information

One facet of public debate associated with genetically modified (GM) food focuses on labelling policy for products derived from GM processes. This paper reports on the analysis of effects on consumers' choices of pre-packaged sliced bread under different GM food labelling policies. Substantial heterogeneity is found to exist among consumers' tastes for various bread attributes, including the presence/absence of GM ingredients in bread products. A simulation-based bias-adjusted measure is applied to estimate the value of information, as opposed to the value of the presence or absence of GM ingredients, revealed to consumers by different labelling procedures for the GM attribute. The information that is provided in a mandatory labelling context is considerably more valued by consumers than the information provided in a voluntary labelling context. In a final section, estimated consumer benefits from labelling policies are expressed in terms of average market prices for bread products, providing a measure of benefits against which potential cost increases that may be associated with labelling policies may be compared in the context of any future benefit–cost analysis of GM labelling.     

Customer preferences for customized household furniture

In the context of market globalization, furniture manufacturers attempt to differentiate their products to attain competitive advantages. Mass customization is one strategy enabling such differentiation. This study measured, through a choice-based conjoint analysis, the value that US American consumers assign to the availability of customization when buying furniture. Roughly 50% of consumers’ product choice is driven by price, 20% by product customization, 20% by delivery time, and 10% by the time needed to customize the product. Thus, while there is a customer segment driven by price, there also is a segment, consisting mainly of females, that values product customization.     

Valuation of New Products in Attribute Space

We contribute to the literature on new product valuation by presenting a model of new product introduction based on the distance metric (DM) approach of Pinkse, Slade, and Brett (2002) . Models based on the DM approach are capable of dealing with highly differentiated food categories that are often responsible for the lion's share of new product activity. Furthermore, since new products are typically characterized by differences in observable attributes, the DM approach is appropriate in that it directly accounts for such differences. Our findings reveal that consumers benefit from new products even when the number of alternatives is already high.