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.     

Use and understanding of labelling information when preparing infant formula: Evidence from interviews and eye tracking

There are various risks associated with incorrect preparation and storage of infant formula, including microbiological hazards. Preparing and storing reconstituted infant formula correctly can reduce potential risks. The product label on infant formula is often the main source of information for caregivers on the correct handling of infant formula. Caregivers’ ability to understand and follow preparation and storage instructions is, therefore, of high importance in the safe use of infant formula. This study aims to increase understanding of how Australian caregivers perceive, interpret and use mandatory and voluntary “on-pack” label information when preparing and storing infant formula. An eye-tracking task requiring caregivers (n = 30) to prepare an unfamiliar infant formula product while wearing Tobi Pro 2 Glasses revealed that almost all caregivers look at the preparation instructions (93%), though fewer look at the warning advice (43%) and storage instructions (27%). Findings from retrospective think-aloud and in-depth interviews conducted immediately after the eye-tracking task, revealed that while preparation instructions are generally understood, they are not always adhered to, with most caregivers making modifications for convenience. Lack of awareness and low perceived risk to the infant’s health were other reasons for non-adherence. These findings suggest that mandated food-safety elements on infant formula products need to be more noticeable, clearer and more specific with respect to potential infant health risks associated with non-adherence, to ensure safe preparation and storage by all caregivers. These findings will be used to inform a review of the labelling requirements for infant formula products.     

Investor reactions to food safety incidents: Evidence from the Chinese milk industry

Using a natural experiment in the Chinese milk industry as background, this paper investigates the reactions of individual and institutional investors to food safety incidents. By classifying firms as either honest or dishonest, we find that: First, honest firms significantly outperform dishonest ones and receive more investment flow. Second, individual investors react to incidents more negatively and intensely, especially toward dishonest firms, compared with institutional investors. This study offers important policy implications: First, our findings directly suggest that the government should enact appropriate policies to strengthen food safety and protect consumers’ health. Second, the government should implement efficient mechanisms to strengthen firms’ incentives to participate in social responsibility activities. Third, having institutional investors as corporate monitors is not a sufficient substitute for legal penalties.