Consumer and Market Responses to Mad-Cow Disease

Wolfram Schlenker and Sofia Villas-Boas ()
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Wolfram Schlenker: Columbia University

No 1023, Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series from Department of Agricultural & Resource Economics, UC Berkeley

Abstract: We examine how consumers and financial markets in the United States react to two health warnings about mad cow disease: the first discovery of an infected cow in December 2003 and an Oprah Winfrey show on the potentially harmful effects that aired seven years earlier. Using a unique product-level scanner data set of a national grocery chain, we find a pronounced and significant reduction in beef sales following the first discovered infection, which dissipates slowly over the next three months. Cattle futures show a comparable pattern of abnormal price drops to the scanner data. Contracts with longer maturity show smaller drops, suggesting that the market anticipated the impact to be transitory. Cattle futures show abnormal price drops after the Oprah Winfrey show that are more than 50% of the drop following the 2003 discovery of an infected cow.

Keywords: Food safety; mad cow disease; consumer behavior; scanner data; futures prices (search for similar items in EconPapers)
Date: 2008-06-17
Note: oai:cdlib1:are_ucb-1124
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