The economics of food safety: an experimental approach

Seung Youll Shin

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: Food safety issues have received increased attention from scientific and consumer groups alike in recent years. Pathogenic microbiological agents have been shown to be a major contributor to food-borne illnesses in the United States. The presence and cost of these pathogens has become a major issue for policy makers, consumers, and producers;Estimated economic losses to society attributable to food-borne diseases have been large. These estimated losses usually have been based on direct consumer losses and likely represent an underestimation of the true economic costs. Morbidity costs, such as consumers' willingness to pay (WTP) to reduce their chance of becoming sick from a food-borne sickness, have not been included, leading to an underestimation of economic costs;With this in mind, this study focuses on developing an experimental approach which can be used to evaluate consumer WTP for safer food and willingness to accept (WTA) a typical unsafe food. Information on consumers' WTP and WTA for food safety is obtained through a nonhypothetical laboratory experimental approach. The often-observed divergences in WTP and WTA measures of market and nonmarket goods are examined and explained. A Vickrey second-price sealed-bid auction, with multiple trials, was used to elicit consumers' WTP and WTA values. Five food-borne pathogens were analyzed: Campylobacter, Salmonella, Staphylococcus aureus, Clostridium perfringens, and Trichinella spiralis. Experiments were conducted on WTP and WTA for all five pathogens. Iowa State University students were the participants for each experiment. A new set of participants was used for each experiment;This study examined the disparity between WTP and WTA measures for a food item, a market good, and for food safety, a nonmarket good. Results showed that the disparity of these two measures is very small for perfect substitutes such as food and wealth. However, observed divergences were much larger for the imperfect substitutes such as food safety and wealth;The results indicate that WTP is more appropriate than WTA for food safety policy analysis. This provides a better estimate of society's WTP and the economic value of enhanced food safety measures. The WTP to completely remove food-borne pathogens from the U.S. food supply was estimated at 91 billion, a value which is far greater than that provided in previous research.

Date: 1991-01-01
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