EconPapers    
Economics at your fingertips  
 

Consumers’ costly responses to product-harm crises

Rosa Ferrer and Helena Perrone

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: Using an ideal setting from a major food safety crisis, we estimate a full demand model for the unsafe product and its substitutes and recover consumers' preference parameters. Counterfactual exercises quantify the relevance of di erent mechanisms -changes in safety perceptions, idiosyncratic tastes, nutritional characteristics, and prices-driving consumers' response. We find that consumers' reaction is limited by their taste for the product and its nutritional characteristics. Due to the costs associated with switching away from the a ected product, the decline in demand following a product-harm crisis tends to understate the true weight of such events in consumers' utility. Indeed, we nd that a large fraction of consumers are unresponsive to the crisis even when they significantly downgrade their product safety perception. For an accurate assessment of the crisis, managerial strategies should therefore account for how di erent demand drivers bind consumers' substitution patterns.

Keywords: Food safety; demand estimation; scanner data; idiosyncratic utility parameters; nutritional preferences (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mkt and nep-upt
Date: 2017-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
https://econ-papers.upf.edu/papers/1571.pdf Whole Paper (application/pdf)

Related works:
Working Paper: Consumers’ Costly Responses to Product-Harm Crises (2017) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1571

Access Statistics for this paper

More papers in Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra
Bibliographic data for series maintained by ().

 
Page updated 2019-12-06
Handle: RePEc:upf:upfgen:1571