The International Consortium on Agricultural Biotechnology Research (ICABR)


The Value to Consumers of GM Food Labels
in a Market with Asymmetric Information:
Evidence from Experimental Auctions

Wallace E. Huffman,
Iowa State University

Jason F. Shogren,
University of Wyoming

Abe Tegene,

Matt Rousu
Iowa State University

The growing GM food controversy and consumer attempts to make better food purchasing decisions has pressed GM food labeling into an important public policy issue. Truthful labeling has been used to provide consumers with information on calories, nutrients, and food ingredients in the United States. In 1997, the European Commission adopted GMO food labeling which requires each member country to enact a law requiring labeling of all new products containing genetically modified organisms. In some EU countries, information technologies have made it economically feasible to encrypt large amounts of information on food package bar codes. Labeling involves real costs--fixed costs of designing labels and testing and monitoring for truthfulness. One key issue is whether the social benefits from labeling exceed the cost.

This paper presents empirical evidence on consumers’ willingness to pay for GM food labeling. We estimate values using a laboratory auction experiment performed on 180 randomly chosen adult consumers in the Des Moines, IA, and Minneapolis, MN, areas, grouped in 12 experimental units. They will participate in a random nth-price auction experiment, in which they bid on three familiar neutral food items (an oil, processed food, and a fresh food) that may be genetically modified. Experimental units are randomly assigned to the labeling treatment (i.e., food items with accurate GM food labels versus no food labels). The paper uses a statistical design and econometric analysis to estimate the average value of food labels to consumers participating in the experiment, measured as the difference in the auction price of a particular food item with and without a label, and relate individual consumer differences in the value of GM labels to their socio-demo-economic attributes. The goal is to provide useful information of the social benefits of GM food labeling to U.S. public policy makers who must decide on GM food labeling legislation.

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