Executive Summary
The main objective for this research project was to understand how consumers as individuals and society in the form of organizations and institutions deal with the risks from genetically modified organisms.
Consumer behavioral intentions were measured in terms of willingness-to-accept (WTA) discount for GM food and willingness-to-pay (WTP) premiums for non-GM food. Given the significant change in the regulatory environment in the EU (i.e., elimination of the moratorium on approving new GM varieties) it is imperative to gain information about how European consumers would behave when faced with the choice between GM and non-GM food. Choice-based conjoint analysis and contingent valuation methods were employed on data collected through a web-based online survey. The empirical analysis provided keen insights into how consumers weight and differentiate among types of risks.
Fifteen laboratory studies and field surveys were also conducted on consumer behavior towards biotechnology. They addressed three question: 1) how consumers respond to food-related crises; 2) how consumers can be profiled to identify which are most likely to accept or reject biotechnologically enhanced foods; and 3) How consumers process labeling related to nutrition and biotechnology. Based on findings from these studies, a framework was developed that shows that consumers (and the messages targeted to them) can be segmented on the basis of their risk attitudes and their risk perceptions. Second, a basic method has been developed and tested that can be used to identify and profile biotech-prone. Third, an understanding of how people jointly consider biotech and nutrition information is the focus of current work.
Correspondingly, how are those risks mitigated by government and industry? Paralleling the consumer component of this project was a study looking at how safety is supplied in the economy. The novel framework and theoretical model formalized the various sources and mechanisms that supply safety in the economy. A critical finding was how significant a role the constitutional environment plays in determining not only how much safety is supplied in the economy, but how and how not it is actually delivered. A second important finding was formally demonstrating why the government is so challenged to elicit safety in the economy. Finally, the research provided policy makers with insights into how various institutions within the economy, in addition to the government, are critical suppliers of safety to consumers. To empiricize the formal economic model, a comparative study of the U.S. and U.K. was conducted. The study showed how critical the U.S. legal system is for mitigating risk and for complementing the efforts of the federal authorities.
Project Highlights
There was one main objective for this research project: to understand how consumers and society deal with the risks from genetically modified organisms. One part of the team focused on consumers' perceptions of and behavior towards risk while the second part of the team focused on how societal institutions to mitigate those risks. Both teams utilized a parallel approach of studying the problem cross-sectionally in both the U.S. and the U.K. These objectives were met. A survey was conducted in the U.K., 15 laboratorty experiments and field surveys were conducted in the U.S., and a formal economic model on safety as a commodity was developed and empirically examined. The research produced numerous presentations and publications, popular press articles, a PhD dissertation, and two policy interventions.
The consumer perceptions part of the project probed UK consumers' perceptions/sentiments about genetically modified (GM) food and analyze behavioral intentions as measured with willingness-to-accept (WTA) discount for GM food and willingness-to-pay (WTP) premium for non-GM food. Given the significant change in the regulatory environment in EU (i.e., elimination of the moratorium on approving new GM varieties) it is imperative to gain information about how European consumers would behave when faced with the choice between GM and non-GM food. We employed two research methodologies (i.e., choice-based conjoint analysis and contingent valuation methods) to accomplish the goal. Web-based online survey was conducted in December 2003 using a UK household panel maintained by the Harris Interactive Inc. Research results are described/published in four journal manuscripts and four presentations in professional meetings.
The consumer perceptions team also identified a framework that helped to better understand why and how consumers might generally respond to a biotechnology-related food safety crisis (see Figure 1). They have also validated a four-segment approach to understanding consumers, based on their level of risk perception and risk aversion:
- The Accountable Segment: The low risk aversion - low risk perception profile corresponds to consumers who are risk-seekers. They view themselves as accountable for their own behavior and what results from it. They ignore any available information on risk and keep their habits, even though some risk may be involved in their behavior.
- The Concerned Segment: This is the low risk aversion-high risk perception segment. The concerned segment have the risk of most behaviors in perspective. They are not risk adverse to begin with, so their behavior is primarily dictated by their perception of risk. As their perception of the riskiness of an action increases, they will eventually get to a point where they will not participate in the action at all.
- The Conservative Segment: This consists of high risk aversion-low risk perception consumers. The conservative segment is compromised of cautious, risk adverse consumers who do not take any unnecessary risks. They can also be seen as being the silent majority in many ways.
- The Alarmist Segment: This high risk aversion-high risk perception profile corresponds to risk adverse consumers. This alarmist segment is comprised of people who are prone to overreacting to many situations. They are also the most assertive in their tendency to become politically involve or to actively attempt to influence others.
Finally they are making progress in better understanding how labeling might effectively communicate nutrition-related information and what this means for biotechnology. Attribute-related information and consequence-related information in combination best predict adoption of functional foods using biotechnology processes.
The component that studied societal institutions and their management of risk took an innovative approach. While there has been much research on the subject of food safety and risk, no work to date had identified theoretically and formally how safety, as a commodity is supplied to the economy. This supply of safety correlates directly to the risks consumers bear as they consume novel and/or potentially risks food stuffs. The group built the first formal model of how safety is supplied in the economy. Their approach utilized a framework that showed that consumers' risks could be allayed in four very distinct ways, not simply by unilateral efforts on the part of the government. One very practical application of their research findings was very specifically explaining why governments, i.e., the USDA, is so challenged to supply GMO safety. The comparative study of the constitutional environments of the U.S. and the U.K. provided a dramatic perspective how critical the underlying legal institutions are to mitigating consumer risks, eliciting discipline on the part of private firms, and affecting the overall supply of safety in the economy.
One important implication of the research that was not explored was the important implications of these findings for developing countries. Developing countries face unique challenges from the lack of resources and weak institutions. Therefore supplying safety into the economy and reducing consumer risk is particularly challenging. The research could be employed to help developing countries develop balanced and efficient institutional settings to promote a maximal supply of safety for their consumers.
Publications
W. Moon
Rimal, A, and W. Moon. Agricultural Biotechnology and Organic Food Consumption. British Food Journal. Vol 107. No. 2, 2005 (84 ~ 96).
Moon, W. and S. K. Balasubramanian. Is There Market for GM Foods in the Europe? Contingent Valuation of GM and non-GM Breakfast Cereals in the UK. AgBioForum , 6 (3), 2004: 128-133.
Moon, W. and S. Balasubramanian. Public Attitudes Toward Agrobiotechnology: The Mediating Role of Risk Perceptions on the Impact of Trust, Awareness and Outrage. Review of Agricultural Economics, vol 26 No. 2, 2004: 186-208.
Moon, W., A. Rimal, and S. K. Balasubramanian. WTA Discount for GM Food and WTP Premium for non-GM Food: UK Consumers. To be submitted to Review of Agricultural Economics.
P. Goldsmith
Turan, N.A., and P.D. Goldsmith. "Legal Systems, Institutional Environment, and Food Safety." Agricultural Economics. Under Review. June, 2005.
Turan, N. and P.D. Goldsmith. "Governments and Firms: Incentives to Supply Safe Food." Food Policy. Under review. March, 2005.
Goldsmith, P.D., N. Turan, and H.R. Gow "Food Safety in the Meat Industry: A Regulatory Quagmire." International Food and Agribusiness Management Review. 6(1) 2003.
Sporleder, T. L., and P.D. Goldsmith. "Alternative Firm Strategies for Signaling Quality in the Food System." Canadian Journal of Agricultural Economics 49 (4) 2001: 591-604.
B. Wansink
Wansink, Brian and Randall E. Westgren (2003), "Profiling Taste-
Motivated Segments," Appetite, 41:3 (December), 323-327.
Wansink, Brian (2004), Marketing Nutrition: Soy, Functional Foods, Biotechnology, and Obesity, Champaign, IL: University of Illinois Press.
Wansink, Brian (2004), "Consumer Reactions to Food Safety Crises," Advances in Food and Nutrition Research, forthcoming.
Wansink, Brian and Randall Westgren (2004) When Does Nutritional Knowledge Relate to the Acceptance of a Functional Food? Working paper, University of Illinois
Presentations
W. Moon
Balasubramanian, S. K., W. Moon, and W. Putis. Choice-based Conjoint Analysis of Public Perceptions of Genetically Modified Foods. Amsterdam, Netherlands, July 2004.
Rimal, A., W. Moon, and S. K. Balasubramanian. Application of Biotechnology in Agriculture and Medicine: United States versus Europe. Presented at Annual American Agricultural Economics Association Meeting, Denver, CO. Aug. 2004.
Moon, W., A. Rimal, and S. K. Balasubramanian. Contingent Valuation of GM and non-GM Foods in the UK: Application of Cheap Talk Script Method. Presented at Annual American Agricultural Economics Association Meeting. Denver, CO. Aug 2004.
Rimal, A. W. Moon, and S.K. Balasubramanian. An Evaluation of Consumer Acceptance of Genetically Modified Foods: Willingness-to-Pay (WTP) vs. Willingness-to-Accept (WTA) Presented at Southern Agricultural Economics Association Annual Meeting. Tulsa, OK. Feb. 2004.
P. Goldsmith
Goldsmith, P.D., N. Turan, and H. Gow. "(Micro) Economics of Food Safety." Presented at the Department of Agricultural and Consumer Economics, University of Illinois seminar series, April , 2004.
Goldsmith, P.D., N. Turan, and H. Gow. "Firms Incentives and the Supply of Food Safety: A Formal Model of Government Enforcement." Presented at the Annual Meeting of the American Agricultural Economics Association, Denver, Colorado, August, 2004.
Goldsmith, Peter D., Neşve Turan, and Hamish Gow. "The Economics of Ensuring Safe Food: A Formal Model." Selected paper. The Annual meeting of the Western Coordinating Committee on Agribusiness Research, Las Vegas, June, 2003.
Goldsmith, Peter D., Neşve Turan, and Hamish Gow "Food Safety in the Meat Industry: A Regulatory Quagmire." Selected paper. The annual meeting of the International Food and Agribusiness Management Association. Cancun. June, 2003.
Goldsmith, P.D. "Is It Safe? Is it what I want? Risk and Quality in the Post-Modern Agri-Food System." Presented at the Department of Agricultural Economics, Texas A&M University, May, 2003.
Goldsmith, P.D., "Is it Safe? Food Safety in the Post-Industrial Agri-food System." Presented at the annual retreat for honors students at the College of Agriculture, Consumer, and Environmental Sciences, University of Illinois, April, 2003.
Goldsmith, P.D., "Is it Safe? Post-Market Surveillance versus Ex-ante Signalling." International Conference on Post-Market Surveillance of Genetically Modified Foods: Issues, Challenges and Opportunities Westin Hotel, Ottawa, Canada. October 16-17, 2002.
Gow, H. and P.D.Goldsmith. "Alternative Paradigms: Why are the European and U.S. Food Safety Systems Different?" Presented at "The Economics of Assurance and Traceability in the US Food System" A working conference organized by the Food and Agricultural Marketing Policy section of the American Agricultural Economics Association in partnership with ERS-USDA and AMS-USDA. January 10 and 11th, 2002 Washington, DC.
B. Wansink
(Title = "Food Psychology and Consumer Response") *
Baylor University College of Medicine 2003M
Boston University 2004B
ESSEC (France) 2004B
INSEAD (France) 2004B
National Academy of Science 2003N
Tufts University School of Nutrition 2004 N
University of Florence (Italy) 2004O
U.S. Army Research Labs - Natick, MA 2003P
Wageningen University (Netherlands) 2004B
Yale University 2004P
* Invited academic presentations are made to the departments noted by the following superscripts: B=Business Schools, M=Medical Schools, P=Psychology Departments, N=Nutritional Science or Food Science Departments, A=Agricultural Economic Departments, O= Other departments.
- The research directly integrated into two policy conferences: an international conference on post-market surveillance of adverse health impacts from biotechnology; A USDA conference on the role of government and food safety.
- Produced one doctoral dissertation: "INCENTIVES AND INSTITUTIONS: A COMPARATIVE LEGAL AND ECONOMIC STUDY OF FOOD SAFETY." Nesve A. Turan, Department of Agriculture and Consumer Economics, University of Illinois, June 2004. Supervisor, P. Goldsmith.
- Produced four major media interviews have been conducted on this general topic :
- Wall Street Journal (January 2004) Æ The basic framework as it relates to BSE
- Seattle Post-Intelligencer (January 2004) Æ Biotechnology and farm-raised salmon
- Nutrition Action Newsletter (March 2004) Æ
- Chicago Tribune (May 2004) Æ Biotech and soy
Papers and presentations will be sent. I have asked the other team members to either provide electronic copies of the papers or post them on the web and provide the URL.
Publications and presentations for Peter Goldsmith can be downloaded directly at https://netfiles.uiuc.edu/pgoldsmi/www/index.htm.
Figure 1. Consumers Responses to Biotechnology-related Food Safety Crises.
