Volume 38, Issue 2, August 2013

August, 2013

A Benefit-Function Approach to Studying Market Power: An Application to the U.S. Yogurt Market

By: Hovhannisyan, Vardges; Bozic, Marin
This article provides a structural framework for studying the market performance of various food industries. It revisits the benefit-function approach to modeling demand and extends its application to the empirical industrial-organization literature. We illustrate the empirical value of our model in an econometric analysis of competitive conditions in the retail market for branded yogurt. The results show that retailers are engaged in imperfect competition. Furthermore, national brand yogurt remains an important tool for retail profitability.
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August, 2013

Polarized Preferences in Homegrown Value Auctions

By: Hurley, Terrance M.; Yue, Chengyan; Anderson, Neil O.
Homegrown value-auction experiments are useful for exploring preferences for controversial product attributes. These auctions have emphasized estimating the effect of the attribute on the willingness to pay (WTP) for a product. The likelihood that individuals are willing to purchase any products with the attribute has received less attention, even though this could also be useful to researchers, marketers, and policy makers. This article shows how simultaneous, single-unit auctions can be used to estimate not just WTPs, but also the likelihood that individuals are willing to purchase any products with a controversial attribute.
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August, 2013

Effects of Cost and Campaign Advertising on Support for California’s Proposition 37

By: McFadden, Brandon R.; Lusk, Jayson L.
Proposition 37 would have required genetically engineered food in California to be labeled. This paper reports the results of a survey designed to determine Californians’ voting intentions prior to the vote, perceptions about the prevalence of genetically engineered foods in the United States, willingness to pay for a mandatory label, and effectiveness of advocacy advertising. Overall, Californians had inaccurate knowledge about the prevalence of genetically engineered foods, and stated they were willing to pay up to 13.8% higher food costs on average for a mandatory label. Findings suggest that the effectiveness of opposition advertising was likely a formative factor in the defeat of Proposition 37.
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August, 2013

A Meta-Analysis of Geographical Indication Food Valuation Studies: What Drives the Premium for Origin-Based Labels?

By: Deselnicu, Oana C.; Costanigro, Marco; Souza-Monteiro, Diogo M.; McFadden, Dawn Thilmany
We conduct a meta-analysis of studies estimating price premiums for agricultural products differentiated by Geographical Indication (GI). Models accounting for differences across product characteristics (food categories) and institutions (PDO, PGI, trademarks) explain a large portion of the variance in estimated premiums. Specifically, GIs capture the highest percentage premium in markets for products with short supply chains and relatively low added value (e.g., agricultural commodities). The premium is lower for wine and olive oil, where alternative means of product differentiation (e.g., branding) exist. Controlling for product characteristics, GIs adopting stricter regulations (PDO) yield larger premiums than less regulated ones (PGI).
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August, 2013

Dairy Farmer Policy Preferences

By: Wolf, Christopher A.; Tonsor, Glynn T.
Dairy policy often becomes a contentious topic during U.S. farm bill negotiations. The dairy subtitle of the 2012 farm bill has been debated and discussed since 2009. This research uses best-worst scenario methods to analyze dairy farmer preferences for policy options, including eliminating existing dairy policies, implementing new dairy policies related to income support and growth management, and ending ethanol subsidies. Results indicate that large and small dairy herd operators have differing preferences. Large herd operators prefer to end ethanol subsidies rather than specific dairy policy changes, while small herd operators most preferred support for income over feed-cost margins.
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August, 2013

Revealed Demand for Country-of-Origin Labeling of Meat in the United States

By: Taylor, Mykel R.; Tonsor, Glynn T.
Proponents of the U.S. mandatory country-of-origin labeling (MCOOL) law have argued that consumers prefer domestic meat and value labels confirming domestic origin. Following legislation enacted in March 2009, an ex post analysis of demand is possible to evaluate relative costs and benefits of MCOOL. This study uses retail grocery-store scanner data to estimate a Rotterdam demand model of meat products. The model results failed to detect changes in consumer meat demand post-MCOOL. Given the costs of compliance incurred by meat processors and no evidence of increased demand, our results suggest that producers and consumers have experienced a welfare loss.
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August, 2013

Ex Ante Economic Impact Analysis of Novel Traits in Canola

By: Naseem, Anwar; Singla, Rohit
This study evaluates the potential economic impacts of ten novel traits in canola by employing a stochastic economic surplus model. Nitrogen use efficiency, water use efficiency, flea-beetle resistance, cold/freeze tolerance, and drought tolerance traits would have the largest economic impacts. Major beneficiaries of the surplus benefits are consumers as well as Canadian producers and innovators. The magnitudes of economic impacts varied substantially across the three major canola-growing Canadian provinces. Net benefits were sensitive to supply elasticity and R&D lags.
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August, 2013

Economic Consequences of Pierce’s Disease and Related Policy in the California Winegrape Industry

By: Alston, Julian M.; Fuller, Kate B.; Kaplan, Jonathan D.; Tumber, Kabir P.
Since 2000, approximately $50 million per year has been spent to control infestations of the Glassy-Winged Sharpshooter (GWSS), an insect that spreads Pierce’s Disease (PD). This amount includes the costs of state and federal efforts to monitor and control the GWSS, research on PD/GWSS, and compliance with the PD Control Program. Using a simulation model of the market for California wine grapes, we estimate that under the current program, PD costs winegrape growers and consumers $92 million annually. If the program ended and the GWSS became widespread throughout California, the annual cost borne by growers and consumers would increase by an estimated $185 million.
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