Consumer preferences before and after a food safety scare: An experimental analysis of the 2010 egg recall
Introduction
Foodborne illness is a serious public health problem in the United States. Each year, approximately 48 million Americans contract a foodborne illness, resulting in 128,000 related hospitalizations and 3000 deaths (Centers for Disease Control and Prevention, 2016). One of the most commonly used approaches to deal with foodborne illness is a product recall. Recalls are important as they attempt to remove the source of the problem to prevent further illnesses. However, recalls can also inflict serious damage on an industry through stigmatizing all like-products, including ones that are safe. Accordingly, the purpose of this research is to examine how food recalls impact consumer demand for both the product being recalled and a closely related version of the product.
A useful measure of consumers’ reaction to a food recall is its effect on consumer willingness to pay (WTP) for the product (Roberts, 2007). Ultimately, understanding these effects can improve the effectiveness of future food recalls in terms of preserving both consumers’ welfare and the economic well-being of the food industry. Economists commonly use experiments to elicit WTP, but experiments that test the impacts of a food recall usually rely on a laboratory setting and hypothetical food-safety risks (Kaiser et al., 1992, Maruyama and Kikuchi, 2004). Thus, the treatment used to test the impact of a food recall is purely hypothetical or provides information about a ‘potential’ risk unless the experiment can somehow include an actual recall. The study presented here benefits from an experiment on food preferences that was conducted shortly before one of the largest egg recalls in U.S. history and that allowed us to design a follow-up experiment to examine the effects of an actual recall.
On August 13, 2010, Wright County Egg Farms of Iowa initiated a voluntary recall of eggs, which it expanded on August 18, 2010. Two days later, the recall was again expanded to include Hillandale Farms of Iowa. In total, more than 550 million eggs distributed throughout the United States (see Fig. 1) were identified as presenting a potential risk of Salmonella contamination. Naturally, the recall received extensive attention by local and national media outlets (Laestadius et al., 2012). We take advantage of this actual food-safety event to examine consumer behavior in the midst of a situation in which the long-term health consequences of the recall were uncertain during the time of the experiment sessions.
Just prior to the recall, we had conducted an experiment involving adult participants in the mid-Atlantic region of the United States, which was not significantly affected by the subsequent recall, to investigate consumers’ WTP for conventional and organic food products, including eggs. After the recall was announced, we contacted the participants from that study about their willingness to participate in a follow-up study, without mentioning the motivating factor of the recall. Of the original 117 participants, 74 (63.24%) took part in the follow-up study, which was conducted during the first two weeks of September 2010.1
Both the initial and the follow-up study used a Vickrey fourth-price auction to analyze the impact of the recall on consumer WTP for eggs. The post-recall study included two parts. In the first part, all participants answered questions about their demographic characteristics, food consumer habits, and attitudes about food before bidding on several food products, including eggs. The experiments collected WTP for both conventional eggs (as were the ones recalled) and organic eggs, enabling us to examine if consumers reaction to the recall would vary by egg type. In the second part, the participants were split into two groups. The first group was given negative information obtained from a media source consisting of then-current information about the recall. The second group was given a more balanced set of information as it contained both the negative information and additional positive information about the recall that could potentially mitigate decreases in WTP caused by their receiving the negative information. To gauge the participants’ knowledge of the recall, several questions about it were asked before the information treatments. In addition, at the end participants were asked to rate the importance of each piece of information about the recall in terms of its influence on their WTP.
The primary objective of this study was thus to determine if consumer WTP for eggs was affected by the recall. Part of this was to examine if reaction to the recall varies between conventional and organic eggs. Specifically, for each egg type did participants react heterogeneously to the recall, and, if so, what factors contributed to any such difference? The second objective was to look at the possible influence on WTP of negative or balanced information about the recall on the two egg types. An included goal here was to see which pieces of information most influenced consumer responses.
Section snippets
Literature review
There have been two broad approaches to studying the impacts of food safety scares, in general, and food recalls specifically. The first approach has used observational market-wide data to discern any impact of a food safety event on either market demand or price. The second approach has used data collected directly from consumers through surveys or economic experiments, with the latter primarily limited to assessing whether hypothetical food safety treatments impact consumer WTP. This section
Experimental design
This study uses data from experimental sessions conducted shortly before and after the recall of eggs in August 2010. The first sessions were conducted in July 2010 for a project that examined consumer WTP for local and organic food products. Participants came from the mid-Atlantic region of the United States and were recruited through flyers at supermarkets, personal solicitation at the University of Delaware’s Agricultural Day (a large annual event open to the general public) and a Craig’s
Model
We use a random effects Tobit model to estimate whether the recall shifted WTP for either conventional or organic eggs. Selection of a two-limit random effects Tobit model is based on the format of the experiments. In the auctions, participants’ bids were confined to a range of $0 to $10. Therefore, we assume that a latent variable, bid∗, exists that represents each participant’s true WTP for the eggs offered in the auction round. The latent variables are related to the observed bidij by
Conclusions
Due to increasing concern among U.S. consumers over food-safety issues and the perception that the number of food recalls is increasing (Hallman et al., 2009), a better understanding of how consumers react to a food recall is an important goal for both the food industry and the government. This study investigates the impact of an actual food recall on consumers’ WTP for the product associated with the recall and a closely related version. Specifically, we examined the effect of one of the
References (32)
- et al.
Consumer acceptability of milk from cows treated with bovine somatotropin
J. Dairy Sci.
(1994) - et al.
Print News Coverage of the 2010 Iowa Egg Recall: Addressing bad eggs and poor oversight
Food Policy
(2012) - et al.
One bad apple spoils the bunch? An exploration of broad consumption changes in response to food recalls
Food Policy
(2014) - et al.
Evaluating the costs of meat and poultry recalls to food firms using stock returns
Food Policy
(2016) - et al.
Changes in US consumer response to food safety recalls in the shadow of a BSE scare
Food Policy
(2016) - et al.
A fresh meat almost ideal demand system incorporating negative TV press and advertising impact
Agric. Econ.
(2001) The Hawthorne effect: a reconsideration of the methodological artifact
J. Appl. Psychol.
(1984)- et al.
Consumer response to a food safety shock: the 2006 food-borne illness outbreak of E. coli O157: H7 linked to spinach
Appl. Econ. Perspect. Policy
(2009) - et al.
What is it about organic milk? An experimental analysis
Am. J. Agric. Econ.
(2009) - Centers for Disease Control and Prevention, 2016. Estimates of Foodborne Illness in the United States....
The demand impacts of chicken contamination publicity—a case study
Agribusiness
Meat traceability: Are U.S. consumers willing to pay for it?
J. Agric. Resource Econ.
Consumer preferences for food irradiation: how favorable and unfavorable descriptions affect preferences for irradiated pork in experimental auctions
J. Risk Uncertainty
A model of consumers’ risk perceptions toward recombinant bovine growth hormone (rbgh): the impact of risk characteristics
Risk Anal.
Multivariate Data Analysis
Cited by (27)
Recall information heterogeneity and perceived health risk: The impact of food recall on fresh meat market in the U.S.
2023, Food PolicyCitation Excerpt :We further calculated the net marginal effect of the number of recalls on market share for markets with at least one recall and no recall in the past six months and found that an additional recall reduced market share by 0.08 % and 1.58 % respectively. This result is different from Taylor et al. (2016) that the consumers respond more negatively to ground beef recalls after the 2003 BSE event and Li et al. (2017) that there were no significant differences in consumer preferences before and after the 2010 egg recall. One possible explanation is that there was no widespread recall that caused severe damage during our sample period, which is from 2012 to 2016.
A Cross-disciplinary review of product recall research: A stakeholder-stage framework
2022, Transportation Research Part E: Logistics and Transportation ReviewCitation Excerpt :Recalls also update consumers’ quality reference points and lower their quality expectations of the recalled product, leading to a reduction in their willingness to buy products from the recalling brand (Byun et al., 2020; Byun & Dass, 2015; Dong et al., 2021; Yu et al., 2018). This reduces baseline sales (Freedman et al., 2012; Topaloglu & Gokalp, 2018; Van Heerde et al., 2007), and thus depletes the market share (Cleeren et al., 2013; Rhee & Haunschild, 2006) across product categories, i.e., consumer products (Cleeren et al., 2013), food (Li et al., 2017; Shang & Tonsor, 2017; Taylor et al., 2016), and automobiles (Topaloglu & Gokalp, 2018). Further, the negative effect of a recall on sales can spread beyond the recalling brand to other brands due to the spillover effect (Koschate‐Fischer et al., 2019; Lei et al., 2012; Lei et al., 2008; Liu & Shankar, 2015; Van Heerde et al., 2007).
Bulk food recall decisions: Postponement and preponement to sustain food business
2022, Journal of Food EngineeringCitation Excerpt :This may lead to a food recall which is the effort to remove food products with quality problems from circulation. Food recall aims to eliminate problems or to prevent negative impacts (Li et al., 2017). However, this will burden a business with recall costs that can lead to financial loss and bankruptcy (Lu and Zhang, 2010).
Consumer behaviour, perceptions, and preferences towards eggs: A review of the literature and discussion of industry implications
2020, Trends in Food Science and TechnologyCitation Excerpt :Consumers perceived that eggs produced by hens raised with higher animal welfare standards were safer to eat (Ochs, Wolf, Widmar, & Bir, 2018). For example, Li et al. (2017) found that US consumers were willing to pay a premium price for organic eggs after the recall of a half billion eggs in 2010 due to a salmonella outbreak, because they were thought to be safer than caged. Similarly, Taiwanese consumers were found to be willing to pay a higher price for cage-free eggs because they were associated with higher food safety standards (Yang, 2018).
A systematic review of drivers influencing consumer willingness to pay for organic food
2020, Trends in Food Science and TechnologyFood safety in low and middle-income countries: The evidence through an economic lens
2019, World DevelopmentCitation Excerpt :However, this reaction appears to be context specific. For example, using data from auction experiments conducted before and after a large egg recall due to a Salmonella outbreak in the U.S., Li, Bernard, Johnston, Messer, and Kaiser (2017) do not find a significant change in the consumer willingness to pay for eggs and show that providing consumers with objective information about food safety risks increases demand. Information on food safety risk can have negative consequences for both nutrition and producer livelihoods if not carefully managed.