Consumer response to biotech food labeling : the effects of voluntary rBGH-free labels on fluid milk demand

Abstract

Consumer response to labeling policies for genetically modified organisms (GMO) in food products is investigated by considering voluntary labeling with respect to the use of the genetically modified Bovine Growth Horri:lone (rBGH) in fluid milk. Existing theoretical approaches on the provision and acquisition of information are extended to develop a framework that specifically addresses the effects of labeling on the relationship between consumer knowledge, information search and product choice. A new data set is utilized in the data analysis. The data set combines national-level supermarket scanner data for fluid milk demand with information about the use of rBGH in milk production and product specific labeling. Estimated parameter coefficients indicate that consumer beliefs previously measured in survey responses lead to an observable and statistically significant change in market behavior. Demand for fluid milk products labeled as rBGH-:free is significantly higher than demand for conventional fluid milk products and increases slightly over time. A positive demand effect is identified for rBGH-:free labeled products but not for unlabeled products, indicating that the provision of labeling information is necessary for market segmentation between conventional and rBGH-:free products. Demand estimates with regard to organic certification of products appear to be affected by market penetration of organic products during the time period analyzed. In addition, price elasticity estimates for half gallons of milk suggest that consumers are less responsive to price changes in rBGH-:free labeled milk products than in conventional milk products.