Estimating Consumer Willingness-to-Pay for Country-of-Origin Labels. for Beef Products. Maria L. Loureiro and Wendy J. Umberger 1

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1 Estmatng Consumer Wllngness-to-Pay for Country-of-Orgn Labels for Beef Products Mara L. Lourero and Wendy J. Umberger 1 Selected Paper 2002 Amercan Agrcultural Economcs Assocaton Annual Meetngs Long Beach, CA July 28-31, 2002 Copyrght 2002 by Lourero and Umberger. All rghts reserved. Readers may make verbatm copes of ths document for non-commercal purposes by any means, provded that ths copyrght notce appears on all such copes. Contact Author: Mara Lourero Assstant Professor Department of Agrcultural and Resource Economcs Colorado State Unversty B311 Clark Buldng Fort Collns, CO Phone: (970) e-mal: maral@lamar.colostate.edu 1 The authors are Assstant Professors n the Department of Agrcultural and Resource Economcs at Colorado State Unversty, Fort Collns, CO.

2 Estmatng Consumer Wllngness-to-Pay for Country-of-Orgn Labels for Beef Products Introducton The escalatng demand for hgh qualty food, and mproved food safety standards has created a growng market for value-added products that carry a strong dentfcaton wth a partcular geographcal regon or country. Moreover, the recent food safety scares n Europe and Japan have added to the demand for orgn-specfc foods. In addton to consumers food safety concerns, the beef ndustry has recently undertaken consderable efforts to mprove the qualty of beef that s produced n the U.S. Both producer and consumer groups have consdered countryof-orgn labelng of beef products sold n the U.S. to be an alternatve that would enable consumers to choose U.S. produced beef (Brester and Smth, 2000). Currently, the Tarff Act of 1930 requres labels ndcatng the country-of-orgn on all fresh and frozen beef products mported nto the U.S. However, under the exstng system, the label does not need to accompany the product after t has been repackaged (Becker, 1999). Therefore, beef handlers are not requred to specfy to ther subsequent buyers whether the beef (fresh or frozen) s a U.S. produced or an mported product. The mplementaton of a more strngent, mandatory country-of-orgn labelng system for all meat products sold n the U.S. has been debated for several years by agrcultural producers, meat ndustry organzatons and consumer advocate groups (USDA-FSIS). A number of arguments exst both n favor and aganst country-of-orgn labelng of fresh and frozen beef products. Accordng to Becker (1999) arguments n favor nclude the dea that country-of-orgn labelng would gve U.S. producers the opportunty to create a compettve nche market, as long as consumers select Amercan beef over mported beef. As n the 1

3 genetcally modfed debate, labelng advocates beleve consumers have the rght-to-know where ther meat products orgnate. For example, a natonal survey sponsored by the Natonal Cattleman's Beef Assocaton (NCBA), found that 78% of the 1,000 Amercan consumers polled support country-of-orgn labelng (Supermarket News, 1999). Fnally, proponents of a mandatory labelng polcy argue that the costs assocated wth ths labelng polcy, as Becker (2001) ponted out, are mnmal. On the other hand, arguments aganst country-of orgn labelng nclude the concern that a label s an unnecessary trade barrer. Some trade offcals are concerned that other countres would retalate aganst ths trade polcy f the U.S. mplements t, and that U.S. meat exports could suffer an ntense reducton. Other opponents of labelng beleve that the country-of-orgn labelng program would be dffcult to mplement, snce many meat products are made by combnng beef orgnatng from varous sources. A 2000 U.S. Congressonal study determned that the potental costs assocated wth mplementaton of a country-of-orgn labelng system would outwegh the potental benefts, due to the fact that approxmately 15% of the beef sold n the Unted States s mported (USDA-FSIS). Therefore, ndustry complance costs could be too hgh, and optmally, the consumer may be bearng these addtonal costs. Fnally, labelng adversares argue that many consumers may develop a taste for nternatonal, mported beef (as t happened wth Japanese cars n the 1980 s), resultng n a reducton of the U.S. beef market share. Regardless of the debate surroundng country-of-orgn labelng, the proposed Farm Securty and Rural Investment Act of 2002 (2002 Farm Bll) ncludes a program mandatng the U.S. Secretary of Agrculture to provde gudelnes for voluntary labelng of meat, fruts and vegetables, fsh and peanuts by September 30, Furthermore, the proposed 2002 Farm Bll 2

4 requres ths voluntary program to become mandatory by The bll states, for a commodty to be labeled a USA product, t must be born, rased and processed n the U.S. (Farm Bll Conference Framework, 2002). Whle the new Farm Bll mandates country-of-orgn labels on all pershable products, very lttle research has been conducted to assess the economc mpact of country-of-orgn labels. For example, could a premum based on country-of-orgn attrbutes offset the costs assocated wth such a labelng polcy? In addton, what market segment s wllng to pay a premum for U.S. labeled beef; and what market segment s wllng to support nternatonal beef products? What role do the soco-demographc characterstcs play on ths market segmentaton? If a premum exsts for U.S. beef, what factors affect such premum? Do Amercan consumers consder domestc beef to be safer than mported beef? Gven these currently unanswered questons surroundng country-of-orgn labelng for beef and other pershable products, the objectves of ths paper are twofold: (1) to determne consumers preferences and the economc effect of country-of-orgn labels on beef demand, and (2) to calculate the market premum (f t exsts) for U.S. labeled beef versus non-labeled or mported beef. Testable hypotheses nclude: segments of U.S. consumers are wllng to pay a premum for U.S. labeled, domestcally produced beef; the percent premum for U.S. labeled beef wll dffer among beef products; the market segment of consumers who are wllng to pay a premum for the U.S. labeled steaks wll dffer from the segment of consumers who are wllng to pay a premum for U.S. labeled ground beef or hamburger. The research presented n ths paper wll shed lght on consumers responses toward country-of-orgn-labelng n beef products. 3

5 Prevous Studes Interest n food labelng has been ncreasng recently due to consumer food safety concerns, and because of the emergence of eco-labels and varous food labels dentfyng food as organc, natural and not genetcally modfed. Many researchers have studed behavoral changes that take place n response to food labelng. Examples nclude: Blend and Van Ravenswaay (1999), and Wessells, Johnston and Donath (1999). These studes fnd that a change n labelng or nformaton can change consumers' perceptons and behavor. Whle these studes all examne the effect of food labels on consumers, to date not many studes have been publshed n the area of consumer economcs and demand analyss dealng wth country-oforgn labels. Prevous marketng research has examned the effect of country-of orgn labels on consumers behavor toward non-food products. Erckson et al. (1984) conducted research to determne whether the country-of-orgn affected consumers belefs wth respect to the evaluaton of cars. Ther results suggest that the mage varable does affect belef formaton rather than atttude. Howard (1989) nvestgated the foregn product mage of Amercan consumers to determne how these made n stereotypes were formed. He concluded that the consumer s atttudes about the qualty of the automoble produced by a partcular country produced a halo effect that covered all products from that country. Wall, Lefeld and Heslop (1991) tested emprcally n a mult-product, mult-cue settng the mportance of the country-of-orgn cue on consumer judgments. In ther experment they concluded that consumers used external nformaton cues about the product. In many cases, consumers favored a low-prced, well-known brand, from a hgh reputaton country, although ths dd not hold true for all products and scenaros. Strutton and Pelton (1993) look at a sample 4

6 made of Southeast Asan consumers and ther perceptons regardng Amercan and Japanese Imports. Usng dscrmnate analyss, they found that consumers perceved dfferently U.S. and Japanese mports. In an nternatonal context, a factor to consder when evaluatng country-oforgn labels s the mage of the country tself. Phelps (1972) and Arrow (1973) studed prncples of ths type of lemons problem n the labor market. Under ther theory of dscrmnaton, employers assgn a pror a lower subjectve probablty of the satsfactory productvty to mnorty workers compared wth whte workers. In the same way, the countryof orgn-effects has sgnfcant mplcatons for nternatonal trade and consumer s percepton of qualty products. Chang and Masson (1988) observed that consumers often statstcally dscrmnate aganst mports from developng countres. Haucap et al. (1997) explaned that locaton choce could act as a sgnal for product qualty, n the sense that hgh country specfc costs (mnmum wages, envronmental taxes, lay-off plans, and others) sgnal hgh product qualty. Whle the studes dscussed above examne consumers behavor toward country-of-orgn labels, few studes have examned consumers perceptons assocated wth country-of-orgn labels on beef products. Schupp and Gllespe (2001a) sampled beef processors, retalers and restaurants n Lousana to dentfy why these beef-handlng frms would ether support or reject a mandatory country-of-orgn labelng polcy. They found that supporters of a law felt that ther consumers would fnd the label valuable, whle opponents of the law thought that mandatory labelng smply meant more government nterventon. In another study by Schupp and Gllespe (2001b), Lousana households were surveyed to fnd consumers degree of support for mandatory country-of-orgn labelng of beef n grocery stores and restaurants. Over eghtypercent of ther respondents supported a compulsory labelng program. Whle these studes show 5

7 beef handlers and consumers support of mandatory labelng, they do not shed lght on whether or not consumers would be wllng to pay the addtonal costs assocated wth the mandatory labelng polcy. A wllngness-to-pay study by Quagrane, Unterschultz and Veeman (1998) compared a popular beef product from Alberta wth a smlar product produced elsewhere n Canada. They found that the prce of the non-alberta meat product had to be reduced by 15 percent so that consumers would be ndfferent between the two sources. Lourero and McCluskey (2000) found that Spansh consumers were wllng to pay a premum for fresh meat products labeled wth a Protected Geographcal Identfcaton label (PGI), Galcan Veal, whch s regulated by the European Unon. Whle consumers were wllng to pay a premum for the beef wth a Galcan Veal label, the premum vared dependng upon the cut and qualty of beef. Thus, a hgh-qualty steak dd not carry the same premum as stew meat. In an addtonal wllngness-topay study, Umberger et al. (2002) found that n blnd taste tests, consumers could taste and were wllng to pay a sgnfcant premum of $0.70 per pound (on average) for corn-fed beef rased n the U.S. versus grass-fed beef rased n, and mported from Argentna. However, a small nche market (23%) of the consumers preferred and were wllng-to-pay a $1.36 per pound premum for the Argentne, grass-fed beef. Whle these studes ndcate that consumers are wllng-to-pay a premum for geographcally labeled products, they are lkely not representatve of U.S. consumers preferences and supermarket choces. Ths current research wll resolve questons regardng U.S. consumers preferences and wllngness-to-pay for country-of-orgn labelng of beef. 6

8 Theoretcal Background The consumer s decson process s modeled usng a random utlty approach. We assume that consumer utlty, U ( y, x, m), has three arguments: whether the beef product has a label, y, other product attrbutes and consumer characterstcs that may affect consumer choce, x, and the ncome level, m. The varable y s an ndcator varable, whch equals one f the product carres a label, and zero otherwse. The consumer s wllng to pay c dollars to swtch to a labeled product, whch wll make hs/her utlty at least as great as t would be wthout a label. Mathematcally, c s represented as (1) U 0, x, m) U (1, x, m ). ( 0 1 c The consumer s utlty functon s unknown because some components are unobservable to the researchers, and thus, can be consdered random varables from the researcher s standpont. Snce utlty s unobservable, we decompose utlty nto an unobservable part and an error term, U ( y, x, m) = V y, x, m. We assume that the random varable error ε. Mathematcally, ( ) + ε term ε s ndependent and dentcally dstrbuted wth a mean of zero. The consumer s decson to pay c dollars can be represented as: (2) V ( 0, x0, m) + ε 0 V (1, x1, m c) + ε1, The decson to pay c can be expressed n a probablty framework as (3) Pr{ WTP c} = Pr{ V + V + ε } = { ε ε V V } ε Pr

9 Ths theoretcal model lays the groundwork for the specfc emprcal models that we estmate n order to analyze the factors affectng choce and WTP for mandatory country-of-orgn labels. In the current study, a bnary choce model has been used to model the decson of supportng mandatory country-of-orgn labelng. Methods In assessng the desre for mandatory labelng programs and consumers wllngness to pay for U.S. Certfed Steak, and U.S. Certfed Hamburger, respondents provded Yes No answers to the valuaton questons at hand. To analyze these dchotomous choces, we used ndependent logt models based on the followng logstc probablty functon: 1 1 (4) P ( = F WTP ) = =, WTP ( α + Xβ 1+ e 1+ e ) where P s the probablty that the th consumer wll make a certan choce (answer = Yes ), gven the observed level of certan soco-demographc characterstcs, food safety atttudes and nformaton condtons contaned n X. Therefore, f (1) represents the probablty that a consumer wll answer Yes to the queston regardng mandatory country-of-orgn labelng, then 1-P wll be the probablty assocated wth answerng No. Thus, (5) 1 P 1 = 1+ e WTP 8

10 As a consequence, f we want to estmate the odds rato n favor of sayng Yes, versus sayng No, then we need to calculate the rato of both probabltes. WTP P 1+ e WTP α + xβ (6) = = e = e WTP 1 P 1+ e When lnearzng (3) by takng the natural log, we obtan the odds rato n favor of those respondents answerng Yes to any specfc queston gven X, where X s a ( n K) matrx of subjectve consumer preferences when buyng beef, subjectve nformaton, and socodemographc characterstcs. Ths can be shown as: P (7) Log = = α + X. β, 1 WTP P where Y s the dchotomous response ( n 1) vector related to a ( n K) matrx of observable explanatory varables X. Notce that the meanng of the coeffcents cannot be nterpreted as the drect effects on the probablty of supportng mandatory labelng; rather, they measure the change n the odds rato by a change n a unt of X. In order to estmate the effects on the probabltes drectly, as Maddala (1998) explans, we need to estmate the margnal effects. It s convenent to remember that the underlyng statstcal model s based on a latent and * contnuous unobservable ( Y ) varable unknown to the researcher, whch n the context of the labelng analyss could be the general consumers concerns about source verfcaton ssues. The 9

11 observable varable, whch s modeled by the researcher, s the response to the dchotomous choce. Thus, the latent model s represented by: * * (8) WTP = I (0, ) ( WTP ), where WTP = α + X β + ε.. Therefore, 1 * > (9) WTP = ff WTP = α + X. β + ε 0. 0 Notce that we are assumng that theε are d unobservable random varables, whch follow a 2 logstc dstrbuton wth mean 0 and a varance of π / 3. We observed a Yes response f and only f the latent unobservable varable s greater than 0. On the other hand, we observed a No response when the latent varable (consumers concerns) s less than or equal to 0. Data The survey was pre-tested wth focus groups n early March 2002 and conducted n late Sprng 2002 n grocery stores located n dfferent towns of Colorado, such as: Denver, Fort Collns, and Boulder. Customers enterng the grocery stores were selected randomly; the ntervewers solcted every thrd customer who came nto the store. In order to collect a more representatve sample, ncludng multple segments of the shoppng populaton, ths survey was conducted n dfferent grocery food chans and durng both weekends and weekdays. In total, 10

12 eght dfferent stores partcpated n ths study. In order to ncrease consumer partcpaton ntervewers were nstructed to wear Unversty t-shrts. In contrast to studes that use mostly telephone or mal survey data, our survey data was collected n grocery stores. By collectng data from consumers at the same tme and place where actual purchase decsons are made, we attempted to obtan data drectly from the actual decson-makers and to better elct consumers' true preferences about beef products. In total, 243 consumers were surveyed. The majorty of respondents were the prmary food shoppers of the household (89%), Caucasan (88%) and female (64%). The respondents' average age was about 40 years, and 39% of all respondents had chldren under the age of 18 years old lvng n ther household. The mean ncome of the sample was calculated about $40,000 for the 2001 calendar year, and ther average educaton ncluded a junor college degree. Summary statstcs and varable descrptons are presented n Table 1. Our sample s comparable to the Colorado Statstcs (U.S. Census 2000) n terms of educaton, number of chldren per household, and household sze. However, ths sample ncludes fewer mnortes and a hgher percentage of female respondents. As wth all surveys, the ablty of the sample to represent the populaton s a concern, and the effect of populaton choce on our results concernng wllngness-to-pay for country-of-orgn labels s lkely ndetermnate. There may also be some degree of sample selecton bas, n whch the people who were more nterested n source assurance labels, or more wllng to support Unversty students elected to partcpate n the survey. Gven the potental sources of bas, we cauton that our fndngs may not represent those of other populatons. The survey solcted nformaton regardng respondents purchasng behavor and atttudes about beef products, beef qualtes that consumers fnd most desrable, food safety 11

13 atttudes, whether or not they would be wllng to pay a certan amount a year n taxes to support a mandatory country-of-orgn labelng program, and whether they would pay a gven premum for steak and hamburger labeled as Certfed U.S. beef. Fnally, soco-demographc characterstcs were elcted n the last part of the survey. Regardng beef attrbutes mportant to consumers, as Table 2 shows the mportance of freshness, the mportance of beef beng nspected, and the mportance of carryng a hgh qualty grade are the three attrbutes that rank the hghest n a Lkerd Scale. Surprsngly, local attrbutes or the mportance that the beef was rased locally ranks as one of the least mportant attrbutes. Addtonally, n our sample (See Table 3), 23 percent of the consumers recognze that prce s the man drvng force of ther shoppng decsons, whle for 41 percent of the consumers, the drvng force s qualty, and for the rest of the sample (25 percent) s health and food safety ssues. Thus, overall our sample has a majorty of consumers who are qualty and food safety seekers. Followng the NOAA 1993 panel recommendatons (Arrow et al., 1993), a dchotomous referendum queston has been used to elct the WTP for the mandatory country-of-orgn labelng program, as well as the ndvdual premums for steaks and hamburgers labeled as Certfed U.S. Beef. In partcular, consumer faced the followng valuaton questons: Suppose that you could vote n a referendum regardng country-of-orgn labelng. If mplementaton of ths mandatory country-of-orgn labelng program for beef would cost your household $[bd]/year. What would your poston be wth respect to ths mandatory labelng program? a. In favor of a mandatory program b. Aganst a mandatory labelng program. 12

14 In ths queston the random bds assgned to consumers ranked from $10/year up to $250/year. Independently of whether or not the customer was wllng to pay the assgned amount for the mandatory labelng program, the next questons elcted consumer WTP for steak and hamburger labeled as Certfed U.S. Beef. The ntervewer read: Now, assume that the costs of traceablty requred to label a steak as Certfed U. S. Beef s $[bd]/lb of steak n addton to the tradtonal $4.00/lb prce, would you be wllng to pay ths premum to guarantee that your beef s Certfed U.S. Beef? a. Yes b. No A smlar queston was presented to the customer to elct WTP for a Certfed U.S. Beef Hamburger; however, the regular or tradtonal prce was set at $1.20/lb of hamburger. In both cases, the bd amounts were percent values n ncrements of 5% over the ntal the value of the product, addng up to a maxmum premum of 75%. Varable defntons and summary statstcs for the questons related to consumers' food safety atttudes and drvng forces when buyng meat products are presented n Table 2. Emprcal Specfcaton In order to smplfy the comparson of the results among models, a set of common explanatory varables has been used to explan the three ndependent decsons. The followng logt model was estmated n order to emprcally model the consumer s desre for mandatory country-of-orgn labelng of beef products, as well as ther wllngness to pay a premum for Certfed U.S. Steak, and Certfed U.S. Hamburger : 13

15 (7) WTP * β Qualty 7 = β + β Bd β Shopper + β Female + β SourceAssurance + ε 8 2, 3 + β 4 Kds + β Educat * Income 5 + β FoodSafety + 6 where Bd represents the random amount that the consumer was asked to pay; Shopper s a bnary varable that represents whether the respondent s the man shopper; Female denotes whether the respondent s a female; kds denotes whether there are chldren lvng n the household; Educat *Income s the cross-product of consumer s ndvdual educaton and ncome levels; FoodSafety represents the respondent s subjectve mportance of food safety; Qualty measures the mportance of qualty; SourceAssurance denotes the subjectve mportance of source verfcaton labels n meat products; and fnallyε s the error term that follows a logstc dstrbuton. Results The coeffcents for the wllngness-to-pay equatons used to model the consumer s desre to pay a) for a mandatory country-of-orgn labelng program; b) a premum for Certfed U.S. Steak; and c) a premum for Certfed U.S. Hamburger are presented n Table 4. All coeffcents carry the expected sgn, except the cross-product of educaton and ncome. We expected that consumers wth hgher educaton and ncome would be more wllng to support a mandatory country-of-orgn labelng program, and would be more lkely to pay a premum for Certfed U.S meat products. Obtanng the opposte result may suggest that wealther and more educated consumers already consder the meat supply safe, and do not place much value on labelng of orgn. 14

16 As expected, the bd or randomly assgned amount (prce for the program or the good) carres a negatve sgn. As demand theory predcts, the hgher the premum or amount requested to pay, the lower the probablty that a consumer would be wllng to pay such a premum. Other soco-demographc varables behave as expected. Thus, the fact that the respondent s the man shopper of the household ncreases the probablty that he/she wll be wllng to pay a premum for the three dfferent labelng programs. Addtonally, f the respondent s a female, the probablty of the respondent to be wllng to pay for a mandatory country-of-orgn labelng program, as well as a premum for U.S. Certfed Hamburger ncreases and s statstcally sgnfcant. The presence of chldren n the household s the only soco-economc factor statstcally sgnfcant when modelng the WTP equaton for U.S. Certfed Steak. Wth regard to the varables denotng the mportance of qualty, food safety, and qualty assurance to respondents, we fnd that consumers who are concerned about food qualty and food safety are more lkely to pay for a general mandatory labelng program, and to pay a premum for the U.S. Certfed Steak. On the other hand, consumers who are more concerned about source assurance of ther food are more lkely to pay a premum for U.S. Certfed Hamburger. Ths fndng reflects the fact that hamburger eaters may be more concerned about country-of-orgn certfcaton gven that a mxture of meats are commonly used to produce hamburgers. Wllngness-to-Pay Estmates Wllngness-to-pay estmates were obtaned usng the grand constant formulae (Graud, Looms, Johnson, 1999), whch s calculated by multplyng the coeffcents by ther respectve varable mean, then summng over all coeffcents (excludng the bd) and dvdng by the bd term. Thus, 15

17 (8) ˆ β 0 + ( ˆ β j x ) ˆ j= 2 MeanWT P =. ˆ β 8 1 Results from the logt model where used to generate the confdence ntervals by the bootstrappng technque employed by Park, Looms and Creel (1991). Mean WTP values and ther respectve confdence ntervals are presented n Table 5. Confdence ntervals are based on 4,000 bootstrappng repettons drawn from a unform dstrbuton. In the three cases, our estmates are statstcally sgnfcant and dfferent from zero, mplyng that n general consumers are very receptve toward country-of-orgn labelng. The mean WTP estmate for the mandatory country-of-orgn labelng program has been calculated as $431.37/ year. Although ths estmate s farly large, t represents the fact that many respondents were wllng to pay for the program even when bds were as hgh as $200 and $250/year. The premum for U.S. Certfed Steak was calculated as $1.90/lb over the orgnal base prce of $4.00/lb, whle the premum for hamburger certfed as U.S. Certfed Hamburger was estmated as $1.33/lb over the $1.20/lb regular prce. In percent terms, the premum for U.S Certfed Steak s about 47 percent of the ntal value, whle for U.S. Certfed Hamburger t s about 110 percent. Ths hgher premum n percentage terms for U.S. Certfed Hamburger can be justfed through two explanatons: frst, the hamburger when compared to steak s much cheaper, whch helps to explan the fact that consumers would be more wllng to pay hgher premums for a product whch s not as hghly prced ntally; secondly, hamburger eaters, as the results from the logt coeffcents ndcate, are n general more concerned about source verfcaton ssues, and as a consequence they are more wllng to pay for country-of-orgn labels. 16

18 Conclusons In ths paper we assess consumer wllngness to pay for a mandatory country-of-orgn labelng program, as well as for steak and hamburger labeled as U.S. Certfed Beef. We conducted a consumer survey n several grocery stores and n dfferent locatons n Colorado. Results ndcate that consumers are n general very concerned about source verfcaton ssues, and as a consequence, they are wllng to pay a hgh premum for the mandatory country-oforgn labelng program, as well as for ndvdual products labeled as U.S. Certfed Beef. In partcular, our results suggest that females, who are the prmary shoppers n ther household, and who are concerned about food qualty and food safety ssues, are more lkely to support mandatory country-of-orgn. The cross product of educaton and ncome s not statstcally sgnfcant and carres a negatve sgn for the three equatons estmated. Although surprsng at a frst glance, more educated and wealther consumers are less lkely to support mandatory country-of-orgn programs and labeled products. Thus, wealther and more educated consumers do not place any addtonal value on country-of-orgn labels. Ths fndng may substantate some of the ntal concerns related to whether or not a country-of-orgn labelng program may decrease the domestc beef market share and ncrease the correspondng share of other exportng countres such as New Zealand, Australa or Canada. Future research may focus on comparng consumer perceptons toward dfferent countryof-orgn labels. It wll be also nterestng to fnd out whether these fndngs hold n a more dverse and larger populaton. Addtonally, from a methodologcal standpont, t wll be worthy of note to dstngush the true concerned ndvduals from the yea sayers of the contngent valuaton questons n order to obtan more relable wllngness-to-pay estmates. 17

19 References Arrow, K.J. The Theory of Dscrmnaton. n O. Ashenfelter and A. Rees, eds. Dscrmnaton n Labor Markets (Prnceton: Prnceton Unversty Press), Arrow, K., J. Solow, P. Portney, E. Leamer, R. Radner, and E.H. Schuman. Report of the NOAA Panel on Contngent Valuaton. Federal Regster, 58(10),(1993): Becker, G. S. Country-of-Orgn Labelng for Foods: Current Law and Proposed Changes. The Commttee for the Natonal Insttute for the Envronment, 1725 K. Street, NW, Sute 212, Washngton DC, October 21, Blend, J.R. and E.O. Van Ravenswaay Consumer Demand for Eco-labeled Apples: Results from Econometrc Estmaton, Amercan Journal of Agrcultural Economcs, 81(1999): Brester, G.W. and V. H. Smth Here s the Beef. Choces, Second Quarter, 2000: Buhr, B., D. Hayes, J. Shogren, and J. Klebensten. Valung Ambguty: The Case of Genetcally Engneered Growth Hormones. Journal of Agrcultural and Resource Economcs, 18(1993): Chang, S. and R.T. Masson. Domestc Industral Structure and Export Qualty. Internatonal Economc Revew, 29(1988): Erkson, G.M., Johansson, J.K., and Chao, P. (1994). Image Varables n Mult-Attrbute Product Evaluatons: Country-of-Orgn Effects. Journal of Consumer Research, 11: Farm Bll Conference Framework. Farm Bll Conference Summary. Aprl 30, Graud, K. L., J.B. Looms, and R. L. Johnson. Internal and External Scope n Wllngness-to- Pay Estmates for Threatened and Endangered Wldfre. Journal of Envronmental Management, 56(1999): Han, C.M. Country Image: Halo or Summary Construct?" Journal of Marketng Research, 26 (1989): Haucap, J., C. Wey, and J.F. Barmbold. Locaton Choce as a Sgnal for Product Qualty: The Economcs of Made n Germany. Journal of Insttutonal and Theoretcal Economcs, 153(1997): Howard, D.G. Understandng How Amercan Consumers Formulate Ther Atttudes About Foregn Products. Journal of Internatonal Consumer Marketng, (2):

20 Lourero, M.L. and J.J. McCluskey. "Assessng Consumer s Response to Protected Geographcal Identfcaton Labelng," Agrbusness: An Internatonal Journal, 16(3) (2000): Lusk, J.L. J.A. Fox, T.C. Schroeder, J. Mntert, M. Koohmarae. In-Store Valuaton of Steak Tenderness. Amercan Journal of Agrcultural Economcs, 83(August 2001): Lusk, J. Branded Beef. Is t What s for Dnner? Choces, Second Quarter, 2001: Maddala, G.S. Lmted-Dependent and Quanttatve Varables n Econometrcs. Econometrc Socety Monographs, 3. Cambrdge Unversty Press, Mathos, D.A. The Importance of Nutrton Labelng and Health Clam Regulaton on Product Choce: An Analyss of the Cookng Ols Market. Agrcultural and Resource Economcs Revew. 27(2) (1998), Park, T., J. B. Looms, and M. Creel. Confdence Intervals for Evaluatng Benefts Estmates from Dchotomous Choce Contngent Valuaton Studes. Land Economcs. 67 (1991): Phelps, E.S. The Statstcal Theory of Racsm and Sexsm. Amercan Economc Revew 62(1972): Quagrane, K., J. Unterschultz and M. Veeman. Effects of Product Orgn and Selected Demographcs on Consumer Choce of Read Meats, Canadan Journal of Agrcultural Economcs, 46 (1998): Schupp, A. and J. Gllespe. Handler Reactons to Potental Compulsory Country-of-Orgn Labelng of Fresh or Frozen Beef. Journal of Agrcultural and Appled Economcs, 33(Aprl 2001): Schupp, A. and J. Gllespe. Consumer Atttudes Toward Potental Country-of-Orgn Labelng of Fresh or Frozen Beef. Journal of Food Dstrbuton Research, 33(November 2001): Strutton, D. and L.E. Pelton. Southeast Asan Consumer Perceptons of Amercan and Japanese Imports: The Influence of Country-of-Orgn Effects, Journal of Internatonal Consumer Marketng, 6(1993): Supermaket News, Natonal Cattleman s Beef Assocaton sponsors survey that ndcates that most Amercans approve of country-of-orgn labelng on beef products, n Supermarket News, (8) (February, 22):37. Umberger, W.J., D.M. Feuz, C.R. Calkns, and K. Kllnger. U.S. Consumer Preference and Wllngness-to-Pay for Domestc Corn-fed versus Internatonal Grass-Fed Beef Measured through and Expermental Aucton. Agrbusness: An Internatonal Journal. Forthcomng 18(Autumn 2002) 4. 19

21 USDA-FSIS, USDA Food Safety and Inspecton Servce, Unted States Department of Agrculture. Communcatons to Congress. Mandatory Country of Orgn Labelng of Imported Fresh Muscle Cuts of Beef and Lamb. January pp Wall, M., J. Lefeld, L.A. Heslop. Impact of Country-of-Orgn Cues on Consumer Judgments n Mult-Cue Stuatons: a Covarance Analyss. Journal of Academy of Marketng Scence, 19(1991): Wessells, C.R., Johnston, R.J., and H. Donath. Assessng Consumer Preferences for Ecolabeled Seafood: The Influence of Speces, Certfer and Household Attrbutes. Amercan Journal of Agrcultural Economcs, 81(1999):

22 Table 1. Summary Statstcs for the Demographc Varables Varable Name Descrpton (Codng) Mean Standard Devaton. Age 1= 18 to 21 2=22 to 24 3=25 to 29 4=30 to 34 5=35 to 39 6=40 to 44 7=45 to 49 8=50 to 54 9=55 to 59 10= 60+ years Gender Shopper Educaton Chldren Famly Sze Income Race 1 f female, 0 f male 1 f prmary household shopper, 0 otherwse 1 = Elementary, 2 = Some Hgh School, 3 = HS Dploma, 4 = Some College, 5 = Junor College, 6= B.A. or B.S., 7= Graduate School 1 f chldren <18 lvng n the household, 0 otherwse Number of famly members lvng n the household 2001 annual household ncome: 1 = <$20,000 2 = $20,000-$29,999 4 = $30, 000-$39,999 5 = $40, 000-$49,999 6= $50, 000- $59,999 7= $60, 000- $69,999 8= >=70,000 1 f Caucasan, 0 otherwse

23 Table 2. Summary Statstcs for Consumer Informaton and Percepton Varables (Varables measured on a Lkert Scale where 1=not at all desrable; 5=extremely desrable) Attrbute Descrpton Mean Std. Dev. Local Source Assurance Brand Importance of the beef rased locally Importance of knowng who produced your beef Importance of carryng a premum brand Fresh Importance of freshness Lean Hgh Qualty Importance of beef beng lean Importance of beef products carryng a hgh qualty grade Tenderness Assurance Nutrtonal Value Food Safety Organc Vsual Presentaton Importance of knowng that the meat s tender Importance of carryng a label about the nutrtonal value of the beef product Importance of beef beng food safety nspected Importance of the use of organc practces when rasng beef Importance of good vsual presentaton of beef

24 Table 3. Consumer Profle: Drvng Forces of Shoppng Decsons and Knowledge about the Orgn of Beef Characterstc Descrpton Mean Std. Dev. Prce Consumers who consder prce as the prmary drvng of ther shoppng decsons Qualty Health Knowledge Consumers who consder qualty as the prmary drvng force of ther shoppng decsons Consumers who consder food safety and health related ssues to be the drvng force of ther shoppng decsons Consumers who are knowledgeable about the orgn of ther beef

25 Table 4. Results: WTP equatons for a) a mandatory labelng program for beef; b) U.S. Certfed Steak; and c) U.S. Certfed Hamburger. Mandatory Labelng Program U.S. Certfed Steak U.S. Certfed Hamburger a)coeffcents a)t-values b)coeffcents b)t-values c)coeffcents c)t-values Constant ** ** ** Bd ** ** Shopper 0.890* ** ** Female 0.763** ** Kds ** Educa* Inc * Qualty 0.356* ** Food Safety 0.146** ** Source Assurance ** Log. Lk Res. Log. Lk % of Correct Predctons 75.24% 67.15% 73.89% 24

26 Table 5. Wllngness-to-Pay estmates and Confdence Intervals Program Mean WTP C.I. Mandatory Country-of- Orgn Labelng Program $ ($101.1, $603.7) Premum for Steak labeled as U.S. Certfed Beef $1.90 ($1.10, $2.45) Premum for Hamburger Labeled as U.S. Certfed Beef $1.33 ($0.98, $1.67) 25