Understanding Individual and Market Reactions to Changes in Information

NON-TECHNICAL SUMMARY: The function of product information approaches (e.g., labeling and social marketing) is to improve the flow of information to consumers who, in turn, alter their information search and or product purchase behaviors. These changes in consumer behaviors then may lead to changes in producer behaviors. For example, firms may develop new marketing strategies or target different consumers, develop new products, and alter the attributes of current products. In theory, firms that are better able to take advantage of the labeling and marketing programs will be rewarded with a comparative advantage. However, only a few firms need to initially respond to these more progressive consumers, as many firms respond with imitation effects. Such information programs are widespread and work well when the focus of the information is a change in product quality that directly benefits the consumers (e.g., provides a private benefit). Recently, such information programs are also being used to provide information about products that provide public benefits (e.g., improved air quality). Empirical comparisons of the effectiveness of these types of information programs are lacking. Although there are a growing number of survey-based studies indicating that these information programs may alter consumers' perceptions of products and influence product choices, these results have been based solely on hypothetical or experimental scenarios. Other studies, which have looked at changes in actual behavior due to changes in such programs, have indicated some success. However, each of the programs studied also includes other, non-informational factors (e.g., subsidies, rebates or lottery prizes for participation in the program). Thus, it is unclear whether the success of these programs was due to the informational component of the program. For products and services where consumer choice can have a substantial impact on public good provision, effective implementation of information programs may be cost effective and desirable. Properly executed and supported, these programs allow customers to make choices that clearly reflect their preferences while simultaneously achieving policy objectives (e.g., reductions in fossil fuel use and air emissions). However, such programs may not achieve these objectives unless consumers notice, believe, understand and can use the information presented to them. Social psychologists identify several steps in the process of behavioral change in response to information, and some of the factors that influence the steps in the process. This literature highlights that the effectiveness of such programs is influenced by the way the information is presented and by the capacity of the consumer to absorb and act on it. Current studies of these information programs have been limited in that they all focus on measuring how information effectiveness varies across the characteristics of the information or the consumer. <P>APPROACH: The proposed research will use various survey datasets to measure the effects of altering product quality, or information about product quality on consumer behavior and welfare. A. This project will use a data set, funded by the Centers for Disease Control (CDC), designed to provide empirical estimates of individuals willingness to pay (WTP) for reductions in the probability of contracting foodborne illnesses and to determine whether WTP varies across pathogens and food products, and to determine if the above WTPs are affected by the amount of information presented to the respondent. B. This project will use national survey data, (2002 FoodNet Population Survey) to evaluate the factors that impact food safety values. An economic model of risk processing appropriate for predicting individuals WTP for food safety protection will be developed and estimated to analyze the relationship between the elicited values and the hypothesized factors that would impact these values. C. This project will use a USDA funded data set designed to measure consumer reactions to alternative labeling policies for genetically modified (GM) foods. A relatively detailed set of preference questions allows us to segment consumers into relatively homogeneous groups and then examine how these segments differ in how they evaluate GM foods and how they evaluate the need and structure of GM labeling policies. Another facet of this data set is that some of the WTP questions varied in their order of presentation within the survey. This will allow us to test if the responses to the valuation questions are affected by the order of presentation. D. This project will use the U.S. Food Safety Survey to measure consumer reactions to alternative food technologies: irradiation, genetic modification and organic. In the survey, respondents were asked a series of questions to elicit their knowledge of, and attitudes toward these technologies. Various statistical techniques (factor analysis, multivariate regression) will be used to determine the factors that influence consumer knowledge and attitudes. E. This project uses data from an EPA funded project, which studied the effect of an eco-labeling and marking effort for environmentally better vehicles. The project provides an excellent opportunity to identify whether eco-information programs can be effective as a policy variable to change consumer knowledge, perceptions, attitudes, and information search behaviors (we focus on these metrics because these are important antecedents to environmentally preferred behavior).