Cathy Roheim Wessells, University of Rhode Island
Marine Resource Economics, Volume 17, pp. 153-162
Objectives
- Presents economic theory of information reflected by differing demand for and supply of seafood products in the presence or absence of certain attributes
- present theoretical framework for economics of market for information regarding product attributes
- reveal use of framework in empirical literature related to seafood
Methods/Approach
- This paper was a literature review of:
* the economics of attributes, specifically for seafood
* empirical literature of studies that broke seafood into attributes specifically using hedonic analysis, conjoint analysis and conjoint choice experiment
Results/Conclusions
- demand for attributes and information about those attributes exist, specific attributes are valuable to consumer
- there is a demand for information on product quality, seafood safety, environmental friendliness, and even the name of broker in the case of bluefin tunas sold in Tsukiji market
- demand is subject to nature of attribute, for cases where there is no demand there is no market for information
- if the government perceives there is a social benefit to the provision of product attributes or information, then there may be regulatory steps taken that force producers to expend resources to do so
- if consumers continue to demand attributes there is a potential for confusion if there are too many labels
* an extreme case of confusion is a lack of interest on the part of the consumer which could possibly lead to the disappearance for the market for attributes or information
Assumptions
- currently a competitive market for seafood
- consumers' interest in knowing more about seafood products will evolve and people will want desired attributes
- fishery sector only recently began paying attention to quality vs. aquaculture sector which has historically focused on quality attributes (ex. Pacific wild-caught salmon market has declined)
- seafood producers (farmed and wild) differentiate products with country of origin, brand, nutritional or environmental labels
- producers will supply information as long as marginal cost to provide is less than marginal benefit
- some consumers concerned with dolphin-safe practices, but not shark-safe practices
- the difficulty of determining product quality in the market is even greater than that of determining price levels, since information about quality is usually more difficult to obtain.
- producers will make explicit claims for all positive aspects of goods which makes consumers suspicious of goods without claims (Aldrich 1999)
Opinion
According to Google Scholar this article has been cited 15 times, 3 are about seafood supply chains. The author never stated a methodology for how the empirical literature was chosen, so I am not certain the literature review is exhaustive. The stated objectives of discussing the economics of information about seafood attributes was concisely discussed, and the literature was informative as it discussed hedonic, conjoint and conjoint choice methodologies. The conclusions were not directly tied to or supported by the information in the paper, but it still contributed to the general discussion. Overall the article had a lot of useful information for me regarding terminology. Specifically the breaking down of good or attributes into search, experience and credence will come in handy for choosing attributes for a conjoint analysis. The discussion of attributes in economic terms can contribute to the framing of our work.
One point of confusions is the last line of of the paper:
- " The extreme case of confusion is a lack of interest on the part of the consumer. Then, the framework presented above tells us that there will no longer be a market for attributes or information. Based on the empirical analysis discussed above, this would truly be unfortunate. "
I guess I just don't think that it will be "unfortunate" based on the empirical analysis of the discussion. I can see it would be unfortunate if industry and government could not align themselves with consumer information demand and therefore confusing the entire population to the point of not caring. The gap may arise in that industry and government do not know what information the consumer demands which is why papers such as this need to deliver this information to the proper recipients.
Useful Information
- Another example of consumer demand for information on product attributes was the nationwide attempt by consumer advocate groups in the U.S. requesting that the federal government require labeling milk as to whether it came from hormone-treated dairy cows. In this case, the consumers wished for a regulatory solution, rather than a voluntary solution, by the milk industry. However, the U.S. Food and Drug Administration (FDA) decided that there was no public benefit in providing that information on milk cartons, as there are no known health risks of drinking milk from bST-treated cows. Thus the initiative failed, even though there was consumer demand for this information." (p. 154)
- search cost (Stigler 1961) = time and energy expended by consumer in determining seller with lower price (or any other attribute), marginal benefit of additional information is equal to marginal cost of obtaining additional information; there exists a willingness to pay for information and a marginal cost for obtaining it
- Types of products
* Search goods: can be determined by quality of searching price, color and smell
* Experience goods: quality discerned by experience of taste, durability or preparation
* Credence goods: (Darby and Karni 1973)
_ imperfect market because it is not practical for consumers to assess quality of product
_ asymmetry of information between producer and consumer, ex. safety-approved or recyclable
_ labeling can transform credence attributes to search attributes that allow consumer to judge quality of good before purchase
- Quality Attributes of Food Products (Hooker and Caswell, 1996):
* Food Safety: Foodborne pathogens, Heavy metals, Chemical residues, Food additives, Naturally occurring toxins, Veterinary residues
* Nutrition: Fat, Calories, Fiber, Sodium, Vitamins, Minerals
* Value: Purity, Compositional integrity, Size, Appearance, Taste, Convenience of Preparation
* Package: Package materials, Labeling, Other information such as recipes
* Process: Animal welfare, Biotechnology, Environmental impact, Chemical use, Worker safety
- "Recognizing that attributes like these have value to consumers, Lancaster (1971) characterized consumer demand for products instead as consumer demand for a bundle of attributes, where each product has one or more attributes. The essence of Lancaster’s framework is that a good by itself does not yield utility, but it possesses characteristics (attributes) that create it. Therefore, there is a demand for attributes in the marketplace. There is also a supply of attributes." (p. 156-157)
- An ecolabel such as the Marine Stewardship Council's (MSC) program creates a vertical supply curve
*only demand determines price
* the cost of certifying a fishery is fixed
* one level of environmental friendliness (fishery is well managed by MSC's standards and criteria)
* no gradation of management
* if size affects cost of supplying a well-managed fishery then supply can shift left or right
* food safety is a classic example of producers choosing not to supply product attributes because private marginal cost may outweigh private marginal benefits even though social benefit of information about attributes outweigh social cost
- freshness, fat content, color and shape have largest influence on price for bluefin tuna sold in Tsukiji Central Wholesale Market in Tokyo
* fat content is experience and search attribute
* determined in Carroll, Anderson , and Martinez-Garmendia (2001) using hedonic analysis, limited to success of data set in ability to differentiate various pieces of information pertinent to determination of product price
- Conjoint analysis vs. contingent choice
* used when market does not exist, product with certain characteristic has not reached the market
* Conjoint analysis
_ Holland and Wessells (1998): 9 hypothetical fresh salmon products presented, respondents asked to rank products, attributes that changed were price and production information such as farmed vs wild vs. no information, seafood safety inspection (USDA, FDA or no information)
^ used rank-ordered logit model (Beggs, Cardell and Hausman 1981)
^ credence goods: inspection, wild vs. farmed
^ search good: price
* Contingent Choice
_ Johnston et al. (2001): consumer tradeoff between products that are and are not ecolabelled in U.S. and Norway
^ using logit model, choice of certified is regressed against price, demographic attributes, preference attributes and environmental purchasing behavior
^ directly asked which agency would be trusted to provide sustainability claim (WWF, MSC or National Marine Fisheries Service (NMFS) in U.S. and WWF, MSC or Norwegian Fisheries Directorate (NFD))
+ NMFS had highest U.S. rating
+ 23% unsure
+ certifying agency is only important to Norwegians
* primary reason for use of conjoint choice is no market data exist from which to compare consumer demand
- seafood consumers place relatively little value on guarantees offered solely by industry groups (Wessells and Anderson 1995)
Further Research
- "There have not been any studies determining the cost structure of supplying seafood safety, environmental friendliness, or other attributes, nor have there been studies of the costs of supplying this information to the consumers." (p. 160)
Useful references
Homans, F.R. and J.E. Wilen. 1997. A model of Regulated Open Access Resource Use. Journal of Environmental Economics and Management 32:1-21.
Mariojouls and Wessels, 2002. ???. Journal of Environmental Economics and Management 32.
Hooker, N.H., and J.A. Caswell. 1996. Regulatory Targets and Regimes for Food Safety: A Comparison of North American and European Approaches. The Economics of Reducing Health Risk from Food, J.A. Caswell, ed., pp. 1–17. Storrs, CT: Food Marketing Policy Center.
Holland, D., and C.R. Wessells. 1998. Predicting Consumer Preferences for Fresh Salmon: The Influence of Safety Inspection and Production Method Attributes. Agricultural and Resource Economics Review 27:1–14.
Caswell, J.A. 1998. Valuing the Benefits and Costs of Improved Food and Safety and Nutrition. The Australian Journal of Agricultural and Resource Economics 42: 409-24.
Darby, M.R. and E. Karni. 1973. Free Competition and the Optimal Amount of Fraud. Journal of Law and Economics 16:67-88.
Lancaster, K.J. 1971. A New Approach to Consumer Theory. The Journal of Political Economy 74: 132-57.
Stigler, G. 1961. The Economics of Information. Journal of Political Economy 69:213-25.
Aldrich, L. 1999. Consumer Use of Information: Implications for Food Policy, Food and Rural Economics Division, Economic Research Service, U.S. Department of Agriculture. Agricultural Handbook No. 715.
Nelson, P. 1970. Information and Consumer Behavior. Journal of Political Economy 78: 311-29.
Nelson, P. 1974. Advertising as Information. Journal of Political Economy 81: 729-54.
Beggs, S., S. Cardell, and J. Hausman. 1981. Assessing the Potential Demand for Electric Cars. Journal of Econometrics 17:19–20.
Akerlof, G.A. 1970. The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism. Quarterly Journal of Economics 84:488–500.
Wessells, C.R., and J.G. Anderson. 1995. Consumer Willingness to Pay for Seafood Safety Assurances. Journal of Consumer Affairs 29:85–107.
Wessells, C.R., J. Kline, and J.G. Anderson. 1996. Seafood Safety Perceptions and their Effects on Consumption Choices under Varying Information Treatments. Agricultural and Resource Economics Review 25:12–21.
Johnston, R., C.R. Wessells, H. Donath, and F. Asche. 2001. A Contingent Choice Analysis of Ecolabelled Seafood: Comparing Consumer Preferences in the United States and Norway. Journal of Agricultural and Resource Economics 26:20–39.
Holland, D., and C.R. Wessells. 1998. Predicting Consumer Preferences for Fresh Salmon: The Influence of Safety Inspection and Production Method Attributes. Agricultural and Resource Economics Review 27:1–14.
Carroll, M., J.L. Anderson, and J. Martinez-Garmendia. 2001. Pricing U.S. North Atlantic Bluefin Tuna and Implications for Management. Agribusiness 17:243– 54.
Anderson, J.L. and S. Bettencourt. 1993. A Conjoint Approach to Model Product Preferences: The New England Market for Fresh and Frozen Salmon. Marine Resource Economics 8(1):31–49.
Wirth, F.F., C.K. Halbrendt, and G.F. Vaughn. 1991. Conjoint Analysis of the Mid- Atlantic Food-Fish Market for Farm-Raised Hybrid Striped Bass. Southern Journal of Agricultural Economics 23:155–64.
