Noisy Information Signals and Endogenous Preferences for Labeled Attributes Report as inadecuate

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Consumer preferences for labeled products are often assumed to be exogenous to the presence of labels. However, the label itself (and not the information on the label) can be interpreted as a noisy warning signal. We measure the impact of “Contains” labels and additional information about the labeled ingredients, treating preferences for labeled characteristics as endogenous. We find that for organic food shoppers, the “Contains” label absent additional information serves as a noisy warning signal leading them to overestimate the riskiness of consuming the product. Provision of additional information mitigates the large negative signaling effect of the label

Keywords: Demand Shifts and Rotations ; Experimental Economics ; Labeling ; Signaling effect ; Willingness-to-Pay

Subject(s): Agribusiness

Agricultural and Food Policy

Demand and Price Analysis

Issue Date: 2015

Publication Type: Conference Paper/ Presentation

PURL Identifier:

Total Pages: 2

JEL Codes: L13; C21; M31; Q13; Q18

Record appears in: Agricultural and Applied Economics Association (AAEA) > 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California

Author: Liaukonyte, Jura ; Streletskaya, Nadia ; Kaiser, Harry M.


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