Academic journal article Agricultural and Resource Economics Review

Food Safety Information, Changes in Risk Perceptions, and Offsetting Behavior

Academic journal article Agricultural and Resource Economics Review

Food Safety Information, Changes in Risk Perceptions, and Offsetting Behavior

Article excerpt

(ProQuest: ... denotes formulae omitted.)

Safety and health policies are adopted to reduce harm to potential victims from accidents and other harmful events. However, such policies can induce offsetting behavior (Miljkovic, Nganje, and Onyango 2009) in which potential victims respond to the policies by relaxing their guard and increasing their exposure to the risk. As a result, the net benefits of food safety policies viewed in terms of reduction of food-borne illnesses can be much smaller than their predicted effects because of failure to account for such behavior. Economists have theoretically (Peltzman 1975, Hause 2006, Pope and Tollison 2010, Potter 2011) and empirically (Crandall and Graham 1984, Yun 2002, Peltzman 2011) recognized that the direct effect of a policy aimed at mitigating harm can be attenuated and even reversed when safety policies induce consumers to alter their attitudes toward a risk and their behavior. An example of offsetting behavior is the increase in rates of head injuries from bicycle accidents by 10 percent between 1990 and 2000 (Barnes 2001) despite much wider use of helmets. Some safety analysts think that this occurred, at least in part, because victims began to engage in behavior that was more risky (Hause 2006).

In other words, risk-reducing policies may affect people's risk preferences and, more specifically, cause them to be less risk-averse. Figure 1 presents the potential relationship between perceptions of risk, the actual degree of hazard, information, and demand for the risky commodity that can lead to this phenomenon. In communication theory, the gap between a person's perception of a risk and the actual degree of hazard can be represented by outrage (Sandman 1987), which, being largely a product of fear of the unknown, is driven primarily by information and can significantly affect demand. Initially, lack of accurate information about food safety or an outbreak will move perceived risk from the baseline risk perception (α). Positive information via creation of mandatory food safety regulations can subsequently modify consumers' risk perceptions, bringing them gradually back to the baseline level (Lui et al. 1998). Positive information also can provide consumers with a choice regarding whether to demand food that presents a relatively high risk, such as burgers served rare. In Figure 1, when positive information is held constant, the magnitude of the benefitofa mandatory regulation (its ability to reduce consumption of unsafe foods) is CD. The combination of outrage and positive information creates a new equilibrium at E rather than D. Circumstances in which the risk associated with E is greater than that of C represent dominant offsetting behavior.

We hypothesize that the shift in risk-aversion related to offsetting behavior may be especially strong when information is imperfect, as is the case for processes such as the U.S. Department of Agriculture's (USDA's) mandatory pathogen-reduction, hazard analysis, and critical control point (PR/HACCP) system. The HACCP regulation requires meat processing plants to conduct hazard analyses to identify potential food safety hazards and to then implement plans for monitoring and controlling the hazards. Imperfect information also can result from consumers' lack of awareness that other segments of the supply chain (farms and retail stores) are not required to implement PR/HACCPs. Again, these conditions affect the magnitude of E in Figure 1.

Our hypothesis is grounded in several observations. The first is that media reports on outbreaks of food-borne illnesses and recalls affect consumers' attitudes toward the risk and demand for hazardous products (Piggott and Marsh 2004). Other studies have concluded that any such change in behavior can be attributed to "herding behavior"-essentially, following the masses (Miljkovic and Mostad 2007). However, there is ample evidence that consumers resume their purchases and consumption of food items once the Food and Drug Administration (FDA) announces that the recalls have ended (Adda 2007). …

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