THE VALUE TO CONSUMERS OF GM FOOD LABELS IN A MARKET WITH ASYMMETRIC INFORMATION: EVIDENCE FROM EXPERIMENTAL AUCTIONS

With the controversy over genetically modified (GM) foods continuing to grow, there has been a major push for mandatory labeling of GM foods by consumer advocacy and environmental groups in the United States. These groups maintain that consumers would benefit from labels. Other groups think that requiring mandatory GM food labels would be too costly, or could confuse consumers. Currently the United States has voluntary labeling policy for GM foods, but several other countries require mandatory labeling. Implementing a mandatory labeling policy in the United States would involve costs, both variable and fixed, and would have benefits. This paper presents empirical evidence on consumers' willingness to pay for foods with and without GM labels using laboratory auction experiments for three food items. These experiments used a randomly selected sample of 174 individuals from two Midwestern U.S. cities, Des Moines, Iowa and St. Paul, Minnesota. Our results indicate that consumers will pay less for a food that is labeled as genetically modified than for the counterpart food product with a standard food label. The average premium that consumers were willing to pay for the food with the standard label was fourteen percent. We also finds that how consumers receive the information on whether a good is genetically modified significantly impacts willingness to pay for GM labeled food - the sequence of bidding on GM foods matters. Our study suggests the discounting for GM foods does not depend on demographic characteristics of consumers. Household income, gender, and marital status are among variables that do not appear to matter in consumer views towards GM foods.