Mandatory Labeling: Changes in Consumer and Producer Behavior

Abstract

In this dissertation, I examine consumer response to information available on product risks, and the response to regulatory changes in the type of risk disclosure specifically. My underlying theses relate to phenomena studied by behavioral economics such as a salience effect, probability weighing and a reliance on heuristics. I begin with a computer-based experiment studying consumer behavior and how the prevalence of a label can drive valuations independent of the underlying characteristics in the context of GMO-labels for packaged foods. I then examine the effect of removing a well-established label for rBGH-free milk in Ohio through 2008 to 2010, revealing a marketing response by producers which has not been discussed extensively in the existing literature. Finally, I take a wide-angle look at producers’ response to regulation, specifically the problem of labeling “leakage” from organic to natural labels, and the effects a changing product mix has on the trends identified.