Benefit evaluation of the country of origin labeling in Taiwan: Results from an auction experiment

Abstract

This research is aimed at investigating the consumer's preference for food produced in Taiwan and the economic benefits for the country of origin labeling. The study uses both experimental auction and contingent valuation method (CVM) to investigate factors that affect the consumer's willingness to pay (WTP) for products under country-of-origin labeling (COOL).Experimental auctions of Taiwan and China preserved olives as well as Taiwan, China and Vietnam oolong teas were conducted using the Vickrey's second price sealed bid auction. For CVM, the study used the double-bounded dichotomous choice method in which we started assuming the same base price for all products in the first question and then varied the prices in the second CV question. The products not chosen in the first question were offered with a discount in a range from 10% to 50% in the following question.Based on auction data, the Tobit model shows that the estimated premiums are 58.1%, 78.15% and 98.13% for Taiwan products over their alternatives of China olives, China oolong tea, and Vietnam oolong tea, respectively. Based on the CVM, the estimated premiums for Taiwan over China olives from a Logit model is 67%, and the premiums for Taiwan produced oolong tea should lie between 50% to an unknown upper bound over China and Vietnam alternatives as the Multinomial Logit model cannot be successfully estimated due to too few choice switches with discounted prices. The study thus demonstrates the superiority of the experimental auction over the CVM in eliciting the WTP for foods produced in Taiwan. The study concludes that enacting a COOL law would increase economic benefits to consumers in Taiwan, and at the same time, placing the imported products in the level playing field.

Market Potential of Folate Biofortified Rice in China

“…3 ¥ 34 , WTP for FBR is calculated as a continuous WTP-variable, which allows one to distinguish people who want a discount, an equal price or a premium. Unlike the DC-CV method (Chern and Chang, 2009), a direct price estimation based on 33 Jīn is the most common measure for rice bags in Shanxi and China: 1 jīn is equal to half a kilogram. 34 The average Shanxi rice price in 2008 that is mentioned in the survey is slightly below the average price for Japonica rice in China, ca.…”

“…As a consequence, auction-based values are typically lower than the values obtained through hypothetical contingent valuation methods (Balistreri et al, 2001;Chern and Chang, 2009). Due to the aforementioned hypothetical bias, hypothetical bids generally exceeded auction values by a factor of 1.65 (Balistreri et al, 2001) to 3 (List and Gallet, 2001).…”

“…Generally, hypothetical valuation methods are found to generate significantly higher values than the non-hypothetical methods, a phenomenon which is mainly attributed to the lack of hypothetical bias in the latter (Balistreri et al, 2001 (Balistreri et al, 2001;List and Gallet, 2001;Chern and Chang, 2009). As both are incorporated in the study on WTP for FBR, the existence of hypothetical bias is examined by comparing sWTP and WTP values (RQ5A).…”

“…values truncated at zero, some authors introduced negative bids in their Vickrey auction to distinguish indifferent from reluctant people. Broadening the bidding rule to allow for negative bidding is relatively new in auction literature (Dickinson and Bailey, 2002;Parkhurst et al, 2004;Hobbs et al, 2006;Chern and Chang, 2009;Wang and McCluskey, 2010) and could be particularly relevant when auctioning controversial goods (Parkhurst et al, 2004), such as GM food products.…”

Delphi study on country-of-origin labelling for processed foods

“…In recent years, much academic research on COOL has been carried out for studying the value of COOL information for consumers (Davies and MacPherson, 2010;Loureiro and Umberger 2007;Tonsor et al 2013;Wang et al 2013;Ward et al 2005;Yong et al 2010), the influence of origin labelling on consumers' choice (Chern and Chang 2012;Ivanković and Kelava 2012;Kimura et al 2011;Klöckner et al 2013;Lim et al 2013;Menozzi et al 2011;Peterson et al 2013), the effect of COOL on trade (Johnecheck et al 2010;Jones et al 2013;Lombardi et al 2013;Matsumoto 2011;Plastina et al 2011;Rabbani et al 2011). In reviewing the findings of the various research, we make the following observations: (1) It is a common view that COOL is useful for protecting consumers' interest by better informing them when they buy foods.…”