UC Davis

This dissertation draws on theories of product differentiation from industrial organization and on agricultural economics, more broadly, to study the effect of information on consumer and producer behavior as it relates to agricultural commodities and food products. Agricultural markets are rife with information asymmetries, as complex production practices and modern supply chains and retail systems can obfuscate information about how and where products are produced and the health implications from consuming them. As a result, downstream actors rarely have perfect information about the food they are purchasing, and regulators often face difficulties tracing foodborne illnesses back to the source. The first essay examines the impact of introducing a government certification and labeling program for transitional organic crops on organic and conventional markets. Premiums garnered by transitional labels may reduce conversion costs and increase conversion, but some existing organic producers worry it may dilute the value of the existing organic label. I construct static and dynamic models of vertical product differentiation to explore how transitional certification and commensurate labeling impacts prices and market shares for conventional and organic versions of a generic commodity, and, in turn, organic conversion rates. I index consumers' valuation of the high-quality commodity (i.e., organic) using a flexible Kumaraswarmy distribution instead of the uniform distribution typically used in these types of models, as consumers valuation of quality may vary by commodity and over time. I then estimate outcomes for the domestic strawberry market by assigning values to the model parameters using data obtained from a survey developed in collaboration with a major berry producer and relevant prior research. Results from the static model indicate that, in the short run, transitional certification and labeling slightly decrease prices for organic strawberries, do not alter conventional prices, and improve or hold constant welfare for all consumers. In the long run, transitional labeling significantly increases the share of acreage devoted to organic strawberries, holding total strawberry acreage constant, and subsequently increases prices for both organic and conventional strawberries. The price increase is because the yield gap between conventional and organic strawberries leads to a reduction in total strawberry output as more acres convert. The increased prices benefit strawberry producers but come at the expense of strawberry consumers. These results suggest that a national transitional certification policy may be a useful tool in increasing domestic commodity production.

Essay 2 analyzes the economic losses resulting from the November, 2018 food safety advisory that warned consumers, retailers, and restaurants not to eat, sell, or serve any romaine lettuce or mixed salads containing romaine due to an outbreak of E. coli infections linked to romaine. Detected outbreaks including the one studied here are usually characterized by uncertainty and lack of information as to the scope of implicated products and regions, which often results in broad advisories and widespread damages. I separately estimate losses to growers, processor/shippers, retailers, and food-service operators, in addition losses to society, during and after the advisory period using wholesale data from a cooperating processor that supplies both food-service and retail outlets combined that with public data on spot-market prices and movement provided by the USDA-Agricultural Marketing Service and retail scanner data from the Nielsen Company. I then use regression analysis to predict what prices and sales would have been in the ``but for'' world absent the E. coli advisory, compare these values to the real-world prices and quantities during the advisory period and aftermath for romaine and its substitutes, and compute economic impacts from price changes and lost sales. Due to the structure of grower contracts, growers were minimally impacted by the advisory, while processors and shippers lost approximately \$52.7 million from price and quantity impacts. Retailers amassed \$25.7 million in losses mostly due to pulling product from their distribution channels and shelves in response to the advisory. Conversely, food-service operators were little impacted. I further estimate that societal losses from the Fall 2018 incident were in the range of \$280 to \$350 million. The third essay evaluates consumers' stated and revealed preference for locally produced food products using both a survey and a market-level labeling experiment. The survey, distributed by two Sacramento-area food co-ops, assessed differences in willingness-to-pay (WTP) and intensity of preference for local produce and processed foods and examined which characteristics consumers associate with a ``Local'' label. For the labeling experiment, I introduced ``Local'' shelf labels to products in five processed-food categories in one of these stores for four weeks. Both stores provided weekly sales data by UPC for four weeks prior to, during, and after the experiment, and I further collected detailed information on product claims, product placement, and promotions for each product. The vast majority of shoppers at both stores expressed a preference for locally produced produce and processed foods and indicated they would be willing to pay a premium for them. These preferences, however, did not carry forward to increased sales for products affixed with a ``Local'' label in the retail experiment. An analysis of the sales data in a triple-triple difference framework fails to detect significant average treatment effects. Significant heterogeneous treatment effects suggest that the experimental labels primarily draw attention to or highlight products at the point of purchase, and might be more effective for products that do not already capture consumers' attention through manufacturer's claims, retailer discounts, or prime shelf-positioning.

Taken together, the research in this dissertation provides valuable insights on when the provision of information might help advance policy goals and when it might fall short in that regard. Further, it illustrates how imprecise and overly broad information, like that provided many initial food safety advisories, can generate far-reaching economic losses.