http://www.a4nh.cgiar.org/

1. Comments on
Solving Market
Failures in
Safety
Vivian Hoffmann
University of Maryland /
IFPRI

2. Market Failures in Food Safety
1. Asymmetric information
 Unobservable attributes (e.g. food quality and
safety) are under-provided
 Possible solutions:
 Reputation effects
 Regulation
 Voluntary certification
 Accessibility to small producers?
 Impacts on profits of certified and non-certified
producers?

3. 2. Low consumer demand for invisible traits
 Noisy signal, difficult to observe benefits
 High discount rate
 Liquidity constraints
 Lessons from demand for preventive health goods
 High price sensitivity around zero
 Importance of salience
 Role of habits
 Suggests model of limited attention
(see Kremer & Glennerster, 2011 Handbook of Health Economics)

4.  Different from other health inputs:
already buying food
 Safety premium is marginal price increase:
possibly lower price sensitivity
 Can bundle safety with other, valued,
attributes:
 fat content (creaminess) of milk
 freshness of produce

5. Reducing Adulteration in Milk
in India: Study Objectives
1. Assess the awareness and valuation of
food safety and nutrition attributes
among dairy consumers
2. Identifying the sources of information
gaps, the study will conduct experiments
with information treatments to assess
their impacts in terms of consumer
choices (in terms of both products as
well as practices)

6. Milk Information Field
Experiment: ideas
 Recruit regular customers of food retailers
 Already sell branded milk conforming to safety
standards (or willing to sell certified milk)
 Given brand no more expensive than at nearby
competitors
 Customers purchase other goods regularly, not
necessarily milk (may purchase from informal sector)
 Randomize information interventions at
customer or shop level (or both)

7. Milk experiment: Outcomes
 Observe purchase behavior
Retailer level randomization
• Track milk sales
Customer level randomization
• Track purchases
 Observe stored milk, discarded packages at
household visit
 Track redemption of coupons

8. Milk Experiment:
Information treatments
1. Learning or salience?
 Collect data on beliefs before and after
information shock
• Does shock affect behavior even when it doesn’t
change beliefs?
 What happens to demand for higher quality milk
over time?
 Effect of reminders
• text messages, fridge magnet (?)

9. Milk Experiment:
Information treatments
2. From whom is information trusted?
 Retailers
 Health experts
 Peers
 Role models (movie stars, near peers)
 Multiple sources vs. repetition from same
source: salience vs. credibility
 Randomize which household member
(woman, husband, mother in law) receives
information

10. Milk Experiment:
Choice treatments
3. Binary certification vs. range of options
 Offer certified safe milk, vs. provide average
contamination levels of each brand, vs. both
 Binary decision requires less thought
 More options allow consumers to get closer to utility
maximizing risk-price combination

11. Milk Experiment:
Choice treatments
4. Bundling attributes
 Combine safety and nutrition information with
information on attributes related to taste
(also offer each separately)

12. Dual food standards in South
Africa
 Can dual standard development
advance market access for emerging
farmers while at the same time ensuring
public health?

13. Fresh Produce Markets in
South Africa
 Serve both formal and informal buyers
• Formal sector has incentive to comply with public regulations
• Small but growing share of sales
 Sell produce from both large scale and small scale
producers
• Many large scale producers already meet export standards.
 What food safety mechanisms are already in place?
• Do formal sector buyers buy from preferred, high quality
vendors?
• Relationship between price and food safety?

14. Consumer perceptions of food safety
in formal and informal sectors
 Consumer survey
• Beliefs about likelihood and effects of contamination
Add?
• Perceptions of other food quality attributes
• Consumer transaction costs: travel and time cost to market,
wage rate
 Market survey
• Prices, observable product attributes
Analyze:
 What factors drive consumers’ sector choice?
 Estimate consumers’ valuation of health benefits

15. New Voluntary Food Safety Standard
 Proposed by food industry group
 All major retailers have agreed to adopt
 Puts pressure on fresh produce
wholesalers to adopt as well
 Research opportunity

16. Producer adoption and impact
 Which producers are able to meet new standard?
 Strategies to promote inclusive market access
• Tailor standards to capacity of small-scale farms?
• Public support for small farmers to meet standards?
 Impact on farm profits?
• Certified producers
• Non-certified producers
 Spillover effects on practices of non-certified
producers?

17. Can voluntary local standards
achieve public health goals?
 Impact on overall food safety?
 Market segmentation effect?
 Given dietary patterns and food preparation
practices, what is likely health impact?
• Distribution of health impacts?
 Compare effects at various levels of stringency
• Producer cost and adoption
• Consumer demand
 Characterize standards that maximize health gains

18. Possible research design
Surveys before and after
implementation of new standard
 Producers
• Farm budget, compliance related costs
 Formal and informal retailers:
• Sales of certified foods, contamination levels,
prices
 Consumers across SES levels
• Vendor and food choices, contamination levels
Model producer decision to adopt
standards, consumer food choices

19. Overlay an intervention?
Randomize compliance assistance to small
farmers
 Test impact of compliance on farm costs,
profits, using assistance as instrument
Vary whether farmers receive assistance to
achieve GlobalGAP or local standard
 Test impact on producers of different
levels of stringency