Effects and Value of Verifiable Information in a Controversial Market: Evidence from Lab Auctions of Genetically Modified Food
Rousu, M., Huffman, W. E., Shogren, J. F., & Tegene, A. (2002). Effects and Value of Verifiable Information in a Controversial Market: Evidence from Lab Auctions of Genetically Modified Food.
Public and private R&D have been a steady source of new goods in the United States during the 20th century. New products of all types, some having new and unknown attributes, create an opportunity for major conflicts to erupt between interested parties that use private information in an attempt to affect the future course of the market for these products. One example of a highly visible new good is genetically modified (GM) foods. The first GM-foods became available in the US in the late-1990s, and the biotech industry has promoted the positive attributes of GMfoods to society. In contrast, international NGOs have advertised their negative attributes. This diverse information has increased the demand by consumers for objective information. We introduce the concept of independent, third-party information and develop a methodology for valuing it. Using data generated from a project that employs a hybrid methodology using data collected from real rather than natural experiments, we analyze laboratory auction data collected from randomly selected adult consumers in two large metropolitan areas. Verifiable information is shown to be a moderating force on willingness to pay in a market with conflicting information. Although the average value of third-party information per lab participant is small, the public good value is shown to be quite large to US consumers. Our methodology is applicable to other new consumer goods.