Showing papers by "Jayson L. Lusk published in 2012"

Repeated Rounds with Price Feedback in Experimental Auction Valuation: An Adversarial Collaboration

Abstract: It is generally thought that market outcomes are improved with the provision of market information. As a result, the use of repeated rounds with price feedback has become standard practice in the applied experimental auction valuation literature. We conducted two experiments to determine how rationally subjects behave with and without price feedback in a second price auction. Results from an auction for lotteries show that subjects exposed to price feedback are significantly more likely to commit preference reversals. However, this irrationality diminishes in later rounds. Results from an induced value auction indicate that price feedback caused greater deviations from the Nash equilibrium bidding strategy. Our results suggest that while bidding on the same item repeatedly improves auction outcomes, this improvement is not the result of price feedback.

Speciesism, altruism and the economics of animal welfare

Abstract: Economists have long relied on utilitarian principles in carrying out cost – benefit analysis, but such utilitarianism is typically limited to the well-being of humans. Some prominent philosophers have argued such an approach is unjustifiably speciesist, but what are the consequences of including animal well-being in cost – benefit analysis? This paper considers this question in the context of human altruism towards animals in which people’s concerns for the well-being of animals create an externality. After uncovering some conceptual challenges involved in carrying out cost –benefit analysis on animal welfare policies, we report the results of a novel experiment used to measure the public-good value of farm animal welfare, and show that although the average value in our sample is quite large, the result is due to the preferences of only a small subset of the subjects.

When do fat taxes increase consumer welfare

Abstract: Previous analyses of fat taxes have generally worked within an empirical framework in which it is difficult to determine whether consumers benefit from the policy. This note outlines on simple means to determine whether consumers benefit from a fat tax by comparing the ratio of expenditures on the taxed good to the weight effect of the tax against the indivi­ dual’s willingness to pay for a one-pound weight reduction. Our empirical calculations suggest that an individual would have to be willing to pay about $1500 to reduce weight by one pound for a tax on sugary beverages to be welfare enhancing. The results suggest either that a soda tax is very unlikely to increase individual consumer welfare or that the policy must be justified on some other grounds that abandon standard rationality assumptions. Copyright © 2011 John Wiley & Sons, Ltd.

Can Labeling and Information Policies Harm Consumers

Abstract: Information and labeling are popular food policy instruments because of their presumedpositive influence on consumer welfare. In a one-good case with unlimited attention, we showconsumer welfare is always improved with the provision of accurate information. However, ina two-good case with limited attention, we show that consumer welfare is not always improvedwith the provision of accurate information. When attention is constrained, welfare may fall withinformation provision policies irrespective of their costs. The results suggest information andlabeling polices may sometimes be counterproductive when attention is limited.

Public and Private Preferences for Animal Cloning Policies

Abstract: Data on individuals’ private shopping choices are often used to draw conclusions about their desires for food policies. The purpose of this paper is to test this often-implicit assumption using data from a nationwide survey about animal cloning. We find that although individuals’ private choices indicate a strong desire to avoid meat and milk from cloned cattle, public choices predict that only 40.29% have a positive WTP for such a ban. The results suggest caution is necessary when inferring public preferences from private choices.

Judging statistical models of individual decision making under risk using in- and out-of-sample criteria

Abstract: Despite the fact that conceptual models of individual decision making under risk are deterministic, attempts to econometrically estimate risk preferences require some assumption about the stochastic nature of choice. Unfortunately, the consequences of making different assumptions are, at present, unclear. In this paper, we compare two popular error specifications (Luce vs. Fechner), with and without accounting for contextual utility, for two different conceptual models (expected utility and rank-dependent expected utility) using in- and out-of-sample selection criteria. We find drastically different inferences about structural risk preferences across the competing specifications. Overall, a mixture model combining the two conceptual models assuming Fechner error and contextual utility provides the best fit of the data both in- and out-of-sample.

A Comparison of Salary Structures Between Economics and Agricultural Economics Departments

Abstract: We examine whether differences exist in the prevailing salary structures for doctorate-granting economics and agricultural economics departments at public, land-grant universities in the United States. Within a sample of 440 economists and 375 agricultural economists, we find that economics departments exhibit greater variation in annual salaries, higher estimated negative returns to seniority, and larger estimated returns to career publishing success than do agricultural economics departments. These difference manifest themselves in a hierarchical salary distribution in which members of elite economics departments earn the highest predicted annual salaries, members of elite agricultural economics and middle-ranked economics departments earn middle predicted annual salaries, and members of middle- and lower-ranked agricultural economics and lower-ranked economics departments earn the lowest predicted annual salaries. In 16 out of 22 universities studied, we predict that economists would face salary declines if they moved across campus (or in some cases down the hall) to their respective agricultural economics departments.

Risk preference elicitation without the confounding effect of probability weighting

Abstract: In this paper we show that the wildly popular Holt and Laury (2002) risk preference elicitation method confounds estimates of the curvature of the utility function, the traditional notion of risk preference, with an estimate of the extent to which an individual weights probabilities non-linearly. We show that a slight modification to their approach can remove the confound while preserving the simplicity of the method which has made it so popular. Data from a laboratory experiment shows that our new method yields significantly different levels of implied risk aversion than the Holt and Laury task even after econometrically controlling for probability weighting in the latter. Implied risk aversion from the traditional Holt and Laury task is relatively insensitive to payout amount, but our new method reveals increasing relative risk aversion and risk neutrality at low payout amounts.

The Value and Cost of Restaurant Calorie Labels: Results from a Field Experiment

Abstract: Using field experiment data, we estimate a structural model of consumer demand to determine the value of information for restaurant menu labels. Our experimental design allows us to compare the effectiveness of calorie labels to a “fat tax” at reducing caloric intake. Results show numeric labels did not influence demand, but symbolic traffic light labels reduced the marginal utility of caloric intake. Our model projects both labels would reduce intake more than high-calorie taxes or low-calorie subsidies. Ultimately, traffic light calorie labels led to the largest reduction in caloric intake but also one of the largest reductions in restaurant net returns.

Can labeling and information policies harm consumers

Abstract: Information and labeling are popular food policy instruments because of their presumedpositive influence on consumer welfare. In a one-good case with unlimited attention, we showconsumer welfare is always improved with the provision of accurate information. However, ina two-good case with limited attention, we show that consumer welfare is not always improvedwith the provision of accurate information. When attention is constrained, welfare may fall withinformation provision policies irrespective of their costs. The results suggest information andlabeling polices may sometimes be counterproductive when attention is limited.

The Role of sensory experience on Spanish consumer’s willingness to pay for sustainable produced food

Abstract: For a variety of reasons, Spanish growth in demand for organic and integrated products has not kept up with supply. This work focused on the effect of information and sensory issues on purchase behaviour in relation to sustainable agricultural production. Using experimental auctions and results from (trained and untrained) sensory Panels, we studied the preferences for attributes related to food sustainability. Spanish consumers have a positive attitude towards sustainable food due to environmental concerns, health concerns, and trust in certification and market agents. However, the premium they are willing to pay for these products is lower than the current market price. Furthermore, “search” and sensory “experience” influence consumers’ purchase behavior.

What Are the Consequences of United States Government Slaughter Policies on Horse Prices

Abstract: As a result of several judicial rulings, the processing of horses for human consumption came to a halt in 2007. This article determines the impact horse prices suffered as a result of the elimination of horse processing facilities. A quantile regression approach is applied and is useful, as horses of varying quality were impacted differently. The authors acknowledge that the slaughter ban occurred alongside the U.S. economic downturn and attempts to account for the recession to adequately asses the policy effect.

Effect of Menu Labeling on Caloric Intake and Restaurant Revenue in Full-Service Restaurants

Abstract: In an effort to help Americans make healthier food choices, U.S. lawmakers recently mandated certain restaurants to add calorie labels to their menus. In this study, we implement the same numeric calorie labels in two different full service restaurants using two different experimental designs. Ultimately, both field experiments lead us to the same conclusion: the numeric calorie label (as currently proposed by the FDA) had little effect on total caloric intake. Our results do reveal, however, that the effectiveness of the numeric label could be enhanced with the addition of a traffic light symbol identifying low-, medium-, and high-calorie items.

Effect of Advocacy Information on Consumer Preferences for Cage Free Eggs: A Neuroeconomic Analysis

Abstract: Understanding how consumers respond to information about animal production systems is important both for animal activist groups and for agricultural producers alike. This is particularly true as information conveyed over platforms such as YouTube both decrease the cost of communication and increase the speed at which interested parties can communicate with the public. The emerging field of neuroeconomics, which integrates the findings of economics, psychology, and neuroscience, can provide unique insights into consumer responses. The purpose of this research is to enhance understanding of consumers’ perceptions of farm animal welfare by capitalizing on recent developments in economics and neuroscience.

Consumer Response to Controversial Food Technologies and Price: A Neuroeconomic Analysis

Abstract: With new food technologies such as cloning or added artificial growth hormones, consumers face complex and conflicting information related to the quality, safety, nutrition, and ethical outcomes associated with food choices. Economics has partially addressed the challenge of predicting people’s choices and willingness-to-pay for new food technologies by using experimental methods, but thus far has offered little to explain why choices are made. The emerging field of neuroeconomics, which integrates the findings of economics, psychology, and neuroscience, can provide unique insights into consumer preferences. The purpose of this research is to enhance understanding of consumers’ preferences for new food technologies by capitalizing on recent developments in economics and neuroscience. Specifically, this research seeks to determine how the human brain responds to the controversial newer food technologies as compared to standard, “rational” food attributes such as product price.

Quarter Horse Supply and Demand: Welfare Analysis and Impacts of the Equine Processing Ban

Abstract: Despite the existence of over 2.5 million Quarter Horses in the U.S., there has heretofore been little information available on the structural parameters underpinning the Quarter Horse market. In this paper, we compiled a unique data set, merging together information on registrations from the American Quarter Horse Association and price data from a large regional horse auction. The data is used to estimate the supply of yearling Quarter Horses using biological production lags to identify the key structural parameters; we find an own-price elasticity of short- and long-run supply of 0.32 and 0.27. An inverse demand function is also estimated, and after accounting for endogeneity, we find a price flexibility of own-price yearling demand of -0.71. Results reveal that demand shifted inward following the horse processing ban, resulting in deadweight annual losses of over $4 million in the yearling Quarter Horse market.