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Helena PERRONE (Universitat Pompeu Fabra) – "Consumers' costly responses to Product Safety Crises" joint with Rosa Ferrer
The Microeconomics Seminar: Every Wednesday at 12:15 pm (exceptionally at 12:00 pm) .
Time: 12:00 pm – 1:15 pm
Date: 20th of December 2017
Place: Room 3001.
Helena PERRONE (Universitat Pompeu Fabra) – “Consumers’ costly responses to Product Safety Crises” joint with Rosa Ferrer
Abstract: Using an ideal setting from a major food safety crisis, we estimate a full demand model for the unsafe product and its substitutes and recover consumers’ preference parameters. Counterfactual exercises quantify the relevance of different mechanisms –changes in safety perceptions, idiosyncratic tastes, nutritional characteristics, and prices– driving consumers’ response. We find that consumers’ reaction is limited by their taste for the product and its nutritional characteristics. Due to the costs associated with switching away from the affected product, the decline in demand following a product-harm crisis tends to understate the true weight of such events in consumers’ utility. Indeed, we find that a large fraction of consumers are unresponsive to the crisis even when they significantly downgrade their product safety perception. For an accurate assessment of the crisis, managerial strategies should therefore account for how different demand drivers bind consumers’ substitution patterns.
Marie-Laure Allain, Pierre Boyer, Laurent Linnemer & Morgane Cure (CREST)
Link (before 17th of December 2017)