Economics Research Institute Study Paper
Utah State University Department of Economics
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Traceable product systems provide a tool to track the inputs of a final good throughout the entire production chain. This tool can provide valuable information to consumers on verifiable characteristics of the product, can improve the speed of product recall, and can help identify areas of inefficiency in the product chain. Recent examples of traceable systems include those used in the diamond, lumber, and food industries. This article reports results from a case study on traceability using Vickrey auctions to generate willingness-to-pay (WTP) data for traceability and related product characteristics. Specifically, we examine WTP for traceable meat, which is a timely topic given that major customers and competitors in the multi-billion dollar red-meat market are all implementing traceable meat systems. However, the largest player in world red-meat markets, the U.S., is lagging in the development of these systems. We conduct comparable auctions in the U.S., Canada, the U.K., and Japan and find that subjects are willing to pay a nontrivial premium for traceability, but the same subjects show even higher WTP for traceability-provided characteristics like additional meat safety and humane animal treatment guarantees. The implication is that producers can likely implement such a traceable meat system profitably by tailoring the verifiable characteristics of the product to consumer preferences. For other types of traceable products, these results highlight the importance of full exploitation of traceable systems by providing consumers with the additional product information that only a traceable system can verify.
Dickenson, David L. and Bailey, DeeVon, "Willingness-to-Pay For Information: Experimental Evidence on Product Traceability From the U.S.A., Canada, the U.K., and Japan" (2003). Economic Research Institute Study Papers. Paper 270.