Does prior knowledge of food fraud affect consumer behavior? Evidence from an incentivized economic experiment.

Abstract

This study uses a laboratory experiment to examine whether prior knowledge of food fraud persistently affects consumer behavior. We invited regular consumers of olive oil to participate in an olive oil valuation experiment. We used a within-subject design to compare consumers' willingness to pay (WTP) for Italian extra virgin olive oil (EVOO) before and after receiving information about labeling scandals in the Italian olive oil industry. After the first round of bidding, but before introducing information about labeling scandals or otherwise mentioning food fraud, we surveyed participants about whether they had heard of food fraud. Results indicate that prior knowledge of food fraud plays an important role in explaining consumers' valuation behavior, both in the pre-information baseline bidding and in how they update their valuation in response to information about a food fraud scandal. Consumers who reported prior knowledge of food fraud partially accounted for the possibility of food fraud in their initial pre-information valuation, submitting significantly lower bids than participants who did not report prior knowledge. They also reacted less to olive oil fraud information than consumers who reported no prior knowledge of food fraud. Findings of this study highlight the potential long-term consequences of increasing consumer awareness of food fraud incidents on consumer WTP for products in industries that have experienced food fraud scandals.