Impact of Food Contamination on Brands: A Demand Systems Estimation of Peanut Butter

Abstract

A 2007 food-borne illness incident involving peanut butter is linked with structural change in consumer demand. Compensated and uncompensated own- and cross-price elasticities and expenditure elasticities were calculated for leading brands before and after the product recall using the Barten synthetic model and weekly time-series data from 2006 through 2008. Statistically significant differences in price elasticities for the affected brand, Peter Pan, were absent. After a period of 27 weeks, this brand essentially recovered from the food safety crisis. Significant differences in price elasticities were evident among non-affected brands. Hence, spillover effects and heightened competition are associated with the recall.