The Effect of Proposition 2 on the Demand for Eggs in California

Abstract

Californians recently passed Proposition 2, barring the use of cages in egg production in the state. Because most consumers are unknowledgeable of egg production practices, the appearance of Proposition 2 likely served as an information shock that potentially affected consumer demand. In this paper, we use scanner data to investigate the market effects of Proposition 2 by studying whether and how consumer demand for eggs changed in the months leading up to the vote in San Francisco and Oakland. Results indicate that demand for the types of eggs associated with higher animal welfare standards, cage free and organic, increased over time and in response to articles on the proposition whereas demand for other types of eggs fell. These results coupled with the finding that cage free and organic egg demand was virtually unchanged in a location unaffected by the vote, Dallas, suggests that Proposition 2 had a significant effect on consumer preferences for eggs – increasing demand for cage free and organic eggs by 180% and 20%, respectively.