The Political Economy of Regulation of Biotechnology in Agriculture - The Oxford Topic of Food, Politics, and Society - page 673

The literature on the demand for food suggests that consumers' behavior choices are
strongly affected by food prices in the market. However, the relatively low price effect of
genetically modified organisms (GMO) on the retail prices of food products in devel-
oped countries and the complex and nontransparent linkages between the price of food
and the use of GMO globally may explain why the price effect of GMO did not motivate
consumers to support them politically. At the same time, there is a large body of lit-
erature that documents consumers' willingness to pay to avoid GM products for health
risks and other reasons (see Lusk and Coble, 2005). However, consumers' willingness
to pay varies significantly depending on how the framing of the issue changes with the
introduction of new information (Kiesel, McCluskey, and Villas-Boas, 2011).
Based upon these considerations, we can (at least stylistically) identify three basic
subgroups of consumers based on their willingness to pay. (1) Price-sensitive consum-
ers are those who care significantly more about price than about intangible product
attributes, like GM, and will always make purchases based on lowest price. In welfare
terms, these are the consumers who benefit the most from the introduction of crop bio-
technology, gaining from the lower prices and not losing anything in terms of perceived
product quality. It is often presumed that the bulk of U.S. consumers are of this sort,
essentially unaffected by the “GM” attribute of products they purchase. Such consumers
are always hurt by a restriction on crop biotechnologies.
(2) A middle group of attribute-price comparing consumers are those consum-
ers who perceive the intangible attribute of genetic modification as lower-quality or
less-desirable but view that as a trade-off for the lower price offered. They will buy prod-
ucts with the less favorable intangible attributes when offered at a sufficiently lower
price, but will avoid GM if the cost is sufficiently low. Clearly, there are enough consum-
ers of this sort for food manufacturers and retailers to find it worthwhile to advertise
and promote products as GMO free in mainstream markets. It is reasonable to assume
that the majority of European consumers are of this type. Many of this type of consumer
will, on average, be hurt by a restriction of crop biotechnologies: whenever the differ-
ence in price is greater than the difference in their willingness to pay.
(3) Attribute-sensitive consumers are those consumers who care significantly more
about the intangible attributes of a product than they do about the price and are willing
to pay for products with a favorable profile of intangible attributes almost regardless of
price (see Johnston and MacKendrick, this volume; Clough, this volume). In an ironical
twist, these consumers may actually gain in welfare terms by the introduction of GM
products, because such products will free resources to produce specialized products.
Such consumers make up a small percentage of the U.S. population and typically choose
to shop at specialized outlets and markets and are likely to be well-to-do. It is often
assumed that many more European consumers are of this category than U.S. consumers;
however, that is an empirical question that is difficult to test.
These heterogeneous subpopulations of consumers are differently affected and are
thus likely to weigh in quite differently on various public-policy proposals for regulating
agricultural biotechnologies.