Seminario 19/12: Rosa Ferrer (UPF) – Consumers’ costly response to product-harm crises

Using an ideal setting from a major food safety crisis, we estimate a full demand model for the unsafe product and its substitutes and recover consumers’ preference parameters. Counterfactual exercises quantify the relevance of different mechanisms –changes in safety perceptions, idiosyncratic tastes, nutritional characteristics, and prices–driving consumers’ response. We find that consumers’ reaction is limited…