The Economic Value of Food Labels:
A Lab Experiment on Safer Infant Milk Formula
Isabell Goldberg1, Jutta Roosen1, and Rodolfo M. Nayga Jr.2
1 University of Kiel, Department of Food Economics and Consumption Studies, Germany
2 Texas A&M University, Department of Agricultural Economics, USA
Abstract. Enterobacter sakazakii, a pathogen that can be found in powdered infant milk formula, can cause adverse
health effects on infants. Using Vickrey auction, this study examines parents’ willingness to pay (WTP) for a quality
assurance label on powdered infant milk formula. The influence of ambiguity with the incidence rate information and
provision of safe-handling information on WTP are also evaluated using three experiments/treatments. The mean
price premium parents are willing to pay for the safer and quality assurance labelled powdered infant milk formula
ranges from 61 to 133 Eurocents per 100 grams depending on the treatment. While no ambiguity effects are generally
found, provision of safe-handling information has a significant influence on WTP. When the safe-handling
information was given, WTP for the quality assurance label was significantly reduced and ranged from 39 to 69
Eurocents per 100 grams depending on the treatment. The results suggest that parents significantly value a quality
assurance label with or without clear incidence rate information. Parents’ valuation of the label, however, is reduced
with the provision of safe-handling information.
Keywords: Ambiguity, Food Safety, Health Risk Information, Lab Experiment, Powdered Infant Milk Formula,
Willingness-to-Pay
1 Introduction
Many producers offer a wide range of powdered infant milk formula in the market to satisfy the
nutritional needs of infants and newborns that are not breast-fed. These infant milk formulas, however,
are not sterile. They can contain, in low doses, microorganisms that can cause severe illnesses. The
microorganism Enterobacter sakazakii (E. sakazakii) has been found to be a serious health hazard to
newborns. Its presence in powered infant milk formula can cause sporadic cases of meningitis and
necrotizing enterocolitis, an inflammatory disease of the gut. Consequently, in 2004, the FAO/WHO held
an expert meeting to discuss the adverse health effects of E. sakazakii in powdered infant milk formula[1].
This study aims to investigate parents’ willingness to pay (WTP) for safer infant milk formula with
a quality assurance label. In addition, this study assesses the effect of provision of ambiguous risk
information and safe-handling information on parent’s WTP using experimental auctions (i.e., second
price sealed bid auction). Our findings generally imply that parents significantly value a quality assurance
label with or without clear incidence rate information. This valuation, however, is reduced by the
provision of safe-handling information.
The paper is organised as follows. Section 2 provides background information on the
microbiological risks of powdered infant milk formula, the marketing of breast-milk substitutes, and
briefly outlines some aspects of ambiguity. The structure and design of the experiments are described in
section 3. Section 4 presents and discusses the results focusing on the WTP measures, tests for ambiguity,
and the effect of safe-handling information. The paper concludes in section 5.
2 Background
We aim to link the health risk associated with contaminated infant milk formula to the measurement
of WTP for a quality assurance label indicating a safer product. In this section, we start with briefly
discussing the health risks and the debate about marketing of breast-milk substitutes. We then describe
the issue of ambiguity.