The economic value of food labels: A lab experiment on safer infant milk formula

rate. The participants were asked to bid for an infant milk formula with a quality assurance label that the
producers intend to introduce. The label signifies the absence of the pathogen E. sakazakii and hence, the
assurance of safety¹. Then they bid for the certified milk formula and stated how much they are willing to
pay more than 1.15 Euro (served as basic price level) per 100 grams. The auctions involved 5 trials or
rounds of bids so that participants could incorporate market feedback into their valuations. Subjects were
told that only one round would be randomly selected to be binding, to control for demand reduction or
wealth effects, and that the winner would be the individual with the highest bid, with the winning auction
price being the second highest price. Before the actual experiments, a coffee mug auction was conducted
to familiarize the participants with the Vickrey auction procedure. The questionnaires and the
experimental instructions are available from the corresponding author upon request. The participants were
aware of the fact that the auction was hypothetical and that they would not really have to buy the milk
formula. We chose the hypothetical approach for several reasons. It would not have been possible to
guarantee that the purchased milk formula is free of E. sakazakii nor would it been ethically to provide
parents with an “unsafe” milk formula and ask them to change it against a “safe” one.

Table 1. Structure of the lab experiment

Notes: ¹Applied, ² Not applied

3.2 Design to test safe-handling information effects

After the trials conducted to test ambiguity effects, the participants in all three treatments were given
information on the preparation techniques that would enable them to control for the health risk. The risk
of an infection of E. sakazakii can be decreased by several preparation techniques that parents apply when
they reconstitute the milk powder. This knowledge puts parents in the position to self-control the health
risk to their newborns. It is recommended, for example, that powdered infant milk formula should be
prepared fresh immediately before the feeding, remnants should be discarded, reconstituted milk formula
should not be kept warm in bottle heaters, and if the storage of prepared formula is necessary, the formula
¹ We did not show the participants a real label. The label and its meaning were just described to them.
This was done to avoid biasing the results due to possible differences in participants’ views about whether
or not they like how the label was designed.

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