CONSUMER ACCEPTANCE OF GENETICALLY MODIFIED FOODS

If respondent j chooses the non-GM food, it implies that the utility of choosing the non-GM food
is greater than that of choosing GM food:

U1j > U0j                                                                           (6)

By assuming the marginal utilities of money (income) for non-GM food and GM food are
identical, i.e. β1 = β0 = β, the probability of choosing non-GM food is:

Prob (Non-GM) = Prob [α₁Zj + β₁ (Yj - Pngmj) - α₀ Zj - β₀ (Yj - Pgmj) > 0]

= Prob [(α₁ - αo) Zj - β(l^,ιιgιrn - Pgmj) + (ε₁j - εoj) > 0]

This can be written more compactly as:

Prob (Non-GM) = Prob [α Zj - β(∆P) + εj > 0]                                  (7)

where,
α = (α₁ - α₀)
∆P = (Pngm - Pgm)
εj = (ε1j - ε0j)

Assume further that the error term has a logistic distribution and it is symmetrical. Therefore, we
can derive the probability of choosing non-GM food as:

Prob (non-GM) = Prob [α Zj - β∆P + ε > 0]

= Prob [- (α Zj - β∆P) < ε] = 1 - Prob [-(α Zj - β∆P) > ε]

= Prob [ε < (α Zj - β∆P)]                                        (8)

Furthermore, with a logistic distribution, ε has a mean of zero and variance π²σ2/3. Normalizing
by σ creates a logistic variable with mean zero and variance n²/3. Equation (8) becomes:

Prob (non-GM) = Prob [θ < (α Zj - β∆P)/ σ] = Ψ [α Zj / σ - (β∆P /σ)]               (9)

where θ = ɛ/ɑ, σ is the standard error, Ψ is the cumulative distribution function.

Therefore, by using a logistic distribution, the probability of choosing the non-GM product is:
Prob (non-GM) = [1 + exp (- (α Zj / σ - β∆P /σ))]^-1                                   (10)

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