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A Revealed and Stated Preference Latent Class Model to Examine Homogenous Subgroup Consumer Behavior Responses to Information and Food Safety Technology Treatments
Abstract: The combination and joint estimation of revealed and stated preference (RP/SP) data approach to examining consumer preferences to relevant policy-based measures has exclusively considered aggregate data and behavior of the average individual. However, in policy-based analyses, where the research is often driven by understanding how different individuals react to different or similar scenarios, a preferred approach would be to analyze preferences of homogenous population subgroups. We accomplish this by developing a latent class RP/SP analysis that examines whether homogenous subgroups (or classes) of the population, based on individual health and behavioral characteristics, respond differently to health-risk information and new food safety technology. The ongoing efforts by the U.S. Food and Drug Administration to reduce illness and death associated with consuming raw Gulf of Mexico oysters provide an ideal platform for the analysis as the health risks only relate to a very specific subgroup of consumer. Results from the probabilistic latent class model indicate that the vulnerable at-risk consumers respond differently to the information treatments than other subgroups, illustrating why educational information brochures have had little impact on reducing annual deaths from consuming raw oysters. Also, findings across all subgroups provide strong empirical evidence that the new FDA policy requiring processing technology to be used in oyster production will have detrimental effects on the oyster industry.
Key Words: Food safety technology, health-risk information, latent class analysis, revealed preference, stated preference