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Consumer Welfare and the Loss Induced by Withholding Information: The Case of BSE in Italy
Author(s) -
Mazzocchi Mario,
Stefani Gianluca,
Henson Spencer J.
Publication year - 2004
Publication title -
journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.157
H-Index - 61
eISSN - 1477-9552
pISSN - 0021-857X
DOI - 10.1111/j.1477-9552.2004.tb00078.x
Subject(s) - ignorance , almost ideal demand system , welfare , demand curve , work (physics) , economics , function (biology) , deadweight loss , ideal (ethics) , microeconomics , measure (data warehouse) , consumer welfare , consumer demand , actuarial science , computer science , market economy , mechanical engineering , philosophy , epistemology , database , evolutionary biology , production (economics) , engineering , biology
The paper develops a measure of consumer welfare losses associated with withholding information about a possible link between BSE and vCJD. The Cost of Ignorance (COI) is measured by comparing the utility of the informed choice with the utility of the uninformed choice, under conditions of improved information. Unlike previous work that is largely based on a single equation demand model, the measure is obtained retrieving a cost function from a dynamic Almost Ideal Demand System. The estimated perceived loss for Italian consumers due to delayed information ranges from 12 percent to 54 percent of total meat expenditure, depending on the month assumed to embody correct beliefs about the safety level of beef.