Technology adoption and diffusion have dramatically increased the welfare of U.S. consumers over time. For future generations to enjoy a higher standard of living than the current generation, it is imperative that adoption of new technologies continue. Hence, discovering factors that cause the adoption or non-adoption of new products is particularly important. This paper examined the factors that increase the probability that consumers are out of the market for genetically modified foods, which could stymie the adoption of genetically modified products.
This paper reveals two key results. First, when participants receive negative information on genetically modified foods, they are more likely to be “out of the market” for GM-labeled foods, i.e. these consumers will not buy GM foods at any positive price. In Europe, where negative information from environmental groups on GM foods is more prevalent, adoption of genetically modified crops has stalled. Many have said that this is because of food safety scandals like BSE (human form of mad cow disease) or the dioxin scandal in Belgium, but this paper presents an alternative explanation for Europe’s reluctance to adopt genetically modified foods. The second result is that a third party source providing verifiable information can soften the effect of negative information and help keep consumers in the market for GM-labeled foods. This shows a benefit to verifiable information in addition to the value that it has in providing consumers with objective information.
The implications of these results are important. When technology is advancing, asymmetric information generally exists about the consequences and benefits of the products. If a group wants to stall scientific progress, they could supply negative and biased information to consumers and producers. Our results show that this will create resistance to adopting new technologies. Furthermore, welfare of society could be lowered significantly by broad non-adoption of new technologies. This presents an interesting dilemma that we will not try to answer: Should interested parties be allowed freedom of speech to disseminate negative information about new products and processes? This can happen when there are significant information asymmetries in society - as there are with the introduction of new goods into the market. Future research to examine the specific value verifiable information has in keeping consumers in the market for GM foods and therefore allowing more efficient innovations to be adopted could be quite valuable.
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