Market Potential and Economic Impacts of Food Nanotechnology Innovations

The study develops an analytical framework of heterogeneous consumers and imperfectly competitive suppliers to (a) examine the determinants of the market acceptance of a food nanotechnology innovation; (b) identify the exact conditions under which the innovation will be ineffective, nondrastic, and drastic; and (c) determine the effects of this technology on the interest groups involved. Analytical results show that high consumer valuations of the enhanced attributes enabled by nanotechnology can lead to consumer acceptance of nanofoods even when consumers are more averse to nanotechnology than conventional food technology. In most cases, the introduction of food nanotechnology leads to reduced quantities and prices of conventional and organic products, which result, in turn, in losses for nonadopting suppliers and benefits for all consumers. The greater is the degree of market power of food suppliers, the greater the reduction in the prices of conventional and organic products and the greater the losses of these suppliers due to the introduction of the food nanotechnology innovation. While all consumers can benefit from the introduction of nanofood innovations, the effect of these innovations on consumer welfare is asymmetric, with the group of consumers benefiting the most being case-specific and dependent on the relative quality ranking of the nanofoods and their conventional counterparts.