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Consumer and Market Responses to Mad-Cow Disease

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  • Schlenker, Wolfram
  • Villas-Boas, Sofia Berto

Abstract

We examine how consumers and financial markets in the United States react to two health warnings about mad cow disease: The first discovery of an infected cow in December 2003 as well as health warnings about the potential effects aired in the highly-watched Oprah- Winfrey show seven years earlier. Using a unique UPC-level scanner data set, we find a pronounced and significant reduction in beef sales following the first discovered infection. This effect slowly dissipates over the next three months. Interestingly, no significant impact can be detected in the diary files of the Consumer Expenditure Survey (CES) that has a much smaller sampling frame. However, futures prices show a comparable drop in prices to the scanner data. Contracts with longer maturity show smaller drops, suggesting that the market anticipated the impact to be transitory. Health warnings by Oprah-Winfrey reduced futures prices by more than 50% of the abnormal changes following the first discovered infection, but the effect was shorter-lived. While the CES should give accurate estimates of average purchasing decisions in a calendar year, researchers may consider instead turning to readily available scanner or futures data to track changes in buying habits over time.

Suggested Citation

  • Schlenker, Wolfram & Villas-Boas, Sofia Berto, 2006. "Consumer and Market Responses to Mad-Cow Disease," CUDARE Working Papers 7164, University of California, Berkeley, Department of Agricultural and Resource Economics.
    • Handle: RePEc:ags:ucbecw:7164
    DOI: 10.22004/ag.econ.7164
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