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Abstract
Using psychological terms such as cognitive dissonance and confirmation bias, this study
reveals how individual consumers inadequately process (food safety) information, pay limited
attention to signals, and make purchase decisions that are bias towards their initial choices.
While it is expected that reading extra information about potential risk associated with the
food decreases consumers' willingness to pay (WTP), the magnitude of the impact varies across
individuals. In general, consumer's judgment and information processing depend a lot on their
initial beliefs or consumption status. They tend to use higher bidding prices to justify previous
behaviors and selectively pay attention to information in favor of their initial choices. Using
an incentive compatible auction mechanism, this study elicited consumers' WTP under different informational settings. Results showed that consumers bid much higher when they chose
to commit to food items (treatment) than when they were randomly assigned (control), suggesting cognitive dissonance. On average, the bidding premium was about 13 cents (roughly
30%) higher for low-risk food item and 30 cents (almost 60%) higher for high-risk item. The
bidding premiums were further enlarged as food safety information was revealed to consumers.
Confirmatory bias hypothesis was supported by the finding that those who made commitment
earlier were more reluctant to change the bids despite of increased risk perceptions. In terms
of market responses, due to psychological biases among consumers, demand curves were less
possible to shift down under food safety risk. Results in this study implied that consumers were
less responsive to public information due to their existing habits. Extra strategies would be
needed to increase the efficiency of public communication to promote health.