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Abstract

Iowa egg producers recalled nearly 500 million eggs in August 2010. The typical effect of a recall is to cause a decline in the demand for the affected product, yielding a decrease in the price. In the case of August 2010 egg recall, the price of eggs increased in the following weeks. This essay investigates the market effects of the egg recall. I estimate a system of simultaneous equations that includes supply and demand equations for the two main segments of the US industry. This essay offers preliminary evidence of the market effects of the August 2010 egg recall and describes the methodology to estimate the shift in consumers’ willingness to pay for eggs accounting for the diversion of eggs in the other segment of the industry.

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