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Abstract

A lab experiment evaluates the consequences of the palm oil controversy on consumers’ willingness to pay (WTP) for food products. Palm oil production induces environmental damages, and its consumption presents a health risk. However, the production of alternative oils raises land use issues. In the experiment, successive messages emphasizing the controversial nature of palm oil and palm oil-free products are delivered to participants. Information has a significant influence on WTP when it underlines the negative impact of the related product. This effect is stronger for the palm oil product than for the palm oil-free product. The experiment also compares the welfare effects of two regulatory instruments, namely a consumer information campaign versus a per-unit tax. Because of the controversial nature of both products, the information campaign improves welfare with a much larger impact than the tax.

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