Bovine spongiform encephalopathy and generic promotion of beef: An analysis for “quality from Bavaria”

In this article we examine the impact of generic promotion on Bavarian beef demand during a period of a serious health concern in Europe: the bovine spongiform encephalopathy (BSE) crisis. We investigate the potential off-setting effects of advertising and promotion (positive) and heightened food safety awareness (negative). Empirically, we evaluate the economic effectiveness of a program that promoted Bavarian beef as safe at the same time consumers were becoming increasingly concerned over the safety of the beef supply. Econometric estimates of both effects are provided and a model proposed to assess the corresponding economic welfare implications. The results show that the regional promotion of Bavarian beef increased demand by 4.6%. This increase was offset with a 6.9% decline in consumption due to information and public awareness of the BSE crisis. In addition, secular declines in consumption due to preference changes away from beef amounted to 15.2%. The welfare effects of the Bavarian government-financed program were positive for both producers and consumers. Private and social benefit cost ratios suggest that the aggregate welfare gains due to promotion more than compensated for the cost of the program. lEcon-Lit citations: Q13, M37r © 2002 Wiley Periodicals, Inc.

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