Reconstructing market reactions to consumption harms

Abstract

We investigate dynamic market reactions from harmful events using phase space reconstruction to analyse nonlinear dynamical systems. Phase space reconstruction analysis is applied to US beef consumption data, demonstrating market deviations and transitions from plausible, stable consumption patterns in response to product attributes (latent or nonlatent) coinciding with longer or shorter term human health harms (e.g. cholesterol) or food safety harms (e.g. Escherichia coli and Bovine Spongiform Encephalopathy (BSE)). The results support complex, nonlinear dynamic behavioural responses to perceived consumption harms. Consistent with previous research, the perceived negative long-run health effect from cholesterol caused consumers to transition their consumption behaviour from a higher to a lower level while retaining a persistent seasonal pattern. In contrast, responses to food safety information (i.e. E. coli or BSE) about beef derived from phase space reconstruction demonstrated temporary deviations from stable consumption patterns.

Keywords:

• food safety
• health effects
• expected utility
• phase space reconstruction

JEL Classification:

• D12
• C14