American shoppers are willing to pay more money for verifiably safer food, but their willingness to pay does not rise proportionately with increases in the potential severity of the illness.
That is the conclusion of a study published in the September 2011 issue of the journal Risk Analysis, conducted by Harvard University health economists and supported by a U.S. Department of Agriculture grant.
The study used the subject of food safety as a context in which to compare two commonly-used economic methods for analyzing risk reduction: willingness to pay and Quality-adjusted Life Years (QALYs). QALYs are a measurement of disease burden that applies a decimal value between zero and one to the quality of life a person experiences during a year. In QALY assessment, someone in perfect health has a value of one, while a mild foodborne illness might qualify as 0.8. Death equates as zero.
Because willingness to pay and QALY assessment are often seen as similar methods for analyzing risk, the study’s authors wanted to compare them in a practical context like food safety. Not only did they conclude that willingness to pay does not correspond proportionately with QALY assessment, the study provides statistical insights into consumer attitude toward paying for safer food.
Surveying 2,858 random adults, the authors asked consumers about their willingness to pay higher prices for chicken, ground beef or packaged deli meats to reduce their risk of general foodborne illnesses, which ranged in length from one to seven days and in severity from mild stomach aches to hospitalization. For example, one respondent might report a willingness to pay an additional 25 cents for deli meat to avoid a 1 in 10,000 chance of becoming moderately ill for three days, while another respondent might opt to pay $2 for that same reduction in risk.
The conclusion: Depending on the length and severity of an illness, Americans are willing to collectively pay between $4,500 and $6,500 for each case of illness they avoid as a whole.
“Suppose 100 people were each willing to pay $1 to reduce their risk of 1 in 100 — they’re willing to pay $100 to save that one person from getting sick,” said Kevin Haninger, Ph.D., health economist and co-author of the study. “If you are willing to spend 45 cents to reduce your risk by 1 in 10,000, you value that risk at $4,500.”
While consumers are willing to pay a certain premium to avoid a mild illness, they are not willing to pay proportionately higher to avoid worse illnesses, essentially showing that willingness to pay and QALYs are not equivalent measurements of risk analysis.
The study estimates that consumers value the avoidance of a mild, one-day illness at $4,500, while the avoidance of a hospitalizing, seven-day illness with a 1 in 1,000 chance of death was worth $6,500. If the consumers’ willingness to pay equated with the quality of life it affected, the monetary value attached to avoiding the seven-day illness would be exponentially higher.
“This is an important issue because federal agencies conduct both types of analyses,” Haninger said. “But our study suggests that consumers are not willing to pay twice as much to avoid a two-day illness as they are to avoid a one-day illness. We’re trying to speak to this economic debate.”
Haninger said he hoped this study would inspire more debate about the changes needed to the field of regulatory analysis. Regulatory analysis currently contains methodological inconsistencies, he said, and he hopes this paper helps encourage more consistent practice.
The subject of food safety served as favorable context for the study because of the private nature of buying and preparing food, Haninger said, and the fact that these economic hypotheses need to be tested in scenarios that are accessible and plausible. When the U.S. Centers for Disease Control and Prevention estimates that approximately one in six Americans acquire a foodborne illness each year, the risk becomes readily apparent to respondents.
“The take-home lesson from an economic perspective is that cost-effectiveness analysis and benefit-cost analysis won’t always produce the same results,” Haninger said. “You can’t go back and forth between the two methods if willingness to pay is not proportional to QALYs. From a broader perspective, the study shows Americans really care about foodborne illness. They’re willing to pay a relatively substantial amount of money to avoid it.”