51 Pages Posted: 13 Aug 2018 Last revised: 24 Apr 2019
Date Written: June 25, 2018
This paper attempts to understand demand for local and other nostalgic production in food. In U.S. household scanner data, nostalgically produced foods sell for a large premium. Controlling for income and demographics, experts who work in food production and health are no less likely to purchase nostalgic milk and eggs, but are less likely to purchase local eggs in regions where eggs are produced at scale. In a choice experiment, willingness to pay for local tomatoes decreases when quality is shown. A simple theory explains this puzzling demand. When goods have too many dimensions of quality to communicate in market exchange (the USDA records over 70 for milk), innovation has ambiguous effects, consumers seek nostalgic signals of quality, and straightforward policies can backfire.
Keywords: quality, innovation, asymmetric information, food, health
JEL Classification: L15, D82, I12
Suggested Citation: Suggested Citation