With Genetically Modified (GM) food increasing in diversity and volume, these products have become a growing topic of interest for policymakers and consumers. The Martin J. Whitman School of Management‘s Rong Li, assistant professor of supply chain management, and Amiya Basu, professor of marketing, explored consumer attitudes and new labeling policies regarding GM products in the first analytical paper on the subject.
In their research paper, Pricing Strategy for GM Food: Impact of Consumer Attitude Heterogeneity and GMO Food Labeling, Li and Basu analyze how upcoming Genetically Modified Organisms (GMO) labeling will affect genetically modified food marketers’ pricing strategy, as well as the additional effects of the industry pricing tradition and market competition. This labeling can change pricing strategies in both directions, increase or decrease, depending on how it changes uninformed consumers’ attitude toward genetically modified foods once they see the label and become informed.
“Under dynamic pricing tradition, the labeling may increase the price if it makes uninformed consumers informed and like GM. Under fixed pricing tradition, the marketer assumes more pressure and may offer a discount for the GM-traits (compared to the comparable non-GM food) and take a profit loss post labeling,” Li explained.
With this in mind, competition in the market generally reduces prices of genetically modified foods, and thus marketers will choose a more dynamic pricing strategy under equilibrium.
Many believe that the upcoming GMO labeling law will lower prices as GM products would be perceived as unfavorable, coinciding with the current assumption of a heterogeneous attitude shared by uninformed consumers regarding genetic modification. However, Li and Basu found the opposite to be true. This labeling increases operational costs, which would in turn increase price, and labeling would better inform the consumer. This could change the attitude toward genetically modified foods to something more positive, along with media influence.
Li and Basu believe their research will open doors to further research on GM and non-GM prices, as well as future effects of production quantity and quality. This will not only inform consumers, but also businesses operating in the industry and the managerial implications they will face.