Effect of the food traceability system for building trust: Price premium and buying behavior

Abstract

The Food Traceability System has been introduced in many countries to provide information on the entire food process from farm to table for the quality and the safety of the food. The main goal of this study is to find out whether reduced uncertainty really pays for adopting the food traceability system. We will also analyze the factors and mechanisms to explain consumer behavior within the system. We have modified Pavlou et al. (2007)'s uncertainty model from the principal-agent perspective, in order to fulfill our research objectives. Through a survey research we found that consumers not only bought more food but also paid more for it when they used the traceability system. The results find mitigated uncertainty to play a key role in price premium and purchase intention. Mitigated uncertainty has a larger impact on purchase intention than price premium, implying that consumers are inclined to buy more than pay more. We also found that mitigated uncertainty is due to reduced fear of seller opportunism originating from trust, and reduced information asymmetry originating from product diagnosticity, informativeness, and trust. The reduced fear of seller opportunism has a stronger impact than reduced information asymmetry on mitigated uncertainty.