Clear Attributes, Ambiguous Outcomes: How Food Labels can Decrease Consumer Welfare (and why Producers Like them so Much)

A large number of studies estimated willingness-to-pay for credence attributes, which are often used in cost-benefit evaluations of food labeling policies. We argue that positive WTP estimates do not imply increased consumer welfare, nor it should be assumed that revealing truthful attribute information necessarily induces more conscious consumer choices. By adopting a means-end (Gutman, 1982) framework, where functional consequences (outcomes), rather than attributes (as in Lancaster, 1966), are the focal point of consumers ’ decision-making process, we show that labels can bias consumer expectations and induce less conscious decisions, which eventually might result in decreased consumer welfare. When attributes are labeled but outcomes remain ambiguous, firms have an incentive to increase the number of labels, and/or reinforce (via advertisement) weakly substantiated linkages between attributes and desirable outcomes. Empirical evidence is provided through a best-worst choice experiment where participants ranked real milk and soymilk products according to (perceived