Is organic labelling enough? Information disclosure as policy instrument to empower consumer choices

Abstract

Governments have been advocating for an open approach to encourage private sector disclosing relevant information in order to create more efficient market. However, it is not always clear what information are needed by consumers. Policy makers need to develop measures that help decide what information should be disclosed and whether a disclosure should be mandated. In this research, we focus on information disclosure in organic products, where consumers find the complex organic labeling hard to understand. Through two studies, we show that feed origin makes a significant difference in consumers' choice; and sellers with feed from non-USA countries would be motivated to disguise the information on feed origin. We propose a way to implement “smart” information disclosure that can effectively distinguish USA feed from feed with undisclosed origin, which enables the feed from USA to claim a higher price premium. Our findings have policy implications for organic product disclosure.