Focussing on Consumer Attention: Price-Quality Relationships and Reputation Indicators

In Germany, the focus of agricultural policy is now "the consumer". In the aftermath of the BSE crisis, farmers are encouraged to produce higher quality "ecological" food for which consumers are willing to pay more. Food is an experience good and quality signals are becoming a more important determinant of the prices received. However, given consumers' cognitive limitations, all signals can not receive equal attention. We argue that consumer attention to product quality signals increases with its producer's quality performance, and given attention spillovers (collective reputation), with the expertise of associated producers. Over time, collective reputations should have an effect on price when attention (or quality performance) is low, but should lose their impact as attention increases. We illustrate our consumer attention argument with an empirical application of wine producers and regions and draw some conclusions for the new consumer oriented agri-food policy in Germany.