The Welfare Effects of Pfiesteria-Related Fish Kills in Seafood Markets: A Contingent Behavior Analysis

We use contingent behavior analysis to study the effects of Pfiesteria related fish kills on the demand for seafood in the Mid-Atlantic region. We use a phone-mail-phone survey to look at the effects of various information provision mechanisms used to ameliorate the effects of misinformation regarding fish kills. A set of demand difference models are estimated based on individual responses to multiple questions about seafood consumption with and without fish kills present and with various health risk information treatments. Random effects Tobit models are used to control for the panel nature of responses and natural censoring of the stated responses. We find that 1) Pfiesteria related fish kills have a significant negative effect on the demand for seafood, 2) seafood consumers are nonresponsive to expert risk information designed to reassure consumers that seafood is safe in the presence of a fish kill, and 3) a mandatory seafood inspection program completely eliminates avoidance costs incurred due to misinformation. We estimate that the aggregate avoidance costs incurred in the month immediately following a Pfiesteria related fish kill is $50-$130 million.