The welfare impact of food pathogen vaccines Stéphan Marette a,⇑ , Brian E. Roe b , Mario Teisl c a UMR Economie Publique, INRA-AgroParisTech, 78850 Grignon, France b AED Economics, Ohio State University, 2120 Fyffe Road, Columbus, OH 43210, United States c School of Economics, University of Maine, 5782 Winslow Hall, Orono, ME 04469, United States article info Article history: Received 28 October 2010 Received in revised form 21 October 2011 Accepted 5 November 2011 Available online 3 December 2011 Keywords: Vaccination Food safety Stated preference Moral hazard Willingness-to-pay abstract Vaccines against several common foodborne pathogens are being developed and could substantially alter the policy tools available to address foodborne illness. However, little analysis is available to suggest how social welfare would be affected by consumer and industry responses to these new vaccines. To address this void, we use stated-preference data to estimate consumer willingness to pay (WTP) for food safety vaccines and then simulate the welfare impacts of subsidizing consumer purchases of the vaccine given two different industry responses: maintaining current levels of food safety vigilance and reducing food safety vigilance due to a moral hazard response that undermines consumer confidence in food safety. To obtain consumer preferences for the vaccine, we simultaneously estimate a three-equation model that recognizes the recursive nature of responses to questions probing respondents’ willingness to purchase vaccines and perceptions of the probability and severity of possible foodborne illness incidents and the joint distribution of unobservable components. Our simulations show large consumer WTP if vaccines are relatively inexpensive while the presence of moral hazard increases respondents’ willingness to pay and voluntary uptake of vaccine. Ó 2011 Elsevier Ltd. All rights reserved. Introduction The development of vaccines to protect consumers against key foodborne pathogens is progressing rapidly (e.g., see Flynn (2009) [E. coli vaccine] and Stevens (2009) [Salmonella and Campylobacter vaccines]). 1 Such innovations could have global consequences be- cause foodborne pathogens are a health concern across the world. For example, estimates suggest that 1.8 million people died from diarrhoeal diseases in 2005 alone, and many of these deaths were attributable to foodborne or waterborne illnesses (World Health Orga- nization, 2007); many of these illnesses might be prevented with vac- cines currently in development. In countries where foodborne illness rates are tracked separately, annual rates of incidence range from 1210 cases per 100,000 inhabitants in France (Institut de Veille Sanitaire, 2004) to 2600 cases per 100,000 inhabitants in the United Kingdom (Adak et al., 2002) to more than 25,000 cases per 100,000 inhabitants in the United States (Mead et al., 1999) and Australia (Aus- tralian Government Department of Health and Ageing, 2005). The economic analysis of vaccines for the purpose of informing public health policy is well established (Cook et al., 2009; Bishai et al., 2004; Geoffard and Philipson, 1997; Cropper et al., 2004), but the availability of vaccines specifically designed to combat dis- eases that are currently subject to control by private sector food suppliers is novel and may present a public policy conundrum. Specifically, in many countries, governments regulate food proces- sors in an effort to reduce consumer exposure to key foodborne pathogens such as Salmonella and E. coli. In many cases the failure of a firm within a food supply chain to prevent pathogens from entering consumer products is not recognized until large groups of consumers report illnesses and public health officials trace the problem to the source. However, if many consumers choose to vac- cinate against these foodborne pathogens, the likelihood of detect- ing problems at the firm level may diminish, which may spur firm- level moral hazard 2 and concomitantly higher ambient foodborne pathogen levels in the food supply (Starbird, 2005). 3,4 If access to 0306-9192/$ - see front matter Ó 2011 Elsevier Ltd. All rights reserved. doi:10.1016/j.foodpol.2011.11.002 ⇑ Corresponding author. E-mail addresses: marette@agroparistech.fr (S. Marette), roe.30@osu.edu (B.E. Roe), teisl@maine.edu (M. Teisl). 1 Each vaccine is at a different stage of development. The inventor of the E. coli vaccination reports that discussions are underway with pharmaceutical companies to approve the vaccine through clinical trials (Michigan State University News, 2009). The research team investigating Campylobacter vaccines has demonstrated efficacy across several animal species (Monteriro et al., 2009) while advances concerning the study of Salmonella activation (Crabbe et al., 2011) suggest promising pathways to vaccine development. 2 In lesser developed countries, the ability of firms and governments to maintain appropriate food-safety controls would suggest an existing moral hazard leaving a potentially larger role for vaccines. 3 Presumably, the mere presence of these vaccines may alter the cost/benefit analyses of other food safety policies and programs. 4 We thank Jean Kinsey for pointing out the strong possibility of moral hazard on the part of industry in response to a vaccine introduction. Food Policy 37 (2012) 86–93 Contents lists available at SciVerse ScienceDirect Food Policy journal homepage: www.elsevier.com/locate/foodpol