Responses of Consumer And Manufacturer to the Salmonella Outbreak in The U.S. Peanut Butter Market

This study analyzes the effect of foodborne outbreaks that occurred in 2006 and 2008 in the peanut butter industry across the United States. The objective of this study was to estimate the demand and pricing conduct in the peanut butter industry under the salmonella outbreaks. The study applied a random coefficients multinomial logit demand for differentiated peanut butter brands. With own and cross-price elasticities and cost parameters corresponding to those products' attributes, the study analyzes the effect of a foodborne outbreak on consumers' behavior and manufacturers' pricing performance. Furthermore, this study used the demand estimates to measure the market power of peanut butter brands. Consumers react negatively to price in all cities, but the other taste parameter estimates for calorie, fat, sugar, and protein had a wide distribution, depending on consumers’ demographics. For pricing conduct, the cities indicated higher Lerner indices when the city shifted the pricing conduct