Effect of the food traceability system for building trust: Price premium and buying behavior

Abstract

Facing a series of food-related accidents, consumers worldwide have become more concerned with the safety of the food they consume. The Food Traceability System has been introduced in many countries to reduce the uncertainties originating in the food purchasing process by providing information about the entire food process, from farm to table, in terms of quality and safety. However, this relatively new information system has not yet been explored with an academic approach. The main goal of this study was to determine whether reduced uncertainty provides benefits for producers and consumers, thereby warranting the adoption of the food traceability system. We also analyzed the factors and mechanisms that explain consumer behavior within the system. We have modified and applied the uncertainty model of Pavlou et al. (MIS Quarterly 31(1):105-136, 2007) derived from the principal-agent perspective in order to fulfill our research objectives. Through a survey conducted in Korea, we found that Korean consumers were not only willing to purchase greater quantities of food, but also willing to pay more for food managed with the traceability system. The results of this study indicate that the mitigated uncertainty given by the traceability system plays a key role in price premium and purchase intention. In addition, mitigated uncertainty has a larger impact on purchase intention than on price premium, implying that consumers are inclined to buy more rather than pay more. These results provide valuable suggestions for producers for how to deal with increased costs resulting from adoption of the system. We also found that in the context of the Food Traceability System, perceived uncertainty was mitigated as a result of a reduced fear of seller opportunism originating from increased trust and reduced information asymmetry originating from increased product diagnosticity, informativeness, and trust. Reduced fear of seller opportunism had a stronger impact than reduced information asymmetry on perceived mitigated uncertainty.