The impact of information asymmetry on animal welfare-friendly consumption: Evidence from milk market in Japan

As the consumption of dairy products continues to increase, consumers are increasingly paying attention to farm animal welfare (FAW) and its relationship with intensive production methods. Specifically, consumers of dairy products are becoming increasingly concerned about making socially responsible purchases. This study considers the nuances of this trend in Japan, which is an interesting market for analysis, as it lags other developed countries in terms of FAW but typically leads consumption of livestock products among Asian countries. We examine consumer demand for milk produced by an ecological, or extensive, production method that carefully considers FAW using a nationwide web questionnaire. First, we clarify how consumer knowledge and experience of dairy farming affects their purchasing behavior using a generalized linear mixed model. Next, we use a randomized controlled trial and choice experiment to analyze how eliminating information asymmetry impacts consumer product preferences. The results show that consumer knowledge and experience greatly influence consumption behavior. In addition, we find that there is potential consumer demand for FAW labeling. Importantly, the potential demand for labeling can be stimulated by providing truthful information about dairy production sites. We clarify the causes of information asymmetry in Japan and discuss the policy implications of our results.