Econometric Models to Evaluate Trust

The dimensions of trust employed in section 3 of the survey were identified by Frewer et al.

(2005), Lang and Hallman (2005), Huffman et al. (2004).⁸³ Specifically, it is hypothesized that consumers‘ confidence in stakeholders (i.e., farmer, government, and supermarkets) depends upon the extent to which they trust different organizations for accurate information, think that these organizations are knowledgeable, think that these organizations are transparent (open) and accountable, and think that these organizations act according to consumers’ best interests when

providing information about the welfare of pigs. An ordered probit model is used to analyze respondents‘ assessment of the verifying organizations on these four dimensions of trust.^84,85 The ordered probit involves a qualitative dependent variable for which the categories have a natural order or ranking that reflects the magnitude of some underlying continuous variable (Nayga et

83 Frewer et al. (2005) elicit the perceptions of a sample of Dutch consumers on animal husbandry practices for farmed pigs and farmed fish. As well, Lang and Hallman (2005) examined who the US public trusts in institutions involved in the genetically modified products supply chain. Respondents had to rate 10 institutions on a 5 point scale on dimensions of trust such as competence, transparency, public interest and honesty. Huffman et al. (2004) elicit the perception of US consumers on the trustworthiness of various institutions with respect to the provision of information on genetically modified foods. The authors formulate and empirically test various hypotheses about the role that measurable attributes of the consumer (i.e., household income, personal and social capital, prior beliefs) play in the formation of trust in information sources.

84 The following stakeholders were assessed by respondents: Farmer (e.g., an individual farm), A Farmers‘

Association (e.g, Canadian Pork Council), Food Processor (e.g., a well-known meat processor), Supermarkets (e.g., a well-known grocery store), Government (e.g., a federal food agency), Independent Third-Party (e.g., a certifying company or a non-profit organization), Media (e.g., newspapers, television, or radio), Animal Rights Organizations, Scientific Experts in Animal Welfare.

85 This method has a widespread use in disciplines such as consumer economics and behavioural economics where it is used to reveal the factors affecting trust between people or in institutions. Cook et al (2002) and Nayga et al.

(2004) use this technique to examine attitudes and intentions toward genetically modified food or irradiated food products in New Zealand and the United States. In a similar vein, Innes (2008) used this technique in Canadian context to examine which are the most important components of trust in Canadian stakeholders – i.e., government, producers, downstream firms and third parties – for accurate information about farming methods.

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al., 2004, p.179). In our particular case, respondents made four assessments of various organizations on a five point scale to indicate the level of trust.⁸⁶ More details on these constructs can be found in questions 16 to 19 in Appendix 6. Thus, the data can be represented as ordered (not at all = 0, very little = 1, somewhat = 2, very much = 3, completely = 4) and modelled according to the following choice specification (see Maddala, 1983; Greene, 2007; Nayga et al., 2004 for more details):

where yi* = an unobserved variable measuring the amount of trust individual i has in a particular stakeholder for accurate information about the welfare of pigs; X_i = a vector of independent variables describing an individual‘s predilection to think of these organizations in terms of the other three dimensions of trust mentioned at the beginning of this section; β’ = a vector of parameters to be estimated and εi = a random error term (assumed to follow a standard normal distribution). The observed counterpart to yi* is yi. Theμi are unknown threshold parameters for the levels of trust that are estimated along with the other parameters, β’s, in the model. They are obtained based on the probabilities of observing a level of trust in each stakeholder given the

86 For example: An on-going debate revolves around the implications of different farming methods for the welfare of farm animals. To what extent do you trust the following types of organizations for accurate information about the welfare of pigs? Please indicate this on the scale provided. If you don‘t know or are not sure, please select the ―don‘t know/not sure‖ option. Possible answers were: not at all, very little, somewhat, very much, completely, and don‘t know/not sure (Question 16 in Appendix 6).

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other three dimensions of trust which are further entered into the log likelihood function as follows:

Prob[yi=j] = Prob [yi*is in the jth range] (4.14)

The marginal effects of the three independent variables on the probabilities are not identical to the coefficient estimates and depend on the values of the three independent variables. More detail on the estimation and mathematical modelling can be found in Madalla (1983), Greene (2003), and Nayga et al. (2004). In this particular case, the advantage of the ordered probit model is that it allows the respondents to express the intensity of their trust in each organization involved in providing information about the welfare of pigs, thereby allowing the researcher to determine the extent to which each dimensions of trust influences the general trust in the particular organization.

4.9 Summary

This chapter examined consumer preferences for FAW within a utility maximisation framework.

As well, it presented a review of consumer studies in the area of FAW that used stated preference methods and concluded the appropriate method for elicitation of consumer preferences.

Moreover it presented the data collection and choice experiment design method used in the survey. Lastly, this chapter outlines the econometric models used to estimate the utility consumers derive from FAW attributes. The next chapter presents the results of the analysis including the MNL, RPL, LCL models, WTP estimates and ordered probit analysis of the dimensions of trust.

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