Benefit evaluation of the country of origin labeling in Taiwan: Results from an auction experiment

► Study of benefits for country of origin labeling (COOL) for food products in Taiwan. ► Dealing with important food safety issue related to labeling. ► The study used experimental auction and Vickrey second-price mechanism. ► Taiwanese have strong preference for domestic products over imports from China. ► The COOL would change the landscape of agricultural trade between Taiwan and China. This research is aimed at investigating the consumer’s preference for food produced in Taiwan and the economic benefits for the country of origin labeling (COOL). The study used Vickrey second-price sealed-bid auction to elicit the consumer’s willingness to pay (WTP) for products under COOL. The study compared the bid functions estimated with Tobit model and the premium functions estimated with ordinary least squares (OLS). Due to price affiliation, it is more reliable to use the estimated premium functions. The estimated premiums are 67.5%, 84.7% and 99% for Taiwan products over their alternatives of China olives, China oolong tea, and Vietnam oolong tea, respectively. The study concludes that enacting and rigorously enforcing a COOL law would increase economic benefits to consumers in Taiwan, and at the same time, placing the imported products in the leveled playing field.