UC Berkeley

We humans are literally eating all the fish in the sea. As a direct result of overfishing, nearly all major wild seafood stocks are now a fraction of their original size. Confronted by a seemingly insatiable appetite for wild fish and the apparent failure of regulations and management strategies to stop rapacious overfishing, conservation organizations seeking to reduce overfishing and promote better fishing practices have increasingly turned to consumer-focused, market-based mechanisms such as environmental sustainability labels ("eco-labels") in order to shift patterns of household consumption towards more environmentally sustainable fish products. Given the recent proliferation of eco-labels, it is imperative to ask: are eco-labels a successful and economically efficient way to reduce the environmental costs such as overfishing that the seafood industry imposes on society? The research presented in this dissertation contributes to the suprisingly sparse empirical literature on this subject by analyzing consumer response to the FishWise Advisory, a sustainable seafood eco-label that was adopted by a supermarket chain in the United States. The FishWise Advisory consisted of a label placed on the pin tag of every fresh seafood product to inform consumers about the relative environmental sustainability of seafood products. The Advisory coded the labels using a system of three traffic light colors: green meant "best choice", yellow meant "proceed with caution", and red meant "worst choice". Using reduced form and structural econometric models, this research examines the effect of the Advisory on overall seafood sales and on seafood sales of each color label, consumers' willingness to pay for an environmentally sustainable seafood label, the effect of the Advisory on own- and cross-price elasticities of demand for each color of seafood, and the effect of a counterfactual policy scenario of not selling red-labeled seafood on the prices and market share of green- and yellow-labeled seafood.

Total seafood sales declined slightly (-15.5%, p<0.10). Yellow-labeled seafood sales significantly decreased (-31.3% to -34.9% depending on the specification, p<0.01). Green- and red-labeled seafood sales did not change.Yellow-labeled seafood on the mercury safe list had the largest sales decline (-41.3%, p<0.05). Consumers had a negative willingness to pay for both yellow labels (-$0.155) and red labels (-$0.0872) seafood and were indifferent to green labels. The Advisory decreased the own-price elasticity of demand for green-labeled seafood (-2.27 to -1.81) and red-labeled seafood (-2.06 to -1.58) and only slightly decreased it for yellow-labeled seafood (-1.99 to -1.89). Cross-price elasticities of demand were essentially zero for all seafood colors, and remained virtually unchanged after implementation of the Advisory. In the counter factual policy scenario of no red seafood sales, the optimal price of green-labeled seafood remained the same at $7.87 (s.e. = 0.1013 in policy simulation and 0.1037 in base case) per pound. The optimal price for yellow-labeled seafood dropped significantly to $9.65 (s.e. = 0.1436) per pound versus $13.15 (s.e. = 0.1187) per pound. The market share of green-labeled seafood remained essentially unchanged at 2.02% (s.e. = 0.000) versus 2.06% (s.e. = 0.040). The optimal market share of yellow-labeled seafood increased significantly to 0.85% (s.e. = 0.000) from 0.75% (s.e. = 0.010).

One implication of this research is that conservation organizations and other groups seeking to reduce overfishing need a much better understanding of whether and when eco-labels achieve their goals before continuing to rely so heavily on using them to change household consumption patterns as a primary conservation tool for wild fisheries. As a complement to any consumer-focused efforts, conservation organizations may want to explore other types of market-based interventions, such as company boycotts; work with governments to enact regulations that would make labels more effective, such as common standards and requirements for information disclosure; and continue to use traditional forms of regulation, such as catch limits and protected areas.