The Impact of Media Hype on Consumer Demand: the Case of Mad Cow Disease in the United States

Bovine spongiform encephalopathy, Durbin–Watson statistic, Autocorrelation

This paper hypothesises that the Mad Cow Disease (MCD) scare in Europe brought on by the ban on exports of British beef has had a negative impact on beef consumption in the United States. This is in light of the fact that MCD has no direct impact on food safety in the US. Using monthly data an Almost Ideal Demand System containing an intercept dummy capturing developments in the MCD media developments is estimated. While concerns over the results generated by the model are raised, the estimated structural change variable is indeed found to be significant for the beef share equation suggesting that media in the case of MCD has had a negative impact on consumer demand for beef.

Table of Contentsii
Literature Review2
Estimation Procedure9
Discussion and Critique of results15

In March of 1996 the British beef industry was dealt an incredible blow when a European Union commission imposed a worldwide ban on the export of UK beef. The ban was imposed after an outbreak of mad cow disease (MCD) in Britain. MCD is the laymen term for Bovine Spongiform Encephalopathy (BSE), a disease that leads to deterioration of the brain tissue in beef and dairy cattle. It is the hypothesized link between MCD and Creutzfeldt Jakob Disease (CJD), the similar condition in humans, which led to the imposition of the export ban on British beef. This ban effectively crippled the UK beef export market in addition to sending a shock throughout Europe concerning beef safety. News of this ban spread throughout the world portraying images of infected cattle stumbling and falling unable to maintain their balance. While the scientific community was, at the time, unsure of the nature of the link between MCD and CJD, if any, the effects of the outbreak may have been much further reaching than Europe.

It is arguable that North America was also...
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