Welfare loss due to lack of traceability in extra-virgin olive oil: a case study

The increasing interest consumers show toward typical products, which are often characterised by a close link to specific geographical areas and their local traditions in food production, has induced a major transformation of the EU food policy, whose regulations have increasingly been aimed at protecting and boosting the value of such typical products. However, "typicity" is difficult to assess on the consumer side because of the need to rely it on labelling and certification, on which EU regulation is not very strict. Exemplary is the case of extra-virgin olive oil. Olive oil bottlers are not required to report the olives' production areas on the commercial label, thus having the possibility of inducing the false belief that product is strictly Italian by stating that it is the product "of an Italian brand" or that it has been bottled in Italy. This paper assess the effects of such false beliefs through estimation of a Choice Model, on data collected by a survey of 169 Italian consumers interviewed after purchase of extra-virgin olive oil in a supermarket. Our research shows that imperfect traceability causes a welfare loss of approximately 1 euro per bottle of extravirgin olive-oil. Moreover we estimated that a complete traceability would increase the quota of true Italian bottled olive oil (coming from 100% Italian olive)by aprox 10%.-oil. Moreover we estimated that a complete traceability would increase the quota of true Italian bottled olive oil (coming from 100% Italian olive).