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Economics and politics of the agri-food

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sector

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Agri-food Economics

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Lecture notes by Prof. A. Banterle

Master Course in Environmental and Food Economics

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Department of Environmental Science and Policy
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Prof. Alessandro Banterle

Dr. Elisa De Marchi
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Dr. Fjona Zeneli

Dr. Enrica Frola
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The agri-food economics team in the Department of Environmental Science and Policy
(ESP) focuses on consumer and company choices, analysing in particular the attitude for
the environmental sustainability and the policies aimed at favouring more responsible
and sustainable behaviours of both consumers and companies.
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Department of Environmental Science and Policy - ESP

Università degli Studi di Milano
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via Celoria 2 - 20133 Milano

[email protected]
[email protected]. [email protected]
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02-50316482
Office hours: Tuesday 14:30 – 18:00
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Milan 2023
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Syllabus
Objectives

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• learn the basic elements of economic theory for the analysis of the food market
• develop knowledge about the organization of food chains, about the main

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economic issues of the food market, and about the sustainability in the food
system
• analyze EU food policies

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Course structure
First part – Supply and Demand Specificities
• the food system

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• the sectors of the food system:
– agriculture,

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– food industry,
– retailing,
– catering and food services

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• supply chain analysis
• food consumption
• food product quality attributes
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• time preferences and eating behaviors
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Syllabus
Second part – Main challenges
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• sustainability
• circular economy and bio-economy
• hunger
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• obesity
Third part – Policies
• food policies and public intervention
• food safety
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• labeling
• traceability
• food quality
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• common agricultural policy

Books and references

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• course slides
• specific literature
• Bremmers, H., Purnhagen, K., 2018. Regulating and managing food safety in the
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EU. A legal-economic perspective. Springer.

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First part

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Supply and Demand Specificities

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Source: Graeme Tozer - www.flickr.com - Creative Commons
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The Food System

inputs
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chemicals, seeds, equipment

agriculture
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fruit and
food industry vegetables
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retailing wholesale
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catering and food services

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home consumption eating out

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The Food System

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• Food system: all the activities connected to production and distribution
of food products up to the final consumption. It is composed by input

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industries, agricultural sector, food manufacturing, wholesale, retailing,
catering and food services, final consumption.

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• The links among the different parts of the system are due to flows of:
– raw materials and final products
– financial

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– information

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• Agribusiness system: it is a more general term that includes not only
activities directed to food consumption, but also activities that use
agricultural commodities to produce non food products (fiber system)

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(Davis e Goldberg, 1957) gl
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The Food System

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• agriculture  set of activities directed at soil cultivation, farming and animal

husbandry
• primary sector  agricolture, fishery, forestry
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• food manufacturing/processing/industry  set of activities directed at the

processing of agricultural or natural raw materials in final food products
• wholesale and retailing  set of activities directed at the transfer of food
products from production plants to final selling points.
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– wholesale – business to business  B2B

– retailing – business to consumer  B2C
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• catering and food services  set of activities directed at meal preparation for
consumers
– restaurant industry (HORECA channel)
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– canteen industry
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The Food System

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Input Agriculture Food Industry Retailing

production of raw mat. and processing of agricultural raw provision of commercial

function provision of inputs

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final products materials in final products services

differentiated
products/commodity

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n. firms

firm size

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influence of firm sale
on market

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pricing

entry barriers

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role of advertising

market structure
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The Food System

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Input Agriculture Food Industry Retailing

production of raw mat. and processing of agricultural raw provision of commercial

function provision of inputs
final products materials in final products services
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differentiated
differentiated commodity differentiated differentiated
products/commodity

n. firms low high medium medium

firm size large small small and large small and large
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influence of firm sale

yes no yes yes
on market
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pricing price maker price taker price maker price maker

entry barriers high low medium medium

role of advertising yes no yes yes

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market structure oligopoly perfect competition monopolistic competition monopolistic competition

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The Food System

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• Food supply chain: outlines food product pathways among
agricultural production, processing, retailing and the pertaining
different flows (Malassis and Ghersi, 1995)

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• The chain reports the distinct technological steps, vertically
interrelated, of a specific commodity to obtain a final food

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product at the consumer level (Saccomandi, 1991) from farm
to fork  vertical analysis of the production

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• It is a vertical decomposition of the food system in terms of
product categories  cereals, milk, meat, wine, etc.

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• Sector: set of firms that have similar activities, features and
provide similar goods targeting similar needs  horizontal

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analysis of the production. Examples: agriculture, food industry,
retailing, etc.
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Food system,
supply chains and sectors
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Chain 1 Chain 2
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wheat milk agriculture

Agri-food system
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bread cheese food industry Sectors

pasta butter
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retailing
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The Food System
• Agri-food district: this concept introduces the space variable in the analysis of the

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food system  local systems specialised in specific food products, often
specialties (PDO – PGI)  territorial clusters

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• Marshallian Industrial District: Marshall (1890) talks about ‘(Industrial
Organization) The Concentration of Specialized Industries in Particular Localities’.
Becattini (1989) and Bellandi (1987) define districts as a socioeconomic entity with

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the following features:
– geographical area with a historical tradition
– specialization of the area in a specific product

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– joint presence of a set of firms (SMEs) and a local community
– disarticulation of productive process in different vertical stages and intensive
relationships among firms

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– external economies of scale (but internal to the district)  agglomeration economies
– temporal stability
– industrial environment that promotes specific skills of employees

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– prone to innovation and optimisation due to strong competition
• From district to Network
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Economic relevance of the food system

Variables to assess the share of the food system on the economic
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system: value-added, employment, consumption

• food system value-added
VAFS = VA input+VAagr + VAfd + VAret + VAcat
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Ratio FS = VAFS *100

VA tot  GDP
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• food system employees

EMFS = EMinput+ EMagr + EMfd + EMret + EMcat
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RatioFS = EMFS *100

EM TOTAL
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• food consumption
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The total turnover amounts to
€3.613 billion (without food and drink services)
the value added to €731 billion (without F&DS)

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5.8% share of the food system in EU gross value
added  with input and food and drink services
around 10%

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11.1% share of the food system in EU
employment  with input and food and drink
services around 15%

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The food system employs
21.5 million people.

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The EU extensive foodsystem, from
the input industry and agriculture to
Source: FoodDrinkEurope, Data & Trends of the European Food and Drink Industry 2022 food and drink services, employs
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1 2016
2 Specialised and non-specialised stores with food and drinks predom.
3 2017 data for fertilisers and pesticides industry
30.7 million workers.

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Agriculture
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Source: United Nations 2011 - Creative Commons

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Agriculture

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• agriculture  set of activities directed at soil cultivation, farming and
animal husbandry
• primary sector  agriculture, fishery, forestry

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Agriculture depends upon:

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• Natural resources and land animals and plants have specific needs
 Type of soil fertility
 Flatland, hillside, mountain  slope, sun exposure, etc.

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 Water availability irrigation
 Climate conditions sunlight, warm/cold temperature, rain, wind, etc.

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 Land  Land productivity
• Fixed capital (i.e., machineries) and raw materials (seeds, chemicals -

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fertilizers and pesticides-, animal feed, etc. )  INPUT
 technological innovation
• Labour  labour productivity
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Agriculture
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• labour productivity and land productivity

• qi = f (xi)  qi = f (Kf, Rm, L, La, t)
where qi=production quantity, Kf=fixed capital,
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Rm=raw materials, L=labour, La=land, t=technological level

• marginal productivity average productivity
MP= dqi / dxi AP= qi / xi
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• labour productivity land productivity

LP= qi / L (ex. t /worker) LaP= qi / La (ex. t/ha)
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qi / L = qi / La * La / L
• qi  tons t, value of production VoP (turnover, sales, output), value
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added VA
• La  ha = hectares of used land (10,000 m2)
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Agriculture

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• if qi  VoP
VoP (euros per worker) = VoP (euros per ha) * La (ha per worker)
L La L

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where Vop depends on 1) production quantity (endogenous variable) and
2) price level (exogenous variable)  price taker

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• VoP/La  quantity of production per hectare (yield) and price
- type of product  maize, rice, salads, fruits, grapes, milk, meat…
- innovations  land saving or yield increasing  genetic

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improvement, irrigation, fertilization, pesticides, etc.
• La/L  labour saving innovations tractors, combine harvester, grape

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harvesting machine, etc.
• intensive agriculture  high level of VoP/La

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• extensive agriculture  low level of VoP/La gl
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Agriculture
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VoP/La (€ per ha) La/L (ha per worker)

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VoP/L (€ per worker)

VoP – costs of Rm & services = VA  VA/L

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VA – labour cost (employees) = EBITDA (earnings before interest, taxes, depreciation

and amortisation)
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EBITDA – amortization – interests – taxes = household labour + profit

in small businesses  labour can be a cost (employees) or can contribute to
entrepreneur and household income together with profit
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 income = household labour + profit  IN  IN/L

in the EU agriculture total income depends on market income and common
agricultural policy (CAP) payment (public support)
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Agriculture
• natural and agricultural landscape

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Following the OECD definition: ‘Multifunctionality or multifunctional
agriculture are terms used to indicate generally that agriculture can

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produce various non-commodity outputs in addition to food.’
The working definition of multifunctionality used by the OECD associates
multifunctionality with particular characteristics of the agricultural

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production process and its outputs:
(i) the existence of multiple commodity and non-commodity outputs that

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are jointly produced by agriculture; and that
(ii) some of the non-commodity outputs may exhibit the characteristics of

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externalities or public goods, such that markets for these goods function
poorly or are non-existent.

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Source: Agricultural Policies in OECD Countries: Monitoring and Evaluation 2000:
Glossary of Agricultural Policy Terms, OECD.
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Agriculture
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externality  positive/negative utility generated by an

economic activity
public goods  goods without market  it is a good that is both
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1) non-rivalrous  consumption by one individual does not

reduce the amount available for other individuals (Gravelle
and Rees)
2) non-excludable  individuals cannot be excluded from use
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the good  non exclusion of non payers  free-raider)

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Agriculture – commodity pricing

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• Different price-setting modes for commodities and differentiated
products

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• commodities  agricultural raw materials (like cereals, rice,
soybean, etc.)  homogenous products  market structure similar
to perfect competition

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– price is the result of the dynamics of total supply and demand
 at the national or international level depending on the level

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of openness of the market
– The single farmer is price taker  no chance to influence

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market price (small size)
– If price is lower than unit production cost  farms firstly stay in

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the market with negative profits, then they exit only the most
competitive farms stay in the market
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Agriculture – commodity pricing

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Agriculture – Price volatility

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• In the last decade commodity markets have shown a strong price
volatility  particularly in the period 2007-2010 price trends firstly

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increased significantly, and then dropped, but also at he the end of
2021 and durind 2022.
• The drivers of this volatility were (Headey, 2011):

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- drought and climate conditions
- increase in petrol prices production and trade costs
- increase in biofuel demand

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- changes in Asiatic consumption patters
- low stocks

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- macro-economic issues (low US dollar value, futures market,
etc.) and financial speculation

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- export restrictions
- logistic issues
- conflicts
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Agriculture – Price volatility

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Rice - price trend at world level

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Source: Jackson Son & Co. data (f.o.b. Bangkok, White Rice, Thai 100% B second grade)
Monthly prices, milled rice Thai
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Agriculture – Price volatility

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Agriculture – Price volatility

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Agriculture – Short food supply chain

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• ‘Short food supply chain is a term that describes a broad range of food
production-distribution-consumption configurations, such as farmers' markets,
farm shops, collective farmers' shops, community-supported agriculture,

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solidarity purchase groups. More in general, a food supply chain can be defined
as "short" when it is characterized by short distance or few intermediaries
between producers and consumers.’ (Wikipedia, 2015)

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• in the literature there is some overlap between the concepts of short food
supply chain and direct sales

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• in general, these include different typologies:

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• direct sales/farm shops • pick-your-own
• farmers’ markets • solidarity purchase groups
• e-commerce • restaurant supply

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• door-to-door selling • milk vending machines
• small processing • farm stays/agritourism
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Agriculture – Short food supply chain

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• Factors that influence consumer preferences (Carbone, 2004)

• Lower number of steps from production to consumption
 higher degree of freshness, sensorial and nutritional
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properties
• Higher transparency on product origin direct relation
with producers
• Higher level of trust of producers higher purchase
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frequency  quality warrenty

• Lower prices
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• Support to small local businesses

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Agriculture – Short food supply chain

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• Benefit for farmers:
• Increase of value added  farmers process and sell own raw

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materials instead of selling to processors increase of
profitability especially for small farms
• Direct relation with final customer higher trust sale

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stability
• Increased product quality and liability of producers
• Farmers become an active agent with respect to consumers 

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knowledge of consumer needs and preferences and target-oriented
communication

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• Need for entrepreneurial skills, know-how, guarantee of food safety
standards, reputation

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References
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• Paracchini M.L., Bulgheroni C., Borreani G., Tabacco E., Banterle A., Bertoni D.,
Rossi G., Parolo G., Origgi R, De Paola C. (2015), A diagnostic system to assess
sustainability at a farm level: The SOSTARE model. Agricultural systems, 133 (1),
35-53. www.sciencedirect.com/science/journal/0308521X/133
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• Headey D. (2011), Rethinking the global food crisis: The role of trade shocks.
Food Policy, 36 (2), 136-146.
www.sciencedirect.com/science/journal/03069192/36/2
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Food Industry

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Source: Pink Sherbet Photography, www.flickr.com - Creative Commons
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Food industry
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• Food industry  set of activities directed at the processing of

agricultural or natural raw materials in final food products
• Production function q = f (Kf, Rm, L, t) Kf fixed capital, Rm raw materials,
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L labour, t technology
• Firm sizes  q, turnover, employees  SMEs
micro < 10 employees, small 10-49, medium 50-249, big >= 250
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Kf industrial process  high level of capital and

low level of labour capital intensive
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small business process  low level of capital

and high level of labour  labour intensive
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L Productivity  labour productivity  LP = q/L

LP = VoP /worker
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Food Industry – product differentiation

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• Intrinsic characteristics  qualitative product attributes
• Extrinsic characteristics  label, certifications, etc.
• Brand

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industrial
- individual brand
private label
- collective brand (PDO, PGI, ecc.)

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• Advertising

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brand loyalty
premium price

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• Pricing
• qualitative characteristics

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• production costs  ATC
• price of possible alternative product
• willingness to pay of consumer
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Food industry – competitive strategies

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price competition  cost leadership

Competitive strategies focus

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non price competition  differentiation

Product life cycle

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sales
A = introduction
B = expansion
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C = stabilization
t D = decline
A B C D
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Food industry

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• The food industry is the leading manufacturing sector in the EU with a
turnover of 1,121 billion euros

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• The value addedd of the food industry is the 1,9% of EU gross value
added and the food consumpion are 21,5% of households expeditures

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Source: FOODDRINK EUROPE, 2022
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Food industry
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• The SMEs play an important role

• The external trade is 156 billion euros. Higher is the internal trade:
many EU countries export the food products to other EU contries; in
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the food sector there is a preference for the domestic products

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Source: FOODDRINK EUROPE, 2022

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Food industry

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• The food industry ia a non-cyclical industry because there is a demand for food
products (essential goods) whether the economy is in an expansion or a
downturn phase.

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Food industry
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Source: Calculation on FoodDrinkEurope data (Annual reports)

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Food industry

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• The value addedd of the food industry is the 1,9% of EU gross value
added

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Source: FoodDrinkEurope-2022
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Food industry
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• 4,62 million of people

are the employees in
the food industry.
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Source: FoodDrinkEurope-2022
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Food industry

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• The SMEs in the EU food industry have the 40,6% of turnover, but they are predominat for number of
companies and employees (58,4%)

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Source: FoodDrinkEurope 2022

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Food industry
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Source: FoodDrinkEurope 2022

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Food industry in Italy

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• In the 2021 the turnover of Italian food industry is 155 billions of euros 
growth after the drop due to Covid-19
• Nominal value versus real value of turnover (and value added)  a real value is
adjusted for inflation (same prices over the years). Real value means no effect of

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inflation

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nominal value

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Billion (€)

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Source: Calculation on Federalimentare data

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Food industry in Italy

• Export is important for the growth of the sector turnover
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• Export/Turnover is an index of internationalisation  capability of companies to go in foreign

markets
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Billion (€)

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Source: Calculation on Federalimentare data

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%
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Food Industry

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Structural bipolar model
 in the Italian food industry micro (<10 employees and <= 2 million
euros of turnover) and small firms (10-50 and <= 10 millions) firms

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are predominant, on the other side few firms of large size (>250 and
> 50 millions)  very few medium size firms

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 stable equilibrium between these two types of firms  coexistence
but different strategies
Micro and small firms strategies Large firms strategies

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– local products ₋ economies of scale

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– specialties  differentiation on ₋ differentiation on branding 
quality large brands
– private labels and dual branding ₋ concentration processes
– low prices
– industrial districts iS
₋ diversification
₋ dual branding
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References
ive

• Banterle A., Cavaliere A., De Marchi E. (2016). The Italian food industry
in the era of the TTIP negotiate. British Food Journal, 118 (8), 1930-
1945.
• FoodDrinkEurope (2022). Data and trends of the European Food and
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Drink Industry 2021. www.fooddrinkeurope.eu

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Retailing

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http://www.centralmarketsnyc.com
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Retailing
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• wholesale and retailing  set of activities directed at the

transfer of food products from production plants to final
selling points.
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– wholesale – business to business  B2B

– retailing – business to consumers B2C
• highest value-added in the food system
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• favourable position  close link with consumers

• growth of Large Retailers
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 in Italy about 60% of household food consumptions is done

in super- and hyper-markets, 6% in corner stores, 24% in
traditional shops, 4% in discount stores and 6% in open-air
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markets (Ismea-ACNielsen)
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Retailing

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• supermarkets  commercial area from 400 to 2.500 m2  from 1970 to
now high growth in the number of supermarkets, the average area and
of the employees

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 advantage of self-service  cost reduction
 de-specialisation  many products

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 financial advantage  high cash availability
• hypermarkets  commercial area > 2.500 m2  high growth
 stronger level of de-specialisation and self-service

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 high number of products
No structural equilibrium

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 traditional shops are in trouble and decreased strongly  especially in
the last fifteen years  lack of strategies to be competitive in the market

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 strong inter-type competition  growth of large retailers and reduction
of small shops  lack of structural equilibrium  small shops have to
adapt their strategy
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Retailing
Growth of Private Labels (PL)
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 PL products (with retailer brand name or with a fictitious name) provide

higher margins compared to industrial brands  produced by firms under
contracts and specific procedural guidelines  no R&D, marketing and
advertising costs
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 prices are lower than those of large brands, but high prices in other countries
 Πu_ret = Marginret = pret - pind
Quality standards diffusion
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 Large retailers tend to increasingly guarantee the safety and quality of their
products, especially PL and products of controlled-quality chains  F&V,
meat, fish
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 International standards are spreading  GlobalGAP, traceability, etc.

Centralised procurement
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 Retailers tend to take part to collective organizations to jointly buy

products, maintaining their autonomy  strong concentration in
retailing
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Retailing

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ASSORTMENT

• Large variety of products

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o large brands  market leaders  medium-high price

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o private labels  medium price

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o specialties  small businesses  high price  small consumer
niche

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o low price products  ‘unbranded’  small-medium business

o other industrial brands  medium-high prices

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Catering and food services

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Un
ht
rig
py

Maksym Kozlenko
Co

Department of Environmental Science and Policy

27
 17/03/2023

no
Catering and food services

ila
• Catering and food services  set of activities directed at meal preparation for
consumers
– restaurant industry (HORECA channel)

M
– canteen industry

• Restaurant industry – HORECA

di
– oriented at individual consumers
 large growth of Horeca  eating out

di
 distinction between restaurants and fast food
 growth of medium-large chains  franchising

tu
• Canteen industry
 oriented at specific groups  concentration of work during meals

iS
 diffusion of specialised service firms  no more auto-production
 possibility of meal tickets/vouchers
gl
Department of Environmental Science and Policy
de
ità
rs

Catering and food services

Canteen industry
ive

 traditional cuisine
 in-place meals
Un

 transported meals
 pre-cooked food
 price is the key feature
Segments of canteen industry
ht

 firms no growth  price is the key feature

rig

 schools price and quality  transported meals

 hospitals  in-place meals
py

 other communities
 catering e banqueting  conferences, events
Co

Department of Environmental Science and Policy

28
 17/03/2023

no
Catering and food services

ila
Main features of canteen industry

M
 low level of concentration
 different kinds of firms  multinationals, cooperatives,
small businesses

di
 public customers  public competition for the service 
price

di
 private customers
 main costs  labour (up to 60% of total costs) and raw-

tu
material procurement

iS
gl
Department of Environmental Science and Policy
de
ità
rs

Supply chain analysis

ive
Un
ht
rig
py

http://tedorcg.com/SupplyChain/
Co

Department of Environmental Science and Policy

29
 17/03/2023

no
Supply Chain

ila
• A chain is a set of three or more organizations directly involved in the
upstream and downstream flows of products, services, finances,
information and/or knowledge from a source to a customer (Mentzer

M
et al, 2001)

di
UPstream

di
Focal
Supplier company
Customer

tu
DOWNstream
iS
gl
Department of Environmental Science and Policy
de
ità
rs

Supply Chain
ive

Dierct chain members

• Supplier
• Focal company
the company from whose point of view the chain is investigated. From the
Un

viewpoint of the focal company a chain is the group of all

companies/organisations with whom the focal company interacts directly
or indirectly through its suppliers or customers from the point of origin to
he point of consumption.
ht

• Customer
rig

• Primary members: autonomous companies or strategic business units who

carry out value-adding activities (operational and/or managerial) in the
business processes designed to produce a specific output for a particular
py

customer or market
• Supporting members: companies that provide resources, knowledge, utilities
or assets for the primary members of the chain
Co

Department of Environmental Science and Policy

30
 17/03/2023

no
Supply Chain

ila
3rd party

M
logistics External
supplier laboraty

di
Focal Customer Customer

di
Supplier Supplier company

tu
3rd party

iS
Market
financial research
provider
gl
Department of Environmental Science and Policy
de
ità
rs

Supply chain
ive

• Structure of a complex supply chain Chain networks

Un
ht
rig
py

Adapted from Lazzarini et al. 2001

Co

Department of Environmental Science and Policy

31
 17/03/2023

no
Supply chain

ila
Functioning of the chain 
Chains function through several distinct but interrelated

M
flows (upstream and downstream) :

di
• Products

• Services

di
• Finances

tu
• Information

iS
• Knowledge
gl
Department of Environmental Science and Policy
de
ità
rs

Supply Chain
ive

PRODUCT FLOW

• The product flow represents the value-added movement and transformation

from a supplier of raw materials to the end customer of goods into the finished
Un

product  the organizations being involved in the upstream and downstream

value added movement of products.

• Traditionally it is rather downstream (from raw material to final product), but it

ht

also integrate returned products by clients/customers)

rig

• Product flow activities include: transportation, logistics, inventory, enhancement

and maintenance of quality, conversion into final products, handling (e.g. cooling,
sorting) etc.
py

• Product flow covers: raw materials, work in progress, finished products, by-
products and all related inventories.
Co

Department of Environmental Science and Policy

32
 17/03/2023

no
Supply Chain

ila
SERVICE FLOW

M
The service flow represents the organizations being involved in the
upstream and downstream flows of services.

di
• Traditionally the service flow is very tightly tied to the product flow

• Service flow activities include: pest control, waste disposal, quality

di
certification, laboratory testing, marketing support, market research,
external R&D)

tu
• Services:
– intangible but provide value

iS
– designed to be used (sold) in exchange for revenue (e.g. consulting
service)
gl
Department of Environmental Science and Policy
de
ità
rs

Supply Chain
ive

FINANCIAL FLOW
Un

The financial flow generally moves in the reverse direction of the value-
added activities

• Financial flow activities include: credit terms, payment schedules, and

ht

consignment and title ownership arrangements, sharing financial

performance information across the stages or processes and participants
in the chain
rig

• The financial flow indicates the payment in exchange of products, services

py

and information (Weill, Vitale 2001).

Co

Department of Environmental Science and Policy

33
 17/03/2023

no
Supply Chain

ila
INFORMATION FLOW

M
Information flow represents the bi-directional exchange of information among
chain members

di
• Information flow activities include: forecasts, purchase orders, shipping and
inventory information, status of delivery, technical information, information
about new technologies, management systems, legal requirements, demand,
product information (price, quality, etc.), consumer requests

di
• Main information flows: examples

tu
– Validity of claims - traceability, transparency (e.g., identity preserved
product/GMO free, organic products, PDO/PGI)

iS
– Quality - (different quality standards)
– Food safety - Availability of the necessary food safety information for the
next stage of chains is a priority – traceability
gl
Department of Environmental Science and Policy
de
ità
rs

Supply Chain
ive

KNOWLEDGE FLOW

The knowledge flow represents the bi-directional exchange of knowledge

among chain members
Un

• Knowledge flow activities include: networking, seminars, participation in

research projects, training, provision of food safety, quality
management/sustainability standards, methods requirements, etc.
ht

• Must understand how to make more money by sharing information/

rig

knowledge than by holding it!

• Results:
 better practice
py

 wider scale of thinking

 "tighter" chain etc.
Co

Department of Environmental Science and Policy

34
 17/03/2023

no
Theoretical approaches to supply chain analysis

ila
Several theoretical approaches:

M
– Economic approaches
 Neoclassical theory

di
 New Institutional Economics
– Managerial approaches

di
 Supply chain management (Matopoulos et al., 2007;
Ringsberg, 2014)

tu
 Organization theory (individual)
– Behavioural approaches
– Sociological approaches
iS
gl
Department of Environmental Science and Policy
de
ità
rs

Conflicts of interest in food supply chain

ive

• Following the neoclassical theory  in FSCs single companies

try to maximise profit (𝛱)  vertical interrelations  max 𝛱 of
company j implies a reduction in costs (TCj) that are strongly
Un

related to the revenue (TRi) of the supplier i  conflict of

interests
firms 𝑖 → 𝑗 → 𝑘
ht

𝑖 → 𝑚𝑎𝑥 𝛱 = 𝑇𝑅𝑖 − 𝑇𝐶𝑖

rig

𝑗 → 𝑚𝑎𝑥 𝛱 = 𝑇𝑅𝑗 − 𝑇𝐶𝑗

py

𝑘 → 𝑚𝑎𝑥 𝛱 = 𝑇𝑅𝑘 − 𝑇𝐶𝑘

Co

Department of Environmental Science and Policy

35
 17/03/2023

no
Conflicts of interest in food supply chain

ila
𝑖 → 𝑚𝑎𝑥𝛱 → 𝑚𝑎𝑥𝑇𝑅𝑖
𝑡𝑟𝑎𝑛𝑠𝑎𝑐𝑡𝑖𝑜𝑛 𝑞𝑖 → 𝑓𝑟𝑜𝑚 𝑖 𝑡𝑜 𝑗

M
𝑗 → 𝑚𝑎𝑥𝛱 → 𝑚𝑖𝑛𝑇𝑅𝑖

di
𝑗 → 𝑚𝑎𝑥𝛱 → 𝑚𝑎𝑥𝑇𝑅𝑗
𝑡𝑟𝑎𝑛𝑠𝑎𝑐𝑡𝑖𝑜𝑛 𝑞𝑗 → 𝑓𝑟𝑜𝑚 𝑗 𝑡𝑜 𝑘

di
𝑘 → 𝑚𝑎𝑥𝛱 → 𝑚𝑖𝑛𝑇𝑅𝑗

tu
→ 𝒎𝒂𝒓𝒌𝒆𝒕 𝒑𝒓𝒊𝒄𝒆
𝒑𝒊 (𝒒𝒊) 𝑎𝑛𝑑 𝒑𝒋(𝒒𝒋), → 𝒕𝒓𝒂𝒏𝒔𝒂𝒄𝒕𝒊𝒐𝒏
(𝑎𝑛𝑑 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦)

iS
gl
Department of Environmental Science and Policy
de
ità
rs

Conflicts of interest in food supply chain

ive

price takers agricultural sector

supply commodities
market
Un

demand
food industry
price makers  Vertical
different levels SMEs large
competition 
companies
different market
ht

supply power
rig

demand market for

price makers  differentiated
retailing
different levels goods
supply
py

asymmetric price
transmission along the chain demand
 different market power
home consumption
Co

Department of Environmental Science and Policy

36
 17/03/2023

no
Supply Chain Management

ila
Definition of Supply Chain Management (SCM)
SCM is the integrated planning, coordination, and control of all logistical

M
business processes and activities in the supply chain (SC)  All businesses
along the chain work together and communicate effectively  joint
responsibility for delivering a product to consumer demands

di
Aim of Supply Chain Management  to deliver superior consumer value at
lower cost to the SC as a whole while satisfying the requirements of other
stakeholders in the SC  improving competitiveness of the value chain as a

di
whole

tu
Reduce costs! Increase efficiency!

Net Profit
Total Asset
=
Net Profit
Net Sales
X
iS
Net Sales
Total Asset
gl
Department of Environmental Science and Policy
de
ità
rs

Supply Chain Management

ive

Value vs. Supply Chain

• Value chain
– A value chain is a collection of businesses ranging from primary
Un

producers, processors, distributors and retailers, consumers

Every step from raw materials to the final end user
– The value is created through interrelated activities which
progressively generate added value through a sequence of
ht

stages to achieve a common goal

– The ultimate goal is delivery of maximum value to the end user
rig

in a specific market segment

• Supply chain
– Every activity that gets raw materials and subassemblies into
py

manufacturing operation
• These terms are often used interchangeably
Co

Department of Environmental Science and Policy

37
 17/03/2023

no
Supply Chain Management

ila
Paradigm shift

M
di
di
tu
iS
gl
Department of Environmental Science and Policy
de
ità
rs

Supply Chain Management

ive

Why chain management?

Chain management can help a company to:

Un

• improve productivity and efficiency

• reduce inventories
ht

• reduce costs

• develop, maintain and manage profitable relationships with

rig

customers/suppliers and other business partners

• understand what makes value for the final customer

py

• deliver better services and enhanced economic value to customers

Co

Department of Environmental Science and Policy

38
 17/03/2023

no
New Institutional Economics on supply chain

ila
• New Institutional Economics  based on bounded rationality, imperfect
information and opportunistic behaviour  different approaches:

M
- Information economics (Akerlof, 1970)  the consequences of
information asymmetry in vertical exchanges  adverse selection

di
- Contract theory
 Theory of incomplete contracts (Grossman and Hart, 1986)  contracts cannot specify
what is to be done in every possible contingency  bounded rationality

di
 Principal-agent theory (Jensen and Meckling, 1976; Holmstrom, 1979): agency
relationship, in which one party (the principal) delegates another party (the agent), who
performs that work  adverse selection models and moral hazard models

tu
- Property right theory (Coase, 1960; Alchian and Demsetz, 1972)  ‘the
rights of individuals to the use of resources’ (Alchian, 1965) historical
and institutional context that shapes and changes property rights

iS
- Transaction Cost Economics (Williamson 1985, 1996)  transaction
attributes and costs influence transaction governance
gl
Department of Environmental Science and Policy
de
ità
rs

Transaction Cost Economics

ive

Objective
Choose the most efficient governance form for transactions 
transaction cost minimisation
Un

Transaction Costs
– Information costs
– Negotiation costs
– Monitoring costs
ht

Transaction characteristics
– Frequency (recurring, occasional)
– Uncertainty
rig

– Asset specificity (unspecific, mixed or idiosyncratic investment)

Transaction governance-forms
– Market
py

– Hybrid forms
– Hierarchy
Co

Department of Environmental Science and Policy

39
 17/03/2023

no
Transaction Cost Economics

ila
Transaction Transaction costs
characteristics

M
- information
- asset specificity
- negotiation
- uncertainty
- monitoring

di
- frequency

TC = f (AS, U, F)

di
+ + -

tu
Types of governance

iS
market, hybrid forms, hierarchy
gl
Department of Environmental Science and Policy
de
ità
rs
ive
Un
ht
rig
py
Co

Department of Environmental Science and Policy

40
 17/03/2023

no
Conflicts or coordination in the food supply chain

ila
• In the FSC there is a strong price conflict  vertical
competition  all firms have private goals

M
• As the focal company deals with other businesses such as
suppliers or buyers, is the simultaneity of competition and
co-operation possible?  both private goals and common

di
goals
• Several cases:

di
– Vertical integration  wine SC, short SC
– Cooperatives

tu
– Private label supply chains

iS
– Food safety, quality and sustainability standards 
traceability
– Logistics
gl
Department of Environmental Science and Policy
de
ità
rs

Vertical coordination
ive

• Vertical coordination  set of tools/ways to manage

exchanges in FSCs, coordinating strategic behaviour and
increasing the efficiency of FSCs (Sodano, 2004)  different
Un

levels
• Cooperation  collaboration among the economic agents of
the FSCs to reach a goal
ht

• Governance  ways of making the vertical exchanges among

the economic agents of the FSCs
rig

• Types of transaction governance:

– market
– hybrid forms
py

– hierarchies
Co

Department of Environmental Science and Policy

41
 17/03/2023

no
Vertical coordination

ila
• Types of transaction governance in food chains
– markets  spot market, commodity exchange, future

M
markets, fruit & vegetables market
– hybrid forms  contracts, agreements, inter-professional
agreements, standards

di
– hierarchies  vertical integration, cooperatives
• Degree of vertical coordination

di
- spot markets
contracts, agreements, traceability, quality standards (PDO,

tu
PGI), sustainability standards (IPM), organic, private labels
cooperatives
+ vertical integration
iS
gl
Department of Environmental Science and Policy
de
ità
rs

Vertical coordination
ive

Classification of the standards

Several voluntary standards are present within food supply
chains  Such standards can be classified in different ways,
Un

mainly depending on the object of the analysis:

– type of stakeholder involved  B2B or B2C
– scheme owners  private standards, public
ht

standards, civil society standards

– types of product involved  specific product, categories,
rig

all products
– legal validity  national or international
– level of standard complexity (for ex. traceability)
py

simple scheme or complex (type of procedures, etc.) 

different levels of vertical coordination
Co

Department of Environmental Science and Policy

42
 17/03/2023

no
Transaction governance in FSCs

ila
Williamson’s
transaction

M
governance
supply

market hierarchy

di
vertical
integration

di
hybrid forms

tu
contracts
demand

Different levels of vertical coordination

Carbone, 2017
iS transaction
characteristics
transaction
costs
gl
Department of Environmental Science and Policy
de
ità
rs

References
ive

• Banterle, A., Stranieri, S. (2008). The consequences of voluntary

traceability system for supply chain relationships. An application of
transaction cost economics. Food Policy, 33 (6), 560-569.
Un
ht
rig
py
Co

Department of Environmental Science and Policy

43
 17/03/2023

no
Food consumption

Mila
di
di
tu
iS
gl
Department of Environmental Science and Policy
de
ità
rs
ive
Un
ht
rig
py
Co

Source: FoodDrinkEurope, 2022

Department of Environmental Science and Policy

44
 17/03/2023

no
Aggregated demand

ila
 single demand  sum yi
 demographic growth
 income distribution in the population

M
 age segmentation of population

food consumption

di
Home consumption Eating out
Horeca

di
purchase of food products for home
consumption  retailing

tu
Characteristics Characteristics
• stable demand • dynamic demand

iS
• decreasing respect to total demand • increasing with total
(other goods) consumption
• low income elasticity  necessity goods • high income elasticity
gl
Department of Environmental Science and Policy
de
ità
rs
ive
Un
ht
rig
py

1,461 billion euros EU household

expeditures on food and drinks
Co

Source: FoodDrinkEurope, 2022

Department of Environmental Science and Policy

45
 17/03/2023

no
M ila
di
di
tu
iS
gl
Source: FoodDrinkEurope, 2022

Department of Environmental Science and Policy

de
ità
rs

Food consumption
ive

Per capita meat consumption by region

Un
ht
rig
py

Source: OECD/FAO (2019), “OECD-FAO Agricultural Outlook”, OECD Agriculture statistics (database)
Co

Department of Environmental Science and Policy

46
 17/03/2023

no
Food consumption in Italy

ila
Food consumptions in Italy (nominal value)
300.000

M
250.000

200.000

di
150.000

di
100.000

50.000

tu
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

iS
food non alcoholic drinks alcoholic drinks restaurants and food service

Total expenditure of Italian households (2,4

Source: calculations on ISTAT data
components on average)  2,560 €/month (2019)
Food expenditure  464 €/month (2019)
gl
Source: ISTAT, 2020

Department of Environmental Science and Policy

de
ità
rs

Food consumption in Italy

ive

Food consumptions in Italy (real value = 2015)

300.000
Un

250.000

200.000
ht

150.000

100.000
rig

50.000

0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
py

food non alcoholic drinks alcoholic drinks restaurants and food service

Source: calculations on ISTAT data

Co

Department of Environmental Science and Policy

47
 17/03/2023

no
Food consumption in Italy

ila
Trend of per capita beef meat consumption in Italy (in kilograms)

M
di
di
tu
Source: Statista 2021 iS
gl
Department of Environmental Science and Policy
de
ità
rs

Food consumption in Italy

ive

Frequency in fruit consumption in Italy in 2020

Un
ht
rig
py

Source: Statista 2021

Co

Department of Environmental Science and Policy

48
 17/03/2023

no
Food consumption in Italy

ila
Frequency in vegetables consumption in Italy in 2020

M
di
di
tu
iS
gl
Source: Statista 2021

Department of Environmental Science and Policy

de
ità
rs
ive
Un
ht
rig
py

Source: FoodDrinkEurope, 2022

Co

DepartmentDepartment of Environmental
of Environmental Science and Policy
Science and Policy

49
 17/03/2023

no
ila
Quality attributes of food products

M
di
di
Kelvin John Lancaster  in ‘60s overcame the
neoclassic model  introduction of differences in

tu
preferences due to quality attributes of products 
products eterogenity

iS
gl
Department of Environmental Science and Policy
de
ità
rs

Food attributes
Intrinsic quality attributes
ive

Food safety attributes Sensory/Organoleptic attributes

Food-borne pathogens Taste and tenderness
Heavy-metals and toxins Color
Pesticide or drug-residues Appearence and blemishes
Food additives, preservatives Freshness
Un

Spoilage and botulism Softness

Irradiation Smell/Aroma

Nutrition attributes Value/function attributes

Calories Size
Fat and Cholesterol content Style
ht

Sodium and minerals Preparation/Convenience

Carbohydrates & Fiber content Package materials
Proteins Long shelf life
rig

Vitamins
Process attributes
Animal welfare
Place of origin
Traceability
Biotechnology
py

Environmental impact
Worker safety
Fonte: Caswell, Noelke, Mojduszka
(2002)
Co

Department of Environmental Science and Policy

50
 17/03/2023

no
Food attributes
Extrinsic quality attributes

ila
Test / Measurement indicators Cues
Price

M
Quality management Systems
Certification Brand
Labelling Manufacturer name
Store name

di
Minimum Quality Standards
Packaging
Advertising
Country of origin

di
Distribution outlet
Warrenty

tu
Reputation
Past purchasing experiences
Other information

Fonte: Caswell, Noelke,

Mojduszka (2002) iS
gl
Department of Environmental Science and Policy
de
ità
rs

Product attributes
ive

Asymmetric Information--> information research done by

consumers --> cost-benefit (Stigler, 1961)
Un

Food product attribute classification  information search

and quality attributes
 search attributes--> can be obtained before purchase
ht

 experience attributes --> can be obtained only after

purchase
rig

 credeance attributes --> nor before nor after

py
Co

Department of Environmental Science and Policy

51
 17/03/2023

no
ila
Time preferences

M
&

di
eating behaviors

di
tu
iS
gl
Department of Environmental Science and Policy
de
ità
rs
ive

Time Preferences:
• Willingness to trade a current utility for a delayed utility  People’s
willingness to accept a larger amount in the future versus a smaller
Un

amount sooner
• TP can be also seen as a measure of impatience

• Time preference: The extent to which people discount future events

ht

High time preferences Low time preferences

rig

- High future discounting - Low future discounting

- Less willing to delay - More willing to delay
py

gratification gratification
- Present-oriented - Future-oriented
Co

Department of Environmental Science and Policy

52
 17/03/2023

no
ila
Time-discounting behavior generally refers to any motive that leads individuals to care less
about future outcomes

M
• Discount function declines
at a t constant rate
• Exponential function does

di
not show instant
gratification effect 

di
does not decline more
quickly in the short-run

tu
than in the long-run
• People are time consistent

iS
• They are able to plan and
behave accordingly
gl
Fonte: R. Nayga

Department of Environmental Science and Policy

de
ità
rs
ive

• Instant gratification effect

• Discount function declines
more quickly in the short-run
Un

than in the long-run

• Relative to current period, all
future periods are worth much
ht

less  People have strong

tendency to over-value
rig

immediate gratification  we
are impatient over short-run
decisions
py

• Unable to plan and behave

accordingly Fonte: R. Nayga
Co

Department of Environmental Science and Policy

53
 17/03/2023

no
ila
Read and van Leeuwen (1998)

M
Choosing - Time delay -
Eating
today next week

Time

di
If you were deciding today, would you choose fruit or chocolate for next week?

di
Tradeoff

tu
iS
Results
74% chose fruit  people tend to make PATIENT CHOICES FOR THE FUTURE
gl
Department of Environmental Science and Policy
de
ità
rs
ive

Read and van Leeuwen (1998)

Choosing - Simultaneity -
Eating
Un

today today

Time
If you were deciding today, would you choose fruit or chocolate for today?
ht

Tradeoff
rig

RESULTS
py

70% chose chocolate  people tend to make IMPATIENT CHOICES IN THE

PRESENT
Co

Department of Environmental Science and Policy

54
 17/03/2023

no
ila
Sophisticates VS Naifs

M
Sophisticates
‘I won’t quit smoking next week, though I would like to do so’

di
• They know that their plans to be patient tomorrow won’t pay out

di
(Strotz, 1957)

tu
• They are aware that their preference will change and act in anticipation
• They will use commitment devices to help guide their future selves

iS Fonte: R. Nayga
gl
Department of Environmental Science and Policy
de
ità
rs
ive

Sophisticates VS Naives

Naives
Un

‘I will quit smoking next week, though I’ve failed to do so every week for five
years’
ht

• They mistakenly believe that their plans to be patient will be perfectly

rig

carried out (Strotz, 1957)

• They do not realize that their preferences will change
• They can get in trouble frequently
py

• They don’t see the need for a commitment device

Fonte: R. Nayga
Co

Department of Environmental Science and Policy

55
 17/03/2023

no
ila
M. Grossman’s ‘demand for health’, (1972). Health is an economic
good that everyone inherits at birth, and that depreciates with aging. The

M
depreciation of health capital stock can be offset by:
direct investments (e.g. medical care)
indirect investments health behaviours

di
di
Health behaviours imply a trade-off between a current satisfaction and
a future benefit. They represent intertemporal choices in which time

tu
preferences have a primary role.

iS
The rate at which a person invests in health depends on his personal
TIME PREFERENCE gl
Department of Environmental Science and Policy
de
ità
rs

: a background
ive

TIME PREFERNCE & HEALTH-RELATED BEHAVIORS

Individuals with LOW TIME PREFERENCES are LESS LIKELY TO:

Un
ht

Smoke Drink alcohol Have high BMI

(Adams & Nettle, (Bishai, 2001; Takanori & (Adams & White, 2009;
rig

2009; Harrison, Lau, Goto, 2009) Borghans & Golsteyn,

& Rutstrom, 2010;
2006; Ikeda, Kang, &
Robb, Huston, &
Ohtake, 2010; Komlos,
Finke, 2008; Scharff
Smith, & Bogin, 2004;
& Viscusi, 2011;
Smith et al., 2005)
Takanori & Goto,
2009)
py
Co

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: a background

ila
TIME PREFERNCE & HEALTH-RELATED BEHAVIORS

Individuals with LOW TIME PREFERENCES are MORE LIKELY TO:

M
di
Exercise Undergo medical Have high diet Control their diets

di
(Adams & Nettle, (Cavaliere, De Marchi, & Banterle, 2014;
2009; Ouellette,
examinations quality Piko & Brassai, 2009)
Hessling, Gibbons, (Bradford, 2010; Chapman, (Houston and Finke,
Reis-Bergan, & Brewer, Coups, Brownlee, & 2003)

tu
Gerrard, 2005; Leventhal, 2001)
Wardle & Steptoe,
2003)

Make use of nutritional

iS
Preventive labels
(Houston and Finke, 2003)
behaviors gl
de
ità
rs

: a background
ive

TIME PREFERENCE & PRO-ENVIRONMENTAL BEHAVIORS

LOW TIME PREFERENCES are related to:

Un

Higher Increased Recycling Less waste

environmental pro-environmental behaviors
ht

(Ebreo & Vining,

concern attitudes (Ebreo & Vining,
2001; McCollough,
2010)
2001; McCollough,
(Carmi & Arnon, 2014; (Joreiman et al., 2001; Franzen and
2010
Franzen & Vogl, 2013; Vogl, 2013; Carmi and Arnon, 2014)
rig

Gretibus, Lusk, & Nayga,

2015; McCollough,
2010).
py

Lack of studies that have investigated how time preferences could affect
environmentally friendly behaviors related to food consumption.
Co

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no
ila
The marshmallow experiment:

- 2 out of 3 eat the marshmallow  Preference for immediate gratification

M
- 1 out of 3 waited  Willingness to accept a larger amount in the future

di
FOLLOW UP: 10 years later… 100% of them had success!

di
Is the ability to delay

tu
gratification the
KEY of SUCCESS??

iS
http://www.youtube.com/watch?v=lWURnHkYuxM
gl
Department of Environmental Science and Policy
de
ità
rs
ive

Which is the main problem with TP?

TP IS NOT DIRECTLY MEASURABLE 

Un

Need to create TP proxy

MOST USED TP PROXY:

ht

•Saving and dissaving rates information

rig

•Monetary choice-task

•Consideration of Future Consequences questionnaire (CFC)

py
Co

Department of Economics, Management and Quantitative Methods

Department of Environmental7th
Science and
Igls Forum Policy18-22, 2013
February

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M ila
MAIN LIMITATIONS

di
• monetary-TP can be very different from health-TP

• Future health consequences do not appear immediately

di
• Health outcomes are not measurable

tu
iS
gl
Department of Economics, Management and Quantitative Methods
Department of Environmental7th
Science and
Igls Forum Policy18-22, 2013
February
de
ità
rs
ive

Obesity and time preference: is there an association? An analysis

through a consumer survey.
(A. Cavaliere, E. De Marchi, A. Banterle, 2012)
Un

HYPOTHESIS  Low TP can be associate with a low probability to gain weight

ht

TP PROXY  Directly related to food consumption Do you think about future
health consequences in your food choices or not?
rig

Results  TP is positively related to BMI 

To give more importance to taste than to healthy aspects of foods could lead
py

consumers to increase their probability to put on weight. Low time preference rates
could be positively related to low BMI, as like as high time preference could be
associated with a higher probability to gain weight.
Co

Department of Environmental Science and Policy

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ila
The effect of present-biased preferences on consumers’ food choices:
evidence from a choice experiment.

M
De Marchi Elisa; Caputo Vincenzina; Nayga Rodolfo M. Jr.; Banterle Alessandro

di
AIM  investigate if time preference may have a role in affecting consumers’
evaluation of healthy and environmentally friendly product attributes

di
HYPOTHESIS  consumers with high time preferences fail to consider the
long-term benefits deriving from both healthy and environmentally-friendly

tu
attributes of food –VS- Low time preference are associated with more healthy
and sustainable food choices

iS
TP PROXY Consideration of future consequences scale (CFCs 14-Items
scale)
gl
Department of Economics, Management and Quantitative Methods
Department of Environmental7th
Science and
Igls Forum Policy18-22, 2013
February
de
ità
rs

CFC 14-items scale

Sub-scale*
TIME PREFERENCE
1
I consider how things might be in the future, and try to influence those things with my day
F ELICITATION METHOD
to day behavior.
ive

Often I engage in a p articular behavior in order to achieve outcomes that may not result for
2
many y ears.
F Consideration of Future
Consequences (CFCs )
3 I only act to satisfy immediate concerns, figuring the future will take care of itself. I
14-Items scale
4
M y behavior is only influenced by the immediate (i.e., a matter of days or weeks)
I (as in Joreiman et al., 2012)
outcomes of my actions.
Un

5 M y convenience is a big factor in the decisions I make or the actions I take. I • 7 items refer to high time
I am willing to sacrifice my immediate happiness or well-being in order to achieve future
preferences 
6
outcomes.
F present-orientation
I think it is important to take warnings about negative outcomes seriously even if the
CFC-Immediate subscale
7 F
negative outcome will not occur for many y ears. (CFC-I)
ht

I think it is more important to perform a behavior with important distant consequences

8
than a behavior with less imp ortant immediate consequences.
F • 7 items refer to low time
preferences 
I generally ignore warnings about possible future problems because I think the p roblems
9 I future-orientation
will be resolved before they reach crisis level.
CFC-Future subscale
rig

I think that sacrificing now is usually unnecessary since future outcomes can be dealt with
10
at a later time.
I (CFC-F)

I only act to satisfy immediate concerns, figuring that I will take care of future p roblems
11 I Respondents give a score to each
that may occur at a later date.
statement:
Since my day-to-day work has specific outcomes, it is more imp ortant to me than behavior 1 = extremely uncharacteristic of
py

12 I
that has distant outcomes.
me
13 When I make a decision, I think about how it might affect me in the future. F 7= extremely characteristic of me
14 M y behavior is generally influenced by future consequences. F
Co

*Subscale: F = CFC-Future subscale item; I = CFC-Immediate subscale item

Department of Environmental Science and Policy

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Consideration of Future Consequences (CFCs ) 14-Items scale
(as in Joreiman et al., 2012)

M
• The CFCs construct is very easy for the respondents to understand
suitable to be used in an on-line survey on a random sample of

di
consumers

• CFCs scale does not require providing respondents with incentives in

di
order to get reliable data and avoid hypothetical bias.

tu
• Not affected by domain dependence

iS
• CFCs has already been shown to be a good predictor of healthy
behaviors in general, and of individuals’ tendency to eat healthy
gl
de
ità
rs
ive

RESULTS
Un

High TP individuals attribute do not take into account healthy and

ht

environmentally friendly attributes of food products

rig

•Results confirm our initial hypothesis  The very preliminary results

indicate that high time preference is associated with a low interest in the
calorie amount of food and the organic label  respondents showing
py

lower future discounting are more likely to consider the USDA organic logo
Co

Department of Economics, Management and Quantitative Methods

Department of Environmental7th
Science and
Igls Forum Policy18-22, 2013
February

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no
POLICY IMPLICATIONS

M ila
IS IT POSSIBLE TO CHANGE CONSUMER TIME
PREFERENCE?

di
di
tu
POSSIBLE INTERVENTIONS?

iS
gl
Department of Economics, Management and Quantitative Methods
Department of Environmental7th
Science and
Igls Forum Policy18-22, 2013
February
de
ità
rs

POLICY IMPLICATIONS
ive

Future policies should attempt to decrease consumers' preference for

immediate utilities and lead people to rethink about the value of their
future health outcomes
Un

• Information campaigns which aim to improve consumer knowledge

about the relationship between diet and health  health-education
intervention could be effective in decreasing the rate at which consumers
discount the future
ht

• Modify the arrangement of food-shelves, placing healthier foods in the

rig

central lines and discouraging the presence of snacks or other junk-

foods near the cash registers. Spatial proximity to the object of desire, the
presence of smells or sounds could be associated with increased impatience
and impulsive behaviours.
py

• Discourage the increasing diffusion of food-self shops (vending-

machines)
Co

Department of Economics, Management and Quantitative Methods

Department of Environmental7th
Science and Policy
Igls Forum February 18-22, 2013

62