Opponents of the voluntary labelling scheme for genetically modified (GM) food products often argue that consumers have the “right to know” and therefore advocate mandatory labelling. In this paper we argue against this line of reasoning. Using experimental auctions we show that the quality of the signal generated by a mandatory labelling scheme is affected by the number of labels in the market. If there are two labels, one for GM products and one for non-GM products, mandatory and voluntary labelling schemes generate a similar degree of uncertainty about the quality of products that do not carry a label.
Dannenberg, Astrid, Sara Scatasta and Bodo Sturm (2011), Mandatory versus Voluntary Labelling of Genetically Modified Food – Evidence from an Economic Experiment, Agricultural Economics 42 (3), 373–386.