In the last decade or so, our world has seen a mass adoption of genetically modified (GM) food, especially in the United States. The USDA reported that since 1996, the percent of GM corn in the US has gone from almost nonexistent to 72% in 2011, and genetically modified soybeans accounted for 94% of the soybean crop in 2011. Europe has been much slower in adopting GM foodstuff, which is often referred to as "Frankenstein Food." Only two years Time Business reported that Europe allowed its first GM-food, a potato not meant for human consumption, in the article Is Europe Finally Ready for Genetically Modified Foods? However they do allow for GM foods to be imported.
With the prevalence of GM foods in the food system, there has long been debate over if, and how, these products should be labeled. Some countries, such as the United States and Canada, have adopted voluntary labeling, letting the market determine the optimal amount of labeling without the high costs mandatory labeling would require. The argument for mandatory labeling centers around the idea that consumers have a right to know these details about their food. In the article "Mandatory Versus Voluntary Labeling of Genetically Modified Food: Evidence from an Economic Experiment" published in Agriculture Economics in November 2010, Astrid Dannenberg, Sara Scatasta, and Bodo Sturm talk about the effect of mandatory labeling on GM foods in Germany, whose consumers typically view GM foods very negatively.
In conducting the experiment, researchers looked at 4 different labeling schemes by changing the number of alternatives in the same choice set (1 or 2 alternatives with voluntary or mandatory labeling as the choice set). This enables them to look at 1) a mandatory labeling of GM foods while allowing for voluntary labeling of non-GM foods, 2) mandatory labels for GM foods, 3) voluntary labels for non-GM foods, and 4) voluntary labeling requirements, allowing for both GM and non-GM food labels. They also looked at how much cheaper GM foods would need to be relative to non-GM foods in order for consumers to purchase GM foods. What they found was consistent with what they expected: most German consumers required a 47%-59% discount to buy GM food.
What they found about labeling is if there are only 2 choices (either "GM food" or "non-GM food" and "unlabeled") consumers could accurately read and trust labeling signals. However, when a 3rd option was thrown in ("GM food", "non-GM food" and "unlabeled") under the mandatory labeling scheme, consumers valued the unlabeled food differently. They had a preference for labeled non-GM foods over unlabeled, devaluing the unlabeled food when mandatory labels for GM foods were required. The authors suggest that mandatory labeling effects consumers' confidence in food labels as a whole. However, under the voluntary labeling scheme, with labels for non-GM food and GM food, consumers monetarily valued unlabeled products exactly between the monetary values they placed on non-GM and GM foods. The authors closed the article by saying that more research needs to be done to find the socially optimal food labeling structure, whether it is voluntary or mandatory.