Thursday, March 7, 2013

How much did the Gulf Oil Spill cost to shrimp consumers?

When the Deepwater Horizon oil platform exploded in 2010 and polluted much of the Gulf of Mexico Coast, some of the loudest complaints came for shrimpers fearing rightfully for their livelihood. The subsequent debate on how much the polluters should pay has been in part fueled by the question of how high the economic costs of the spill are, with a focus on repairing the pollution on the coast and in the water, as well as the economic costs to those living in the area. Ignored in all of this are damages to people outside of the region, for example shrimp consumers.

Addison Ellis, Jaclyn Kropp and Michael Norton identify for this case three sources of damages: higher prices, substitution to less liked goods, and added stigma from consuming Gulf shrimp (because it was perceived to be more risky). For the two first, they estimate the loss of consumer surplus to about US$100 million. For the third, they performed a series of experiments in 2010 to elicit from participants their willingness to pay for various types of shrimps. The stigma is reflected in a willingness to pay US$1.10 less per half-pound for Gulf shrimp. In terms of overall cost, my calculation indicates this would increased it by a little less than US$400 million, as 80,000 metric tons of shrimp were produced in the Gulf in 2010 (note the spill occurred on the 10th of April). Not small potatoes.

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