Information and risk perception: A dynamic adjustment process

It is common in catastrophic food-contamination events that consumers fail to adjust instantaneously to a normal consumption level. One explanation is that consumers only gradually accept new positive information as being tru stworthy. The gradual establishment of the trustworthiness of the released information depends on both positive and negative media coverage over time. We examine the individual "trust" effects by extending the prospective ref erence theory (Viscusi, 1989) to include a dynamic adjustment process of ri sk perception. Conditions that allow aggregation of changes in risk percept ions across individuals are described. The proposed model describes a gener al updating process of risk perceptions to media coverage and can be applie d to explain the temporal impact of media coverage on consumption of a broa d range of goods (food or nonfood). A case study of milk contamination is c onducted to demonstrate consumer demand adjustment process to a temporarily unfavorable shock. The results suggest that effects of positive and negati ve information to adjustment of consumption and risk perception are asymmet ric over time.