Vegetarians do #1, but not #2 - which doesn't encourage a change in practice at all, just a reduction of amounts.
It can be hard to stick to #2 when faced with a $20 roasting chicken, but that's the nature of this sort of change.
editing additions (above is unchanged) because I was obviously not clear enough.
I was responding to a post asking what can be done to change a market like that, not saying anything about the choice of being vegetarian itself.
If you decide to become vegetarian for whatever reasons, that is a market signal. However, it is not a market signal to change how meat is being processed, it is a market signal to reduce how much is being produced under any method.
DeusExMachina's point is fair, eggs are a valid (for some versions of "vegetarian" [1]. The rest of his comment is exactly the same as what I'm saying - by participating in the market but choosing to buy products that are more expensive because of the way they are raised, you are signalling a value for that practice. This is much more effective for change in how that market produces goods than simply not participating.
So to be clear - I'm not making a value judgment on choosing to be a vegetarian, I'm just pointing out something fairly obivous - that not participating in a market is not a very effective way of changing how that market produces things.
[1] in my lexicon vegetarians don't eat cheese or eggs either, which is different from vegan's who wouldn't eat honey for example - but that's not really important