Willingness-to-pay for natural,organic, and conventional foods: The effects of information and meaningful labels

Vague food labels and distorted product claims have persisted in the “natural” food industry, while organic claims can be certified by the U.S. Department of Agriculture (USDA). Using experimental methods and a sample of randomly selected subjects, we test food label and information treatment effects on subjects' willingness-to-pay (WTP) for organic, “natural,” and conventional foods. Random nth-price auctions are used to elicit WTP after subjects received one of five randomly assigned information treatments. We find large information effects, including asymmetric cross-market effects for natural and organic foods. Perhaps surprising is that organic premiums increase in response to subjects seeing the “natural” foods industry's perspective on its products. Demographics effects are also important. The results have practical implications for natural and organic food marketing and valuing products where there are vague claims about their attributes.     

Two experiments in one: How accounting for context matters for welfare estimates

By combining two different types of experiments in one experimental session, this paper aims at understanding how different contexts may influence participants’ choices. This paper focuses on one hybrid experimental session that mixed one voluntary contributions mechanism (VCM), influencing the indemnity received by participants, and one mechanism eliciting willingness to pay (WTP) for milk bottles with public and private attributes. The VCM shows relatively high levels of contributions that are mainly influenced by the positive expectations of participants about the average group contribution, rather than by the variations in the design of this mechanism and the period of experiments. The WTP for milk bottles are particularly sensitive to the order of mechanisms and to the period of experiments. Conversely, the WTP differences between milk bottles for a given round of information are invariant across the order of mechanisms and the period of experiments. For each bottle, the variations of WTP coming from the messages about private and public attributes are also stable over the order of mechanisms and the period of experiments. This confers validity to experiments for measuring WTP for public and private attributes related to food. In other words, these variations of WTP contribute to welfare estimates and are useful to evaluate market regulations focusing on public and/or private attributes.     

Are consumers concerned about palm oil? Evidence from a lab experiment

A lab experiment evaluates the consumers’ willingness to pay (WTP) for food products made with and without palm oil. Palm oil production induces environmental damages, and its consumption presents a health risk. However, the production of alternative oils raises land use issues. In the experiment, successive messages emphasizing the characteristics of palm oil and palm oil-free products are delivered to participants. Information has a significant influence on WTP when it underlines the negative impact of the related product. This effect is stronger for the palm oil product than for the palm oil-free product. The experiment also compares the welfare effects of two regulatory instruments, namely a consumer information campaign versus a per-unit tax. Because of the respective attributes of both palm oil and palm oil-free products, the information campaign improves welfare with a much larger impact than the tax.     

Economic benefits from promoting linseed in the diet of dairy cows for reducing methane emissions and improving milk quality

Linseed for feeding dairy cows reduces methane emissions and increases the omega-3 content of milk. In a lab experiment, milk bottles from cows fed a diet with or without linseed were offered to French participants for eliciting their willingness to pay (WTP). Successive messages highlighting the different effects of linseed were revealed to participants. We find that messages including the ones on methane emissions and omega-3 in milk significantly impact the participants’ WTP. These WTP estimates are used for welfare simulations that underline the positive impact of a public advertising campaign informing about linseed. When informing participants via a campaign becomes difficult, some regulatory tools like a quality standard may complement this advertising campaign.     

Consumer valuation of information about food safety achieved using biotechnology: Evidence from new potato products

This study focuses on the role of food labels and information for affecting consumers’ valuation of food safety achieved through application of biotechnological (biotech) methods. In 2002, potato products cooked to a high temperature were first reported to contain the human carcinogen acrylamide. Research discoveries using genetic engineering can substantially reduce carcinogenic-forming potential, and thereby increase food safety of potato products. Adult consumers from three distant regions of the U.S. were the subjects in lab auctions of potato products. They engaged in distinct rounds of bidding, first without packaged information and again after receiving information about the food safety risks and benefits of new biotech potato products. The study finds that willingness-to-pay (WTP) for these new potato products are not significantly different from conventional potato products under no information. However, exposure to a scientific perspective and scientific plus industry perspectives increases participants’ willingness-to-pay for the new potato products and reduces willingness-to-pay for conventional products. Exposure to the negative perspective on the new technology significantly reduces willingness-to-pay. Consumer valuation of the new potato products is affected by food labels, information, and consumer attributes. A consumer information program could be needed to gain consumer acceptance of these potato products or other foods that have been genetically modified to increase certain food safety dimensions.     

Consumers’ willingness to pay for eco-friendly apples under different labels: Evidences from a lab experiment

An experiment was conducted in France to evaluate the impact of health and environmental information on consumers’ choices between conventional and organic apples. Results show that additional and precise messages about both pesticides use and pesticides residues significantly impact consumers’ choices between both products. The experiment also studied the effect of a new label signaling apples that only use few pesticides compared to conventional apples. With elicited willingness-to-pay, we show that the introduction of this new label increases the average participants’ surplus whatever the information context for participants, because of a higher quality compared to conventional apples and a lower price compared to organic products. In order to complement this label, a minimum-quality standard imposing the use of few pesticides is socially optimal when initial participants’ knowledge is limited.     

Hen housing system information effects on U.S. egg demand

The U.S. egg industry has been moving rapidly towards “cage-free” aviary housing as an alternative to conventional cages for hens. A choice experiment was used to evaluate the U.S. public’s willingness to pay (WTP) for egg attributes including housing system, color, size, and certifying agency. A significant difference in WTP for hen housing systems was found using video information treatments describing hen housing systems. When respondents were shown videos of egg production systems, they were indifferent between cage-free aviary and the alternative enriched colony hen housing system whereas with no video information the respondents clearly preferred the cage-free system. Results point towards potential public misunderstanding of the costs and benefits associated with the “cage-free” egg label designation and highlight potential discrepancies between industry commitments and informed consumer preferences.     

Food choice,health information and functional ingredients: An experimental auction employing bread

In this paper we present the results of an experimental auction conducted to examine the influence of health and nutritional information on food choice and in particular estimate consumer willingness to pay (WTP) for bread that contains functional ingredients. Employing a sandwich we find that consumers are WTP more for a whole grain and whole grain granary bread sandwich than other bread types including white bread that contains a functional ingredient. We also find that consumers react positively to the provision of nutritional and health benefit information but that this effect occurs regardless of whether we supply specific or non-specific health benefit information. We discuss information provision and health policy implications that emerge from our analysis for bread products in the sandwich market.     

Quality perceptions under evolving information conditions: Implications for diet,health and consumer satisfaction

Consumers’ perception of, and satisfaction with, fruit quality is an important issue for both public policy and commercial reasons. However, because of information problems, consumers cannot easily choose fruits of a quality most likely to satisfy their preferences and health needs. The research reported here employed an experimental auction method to test perceptions of fruit quality by evaluating the willingness to pay (WTP) of consumers for five different varieties of soft citrus under three different information conditions: visual inspection of the fruit before peeling; visual inspection after peeling; and after consumption. Significant differences were found in valuations of the different varieties as consumers gained information. Conclusions are drawn about the value of the methodology and the results themselves, and implications are inferred for policy and for growers and traders. It is argued that product information should be oriented not just towards nutritional education but also towards increasing the pleasure of healthy eating.     

A Closer Look at Serial Growth Rate Correlation

Serial correlation in annual growth rates carries a lot of information on growth processes – it allows us directly to observe firm performance as well as to test theories. Using a seven-year balanced panel of 10,000 French manufacturing firms, we observe that small firms typically are subject to negative correlation of annual growth rates, whereas larger firms display positive correlation. Furthermore, we find that those small firms that experience extreme positive or negative growth in any one year are unlikely to repeat this performance in the following year. Thanks go to Carlo Bianchi, Giulio Bottazzi, Domenico Delli Gatti, Giovanni Dosi, Bernard Paulré, Rekha Rao and participants at the LEM conference on ‘Reappraising Economics as an Empirically Disciplined Science’ in Volterra in September 2006 for helpful comments. I am also indebted to Larry White (the editor) and two anonymous referees for many insightful remarks and suggestions. The usual disclaimer applies.     

Demand for ecolabeled seafood in the Japanese market: A conjoint analysis of the impact of information and interaction with other labels

The use of seafood ecolabels is expanding in the world marketplace, but so are labels indicating other product attributes, such as country of origin and wild vs. farmed. The interactive effects of these labels and attributes in evaluating consumers’ preferences for ecolabeled seafood are relatively unexplored. In this paper we investigate (1) the direct and interactive effects of seafood ecolabels with other common fish labels, and (2) how consumers’ perceptions about the state of marine stocks and the valuation of ecolabels may be affected by different information. We find moderate interactive effects between ecolabels and country of origin labels, whereas the valuation for seafood ecolabels is fairly high. In terms of information, we find that consumers’ perceptions about fish stock levels changed (negatively) after receiving information on declining stock levels, and more sensationalized information led to increased change. However, valuation for a seafood ecolabel increases only when the information was perceived positively (credible/interesting); whereas exaggerated information (which was also perceived less credible) had insignificant effects on WTP.     

Estimating the adoption of Bt eggplant in India: Who Benefits from public–private partnership?

The study analyzes ex ante the adoption of insect-resistant Bt eggplant technology in India. Farmers’ willingness to pay (WTP) is estimated using the contingent valuation method. Given the economic importance of insect pests in eggplant cultivation, the average WTP for Bt hybrids is more than four times the current price of conventional hybrid seeds. Since the private innovating firm has also shared its technology with the public sector, proprietary hybrids will likely get competition through public open-pollinated Bt varieties after a small time lag. This will reduce farmers’ WTP for Bt hybrids by about 35%, thus decreasing the scope for corporate pricing policies. Nonetheless, ample private profit potential remains. Analysis of factors influencing farmers’ adoption decisions demonstrates that public Bt varieties will particularly improve technology access for resource-poor eggplant producers. The results suggest that public–private partnership can be beneficial for all parties involved.     

Will they buy it? The potential for marketing organic vegetables in the food vending sector to strengthen vegetable safety: A choice experiment study in three West African cities

Considering the hazardous use of synthetic pesticides in vegetable production in urban West Africa, this research investigated the marketing potential of organic vegetables in the food vending sector of Cotonou (Benin), Accra (Ghana) and Ouagadougou (Burkina Faso). Certified organic production and marketing was examined as a potential strategy to improve chemical food safety. A stratified random sampling strategy was applied to study the preferences of food vendors (n = 180) and consumers (n = 360); vegetable use, risk perception, choice preferences and willingness-to-pay (WTP) for organic certification were specifically analyzed. The results showed that awareness of chemical contamination risks was generally low. Appearance of a product was central to vendor choice; consumers attributed similar utility to taste and organic certification. Consumer WTP was calculated to be a premium of 1.04 USD (per plate) if the food served contained only certified organic vegetables. In restaurants, this would mean an average premium of 19% for a meal. If certified organic vegetable production is to make a positive impact on food safety in urban West Africa, we suggest concentrating marketing efforts on the educated “elite” who frequent restaurants. However, considering that restaurant owners exhibited a lower preference for organic certification than lower class food vendors, the marketing situation is difficult. We therefore conclude that demand from the food vending sector alone will not institutionalize domestic certification mechanisms; this underlines the need for public commitment to facilitating such change.     

Health information and diet choices: Results from a cheese experiment

This study reports results from a choice experiment on semi-hard cheese from Norway. About half of the 408 participants were exposed to diet-related health information before performing either a choice or a ranking task, while a control group did not receive such information. The effects of health information on marginal willingness to pay for low-saturated-fat, low-fat and organic cheese are analyzed using rank-ordered mixed logit models. Cheese preferences are clearly affected by exposure to health information. On average, the health information group is willing to pay a price premium of 27.2% (NOK 24.5 per kg) for low-saturated-fat cheese and 14.4% (NOK 13.0 per kg) for low-fat cheese. This is respectively 1.73 and 2.89 times more than corresponding price premiums in the control group. Non-college, medium–high income, age 50–70 and female participants are more clearly affected by health information than college, low income, age 30–49 and male participants. Subjective statements on diet-health knowledge and awareness are used to discuss these findings. Our results suggest that provision of health information is likely to reduce educational differences in diet-health knowledge and thus dietary behavior. Low income participants seem to be constrained by high food prices, but not by lack of knowledge or awareness. Finally, due to lack of diet-health awareness, reaching out to young people and particularly males through health information policies seems difficult.     

Functional ingredients and food choice: Results from a dual-mode study employing means-end-chain analysis and a choice experiment

In this paper we present the results of a choice experiment (CE) conducted to examine how the inclusion of a functional ingredient (to increase the quantity and effectiveness of fibre) affects consumer attitudes towards bread. An novel feature of the design of our CE was that it was informed by a means-end-chain (MEC) to reveal key attributes to be included in the CE. In addition, we included the Dutch eating behaviour questionnaire (DEBQ) to collect information on all participants underlying eating behaviours. We find that bread type is a major factor in determining choice, and that the inclusion of a functional ingredient yielded relatively small measures of value. We also find that there are differences in willingness-to-pay (WTP) between respondent segments and that segment membership is explained by the DEBQ information. Finally, we find that respondents have a stronger preference for a simple health statement compared to, or in addition to, the implied benefits that result from consuming a functional food product. These findings are important in informing both pricing and promotional messages for a functional bread product.     

Virtual Word of Mouth and Willingness to Pay for Consumer Electronic Innovations

The authors examine the impact of virtual word‐of‐mouth (vWOM) communication on willingness to pay (WTP) for an innovation. A series of hypotheses are developed that link vWOM to the credibility of innovation information, perceived utilitarian value, and the perceived hedonic value of an innovation, which are in turn hypothesized to influence WTP. The authors test these hypotheses using data collected in Japan from 658 potential adopters of e‐readers and from 565 potential adopters of smartphones. Findings indicate that, in both samples, vWOM is positively correlated with the perceived credibility of innovation information, which in turn is positively correlated with both perceived utilitarian value and perceived hedonic value. WTP is also positively correlated with an innovation's perceived utilitarian and perceived hedonic value. In addition, the path between vWOM and perceived hedonic value is positive and significant in both samples. However, the path between vWOM and perceived utilitarian value is positive and significant in the smartphone sample, but not in the e‐reader sample. The empirical findings provide support for theoretical arguments that link WTP for complex consumer electronic products to consumer perceptions of utilitarian and hedonic value. The results also have important implications for the creation of vWOM strategies designed to reduce the price sensitivity of potential adopters.     

Willingness to pay for the “Green Food” in China

With use of payment card survey data of willingness to pay (WTP) for the “Green Food”, a unique food certification in China, this study finds that age and income are important for the WTP for the Green Food in China. There are structural differences in consumer preference for Green Food between the large city and the small county. Consumers in China, on average, are willing to pay 47% more for Green vegetables and 40% more for Green meat than for their conventional counterparts. Compared with the real markets and the previous studies, our results are very consistent and reliable.     

Putting their money where their mouths are: Consumer willingness to pay for multi-ingredient,processed organic food products

In response to dramatically increasing adoption in consumer markets, the National Organic Program (NOP) initiated novel labeling standards for food products in the US in 2002. This program is a particularly relevant standardization effort for multi-ingredient processed foods. Rather than a simple binary message (organic or not), gradations of organic content are now codified. No existing published study evaluates consumer willingness to pay or motivation to purchase in response to such a rich organic label. This article presents evidence of the impact of the NOP through analysis of data collected in seven central Ohio, USA grocery stores. Results suggest that consumers are willing to pay premium prices for organic foods, even those with less than 100% organic ingredients. The magnitudes of WTP premia varied significantly among consumer groups, suggesting that targeted marketing may be effective for organic merchandisers.     

Lead-farmer extension and smallholder valuation of new agricultural technologies in Tanzania

Encouraging the widespread adoption and use of new on-farm technologies is an important part of productivity-led strategies to promote agricultural transformation. While many interventions have been designed to promote adoption through extension and education, little is known about how these efforts influence farmer willingness-to-pay (WTP) for new technologies. We use a Becker-DeGroot-Marschak (BDM) mechanism to elicit farmer WTP for two improved seed varieties and a new seed treatment product, Apron Star, under two different lead-farmer extension treatments in Tanzania: (i) a demonstration plot showcasing the technologies within a village; and (ii) a demonstration plot coupled with distribution of trial packs enabling some farmers to test the technologies on their own land. In the BDM, farmers were presented with six products – the two bean varieties: without Apron Star, with Apron Star already applied, and with a sachet of Apron Star for the farmer to treat the seed him/herself. Our results suggest that neither extension treatment significantly affects WTP for these technologies. However, we find that farmers are willing to pay more for seed that is pre-treated with Apron Star than for seed bundled with a sachet of Apron Star for self-treatment.     

Are consumers at the base of the pyramid willing to pay for nutritious foods?

Base of the Pyramid (BoP) consumers living in the urban informal settlements of developing countries spend over 60% of their income on food, yet malnutrition and micronutrient deficiency remain widespread among these populations, pointing to the inadequacy of the foods they consume in terms of quality and quantity. In this paper we examine BoP consumers’ willingness to pay (WTP) for nutritious multi-composite porridge flour (improved flour) in the informal settlements of East Africa. The analysis is based on experimental data collected from 600 households in the informal settlements of Kampala, Uganda and Nairobi, Kenya (300 in each country) in 2016. We use Tobit regression models to analyse determinants of WTP for the improved porridge flour. Results show that both Kenyan and Ugandan BoP consumers are willing to pay a premium for the improved porridge flour. In addition, providing nutrition information about the flour, characteristics of household head, economic status of the household, and presence of young children between six and 59 months in the household, influence WTP for the safe and nutritious porridge flour. The paper concludes by providing recommendations for enhancing nutrition among poor consumers in the informal settlements of developing countries.