Consumers’ preferences for a local food product: a real choice experiment

This paper analyses consumers’ preferences for a local food in Spain and assesses their willingness to pay (WTP) using a real choice experiment to mitigate possible hypothetical bias. In particular, preferences for fresh lamb meat were investigated and two attributes evaluated, “locally grown” and the type of lamb meat. Data came from an experiment conducted in Spain during 2009. An error component random Parameter model with correlated errors was used to estimate the effect of the attributes on consumers’ utility and derive their WTP. Results suggest that consumers positively value both attributes and are willing to pay a premium of 9 % price increase for the “locally grown” lamb meat (“Ojinegra from Teruel”) and 13 % price increase for the “Ternasco” lamb meat. If we assume a market where only “Ternasco” lamb meat without indication of the local origin is sold, and then a new “Ternasco” lamb is introduced in the market with the “Ojinegra from Teruel” label, this new local lamb meat would capture 18 % of the market if the package is assumed to be sold at 3.5 \(\hbox {C}\!\!\!\!\!=\) and a 10 % market share if the package is assumed to be sold at 4 \(\hbox {C}\!\!\!\!\!=\) .     

Public versus private demand for covering long-term care expenditures

This article studies the determinants of the Willingness to Pay (WTP) for Long-Term Care (LTC) insurance coverage. Two alternatives are considered: one compulsory, financed through taxes, the other purchased on a voluntary basis and paid through a premium. WTP was elicited through open-ended contingent valuation within a survey conducted in the Italian region Emilia-Romagna about LTC population needs. We model information on individual WTP as a two-stage process, where respondents first establish their interest for LTC cover, then state their WTP. Results show that interest and WTP are influenced by different variables, and that differences arise also between the WTP for public and private coverage.     

Behavioural responses to science-based eco-labelling: gold,silver, or bronze

This study uses unique data collected from field experiments to investigate consumer willingness to pay (WTP) for otherwise homogeneous commodities that provide different levels of environmental services. On average, individuals are willing to pay more for products that provide a higher level of ecosystem services. This effect is larger when the label contains symbols that explicitly differentiate the levels. The effect magnitude is further amplified when it contains brief information on the scientific basis for the levels. However, our results also suggest that the WTP premium for the superior product is smaller than the discount in WTP for the inferior product.     

Dealing with Ignored Attributes in Choice Experiments on Valuation of Sweden’s Environmental Quality Objectives

Using a choice experiment, this paper investigates how Swedish citizens value three environmental quality objectives. In addition, a follow-up question is used to investigate whether respondents ignored any attributes when responding. The resulting information is used in model estimation by restricting the individual parameters for the ignored attributes to zero. When taking the shares of respondents who took both the environmental and the cost attributes (52–69% of the respondents) into account, then the WTP for each attribute changes if the respondents who ignored the attributes have a zero WTP. At the same time, we find evidence that not all respondents who claimed to have ignored an attribute really did. However, the most commonly ignored non-monetary attributes always have the lowest rankings in terms of WTP across all three environmental objectives. Thus, our results show that instead of ignoring attributes completely, respondents seem to put less weight on the attributes they claimed to have ignored.     

Sensitivity of Willingness to Pay Estimates to the Level of Attributes in Discrete Choice Experiments

This paper considers issues raised in the application of discrete choice experiments (DCEs) to estimating willingness to pay (WTP). The main issue addressed is the sensitivity of WTP estimates to the level of attributes. A DCE, concerned with preferences for alternative cervical screening programmes, was carried out with women in the Tayside area of Scotland. A split sample design was employed in which respondents were divided into two groups. Each group received a discrete choice questionnaire that varied with respect to the levels of three of the six attributes. The price attribute was one of the attributes that varied across questionnaires. Whilst estimated coefficients were not significantly different across five of the six attributes included in the experiment, mean WTP estimates were significantly different for four of the five welfare estimates. However, from a policy point of view, such a difference may not be important. Consideration is also given to other general methodological and policy issues that are raised when using DCEs to estimate WTP. The findings suggest the need for further research into the design and application of DCEs as a method for estimating WTP.     

Hedonic Wine Price Functions and Measurement Error

Accumulated theoretical and empirical evidence suggests that wine prices depend on quality, reputation and objective characteristics. Unlike previous studies, we recognize that quality and reputation are latent constructs and therefore employ factor analysis and 2SLS techniques to consistently estimate hedonic prices in the presence of attributes measured with error. The application to Australian premium wines points to significant reputation effects but insignificant quality effects. It is also illustrated that inappropriately using standard OLS procedures can seriously distort the statistical significance of attributes, the implicit marginal attribute prices, and the predictions of 'average' prices for a given set of characteristics.     

Non-attendance and dual processing of common-metric attributes in choice analysis: a latent class specification

There is a growing literature that promotes the presence of process heterogeneity in the way that individuals evaluate packages of attributes in real or hypothetical markets and make choices. A centerpiece of current research is the identification of rules that individuals invoke when processing information in stated choice (SC) experiments. These rules may be heuristics used in everyday choice making as well as manifestations of ways of coping with the amount of information shown in choice experiment scenarios. In this paper, using the latent class framework, we define classes based on rules that recognise the non-attendance of one or more attributes, as well as on the addition and the parameter transfer of common-metric attributes. These processing strategies are postulated to be used in real markets as a form of cognitive rationalization. We use a SC data set, where car driving individuals choose between tolled and non-tolled routes, to translate this new evidence into a willingness to pay (WTP) for travel time savings, and contrast it with the results from a model specification in which all attributes are assumed to be attended to and are not added up with parameter preservation. We find that the WTP is significantly higher, on average, than the estimate obtained from the commonly used full relevance and attribute preservation specification.     

Measuring heterogeneity,survey engagement and response quality in preferences for organic products in Nigeria

The identification of the market potentials of organic products is important in the drive towards a sustainable agricultural development in sub-Saharan Africa (SSA). However, available evidence shows that valuing attributes of credence goods (such as organic products) while using stated preference methods faces additional obstacles compared to other normal goods. In this study, we examine consumers’ preferences and willingness-to-pay (WTP) for health and environmental attributes of organic products in Nigeria. We employ an approach that allows us to adequately capture the value of organic products by linking part of the heterogeneity across respondents to differences in scale, while making use of indicators of survey engagement, without risks of endogeneity bias and measurement error that arise from the deterministic methods. The empirical results show that market for organic products exists in Nigeria, with reduction in pesticide residues attribute attracting the highest value, followed by the certification programme. Furthermore, we observe that increases in the latent engagement variable lead to a greater probability of agreement with statements relating to survey understanding and realism, and hence more substantive output.     

Identifying significant characteristics of organic milk consumers: a CART analysis of an artefactual field experiment

The organic dairy category is one of the fastest growing categories of organic foods in the US. Organic milk consumers generally cite perceived health benefits and lower risk of food contamination, as well as perceived superior quality and environmental sustainability of organic farming methods, as the major motivations for preference of organic over conventional milk. While the attributes of organic milk that are valued by consumers are fairly well-known, more ambiguity exists regarding the demographic characteristics of the typical organic milk consumer. This research makes use of experimental data from 148 adult participants and use a Classification and Regression Tree (CART) analysis, a nonparametric modelling approach, to identify how Willingness-to-Pay (WTP) for organic milk varies with the demographic profile of experiment participants. The study finds that perceived taste of organic milk, concern for the risk of consuming conventional milk, being a primary shopper, and the quantity of milk consumed are the major factors that separate experiment participants into groups with high and low WTP for organic milk.     

Too poor to be green consumers? A field experiment on revealed preferences for firewood in rural Guatemala

The paper reports on a field experiment that investigates whether households in Guatemala are willing to surrender a small material gain in order to buy legal rather than illegal firewood. Given the ineffectiveness of command-and-control policies to curb the problem of illegal logging in Guatemala, the experiment assesses the potential viability of market-oriented solutions. Local consumers in developing countries are generally believed to be too poor to pay a premium for green/ethical products. Therefore, little information has been gathered on willingness-to-pay (WTP) for such products and its determinants in non-affluent consumer markets. While our experiment on firewood consumption in central Guatemala only implies a weak and indirect test of WTP for green products, the results indicate that it is premature, if not unwarranted, to assume that the poor are not ready to make pro-ethical choices in the marketplace. Moreover, we find that information on the legal procedures for firewood extraction significantly affects consumer choice between legal and illegal firewood.     

Willingness to pay for other species' well-being

Benefit-cost analysis of environmental policies typically focuses on benefits to human health and well-being. For other species, economists have attempted to measure human WTP for changes in the numbers of individuals for different types of wildlife, and to preserve biodiversity. When it comes to humans' WTP for improvements in the quality-of-life for other species, however, the evidence is limited. Morbidity and quality-of-life considerations may be particularly important to the task of valuing non-fatal harm to wildlife in the wake of an environmental disaster. We argue that the other species morbidity-reduction component of WTP should be calculated net of any “outrage” component associated with the cause of the harm. This net WTP is likely to be correlated with the premium that people are willing to pay for chicken products from birds for which the quality-of-life has been enhanced by improved animal welfare measures. This paper uses a conjoint choice stated preference survey to reveal the nature of systematic heterogeneity in preferences for “humanely raised” versus “conventionally raised” chicken. We also use latent class analysis to distinguish between two classes of people—those who are willing to pay a premium for humanely raised chicken, and those who are not.     

Heterogeneity and fine wine prices: application of the quantile regression approach

ABSTRACT

This study addresses the price heterogeneity of the five first growths of Bordeaux. We apply the quantile regression (QR) approach with market segmentation based on wine bottle price quantiles. We compute the hedonic price of wine attributes for various price segments in the market. This approach is applied to a major dataset comprising approximately 50,000 transactions over the 2003–2017 period. The findings indicate that the relative hedonic prices of several wine attributes differ significantly among deciles. The implications of our results are manifold. Vintage and Parker grades have a strong impact on the variation in wine prices, and there is a hierarchy among the five first growths of Bordeaux. There is also a premium commanded by the reputation and experience of an auction house. Since the financial crisis of 2012–2013, investors have considered that the five first growths are overrated, save for the most expensive wines; for those most expensive ones, investors prefer scarcity to liquidity. These results are of import to several actors in the fine wine market: investors, for example, could use the findings herein to better diversify their wine portfolio, while auction houses could better anticipate their future sales based on consumers’ expectation.     

A field experiment to estimate the effects of anchoring and framing on residents’ willingness to purchase water runoff management technologies

Watersheds throughout the world have been severely polluted by nutrient-laden runoff that comes from industrial, agricultural, and residential sources. Efforts to reduce this runoff have focused on industrial and agricultural sources, while little attention has been paid to encouraging residents to reduce runoff from their properties. To study residents’ willingness to adopt landscaping practices that reduce runoff, we conducted a field experiment in the Delaware River watershed. In the experiment, over three hundred adults participated in a series of random-price auctions that revealed their willingness to pay (WTP) for five products that reduce nutrient runoff. To study how WTP can be influenced by attributes of the choice architecture, we randomized the starting bid values (anchors) and the way in which the external benefits of the five practices were framed. Compared to a neutral framing, a positive framing (using the product can improve water quality) increased average WTP by about one-third, while the estimated effect of a negative framing (failing to use the product can worsen water quality) was also positive, but smaller and not statistically different from zero. The estimated effect on average WTP from the anchor depends on how bids of $0 are modeled, but the results imply that higher anchors lead to higher WTP. Although we believe the magnitudes of our results should be considered suggestive and we recommend replications with higher statistical power, the results add to the evidence base that environmental programs can achieve policy-relevant gains in program performance through a series of small changes to the decision environment.     

HETEROGENEITY IN WILLINGNESS‐TO‐PAY FOR THEATRE PRODUCTIONS: INDIVIDUAL SPECIFIC WILLINGNESS‐TO‐PAY ESTIMATES FOR THEATRES,SHOWS AND THEIR ATTRIBUTES

This paper investigates people's preferences for live theatre, and heterogeneity in willingness‐to‐pay (WTP). A stated preference discrete choice model estimates utility and WTP for different attributes of theatre productions. Previous studies assumed fixed coefficients across all theatre‐goers. This study allows coefficients of attributes to vary across individuals in the population, providing information on the heterogeneity of tastes. Theatre‐goers' choices are used to estimate individual‐based parameters for a person's tastes in theatre productions. The analysis reveals the heterogeneity of tastes for different types of plays and ticket price; and the significance of ‘reviews’ by critics and ‘word of mouth’ opinions as important variables determining choice.     

Temporal stability of preferences and willingness to pay for natural areas in choice experiments: A test–retest

The main objective of this paper is to test the temporal stability of stated preferences and willingness to pay (WTP) values from a Choice Experiment (CE) in a test–retest. The same group of participants was asked the same choice tasks in an internet-based CE, conducted twice with a time interval of one year without interviewer interference. We examine choice consistency at individual choice task level and transferability of the underlying indirect utility function and associated WTP values. The results show that choices are consistent in 57 percent of the choice occasions. Comparison of the choice models over time shows that the estimated preference and scale parameters are significantly different, suggesting that choice behaviour changed between the two surveys. Differences between marginal WTP estimates for individual choice attributes are statistically significant only at the 10 percent level. However, we show that this can result in significantly different WTP values for policy scenarios. The instability of estimated mean WTP values for different policy scenarios asks for caution when including WTP values in cost-benefit analysis.     

Willingness to Pay for Car Safety: Evidence from Sweden

This study estimates a marginal willingness to pay (WTP) function for a road-mortality risk reduction. Observed marginal WTP from the Swedish car market is used and found to be positively correlated with the baseline risk of the cars. No statistically significant relationships between examined owner attributes, e.g. wealth and background risk, and marginal WTP are found. When comparing the estimated monetary value of a non-marginal risk reduction derived from the integral of the marginal WTP-function with an estimate based on marginal WTP we find, in line with expectations, that the difference between the estimates is negligible for smaller risk reductions and small, 4–10%, also for relatively large risk reductions.      

The geography of market failure: Edge-effect externalities and the location and production patterns of organic farming

Perceptions of increasing land scarcity and negative impacts of chemical-based agriculture have led to increasing concern regarding the sustainability of food systems. Incompatible production processes among farming systems may lead to spatial conflicts and production losses between neighboring farms, and the magnitude of such losses may depend not only on the scale of each activity, but also on patterns of land use. Such conflicts can be classified as “edge-effect externalities”—spatial externalities whose marginal impacts decrease as distance from the border generating the negative impact increases. This paper tests the hypothesis that edge-effect externalities have influenced the location and production patterns of certified organic farms, using data from California Central Valley certified organic farmers. Using concepts from landscape ecology and spatial statistics, we investigate difference in parcel geometry and surrounding land uses between organic and non-organic parcels. Using a generalized method of moments (GMM) spatially autoregressive econometric model, we demonstrate that both parcel geometry and surrounding land uses influence the probability of a given parcel being certified organic. We conclude with suggestions for policies to encourage development of organic farming regions.     

Health IT adoption,productivity and quality in primary care

Within the last decade, there has been a growing push towards the use of electronic medical records and health information technology (IT) within primary care physician practices. Despite financial subsidies, smaller practices remain reluctant to adopt these information systems. Using a nationally representative survey of physicians, this study explores the relationship between physician, practice and area attributes and the adoption of health IT systems. Controlling for these attributes, the analysis subsequently studies the relationship between health IT, physician productivity and perceived quality of care. It finds that smaller practices and physicians with lower incomes are less likely to adopt health IT systems and that adoption varies with the type of medical conditions the practice typically treats. With regards to productivity, health IT adopters are more likely to see fewer patients and spend a larger amount of time on each visit with marginal increases in time on administrative tasks and no differences in perceived ability to deliver quality health care.     

Proportionality of Willingness to Pay to Small Changes in Risk: The Impact of Attitudinal Factors in Scope Tests

Sensitivity (proportionality) of willingness to pay (WTP) to (small) risk changes is often used as a criterion to test for valid measures of economic preferences. In a contingent valuation (CV) study conducted in Austria, 1,005 respondents were asked their WTP for preventing an increase in the risk of being killed in an avalanche of 1/42,500 and 3/42,500 respectively. WTP for the higher variation in risk is significantly greater than WTP for the lower risk change. We find evidence that those respondents who have had personal experience of avalanches in recent years combine the information about future risk increase—as provided in the survey—with the observed number of fatal avalanche accidents in the past. Proportionality of WTP holds if such prior experience is taken into account and if attitudinal factors in scope tests are controlled for. This research was funded by alpS GmbH—Center for Natural Hazard Management, Innsbruck, Austria.     

Preferences for improvements in attributes associated with basal insulin: a time trade-off and willingness-to-pay survey of a diabetic and non-diabetic population in Sweden

Objective: Apart from improved health outcomes, treatment convenience per se may have a value to individuals. This is sometimes referred to as process utility and can be estimated in terms of willingness-to-pay (WTP) or quality-adjusted life-years (QALYs). Previous research has produced multiple studies on QALY gains and WTP estimates of insulin-related attributes. There are, however, significant variations between studies, and it is not clear to what extent the value is a reflection of the true preferences or a consequence of the methodological approach. The aim of this study is to estimate the preferences for treatment attributes associated with basal insulin (administration frequency, administration flexibility, and treatment-induced weight gain) using both QALYs—elicited using time trade-off (TTO) and WTP—among a sample of the Swedish general population and among a sample of the Swedish diabetes population.

Methods: Data was collected using web-based surveys which were distributed to members of internet panels. The WTP survey presented five hypothetical scenarios with an offer to pay the incremental cost to receive basal insulin with improved attributes. The TTO survey presented six hypothetical scenarios where the respondent could choose between living for the rest of his/her life with diabetes and receiving treatment with a basal insulin with certain attributes or live for a shorter time with full health. The scenarios were combined with either a basal or a basal–bolus treatment regimen. Results from the TTO analysis were translated into monetary estimates using a threshold value of SEK500,000 per QALY.

Results: In total, 2012 responses were included. The ratings of the attributes were almost identical, irrespective of method for the general population, while it differed to some extent for the diabetes population. The methods produced the same value for flexibility, but the estimates generated with the TTO approach were higher for one less injection and avoided weight gain. The general population assigned a higher utility gain to convenience attributes, while the diabetes population assigned a higher utility gain to avoiding weight gain.

Limitations: About a quarter of the respondents did not accept the scenario in the WTP survey, i.e. protesters.

Conclusions: The ranking of the attributes was generally independent of evaluation method, but the TTO method resulted in similar or higher values compared to the WTP method.