Consumer sorting and hedonic valuation of wine attributes: exploiting data from a field experiment

This article uses a novel experimental approach to measure consumer willingness to pay (WTP) for wine attributes. We invited customers of a local supermarket who had selected a bottle of wine to purchase to participate in a valuation experiment. Integrating their original wine choice into the experiment, each participant evaluated six alternative wines, generating a rich set of data on willingness to pay and consumer characteristics. The data from the experiment allow us to compare standard shelf price‐based wine attribute valuation estimates with estimates using WTP data and an increasing amount of information about individual consumers. The full model employs individual fixed effects to estimate WTP parameters without bias from consumer sorting or supply side influences. Our WTP estimates for wine attributes differ markedly from previous attribute value estimates. Consumers in our sample display clear and stable preferences for wine varieties, but less clear preferences for appellations. Our results suggest caution is needed in using market prices to estimate parameters of the consumer valuation function for product attributes.     

Demand for a labor‐based drought insurance scheme in Ethiopia: a stated choice experiment approach

Index‐based weather insurance is increasingly used to manage weather‐related risks in smallholder agriculture. However, cash‐constrained smallholders often lack the resources to pay an insurance premium, which may undermine its wider adoption. This article investigates alternative insurance payment methods that may help to enhance the adoption of index‐based weather insurance. We use a choice experiment to elicit smallholders’ willingness to pay in cash or labor for index‐based weather insurance in four districts in the south‐central highlands of Ethiopia. The insurance schemes were created using a fractional factorial design with three factors: work, cash, and payout rate. We analyze the choice data using a random parameter mixed logit model. We find that the average participants need a subsidy to pay cash for insurance because their willingness to pay is less than the expected cost of the insurance. On average, they are willing to pay only 0.81 ETB (Ethiopian currency) to get an expected yearly payout of 1 ETB. However, most are willing to participate in work‐for‐insurance programs at lower daily wage rates than is common for other work programs in Ethiopia.     

Choice experiment adaptive design benefits: a case study*

Efficient experimental designs offer the potential to reduce required sample sizes, or to reduce confidence intervals for parameters of interest, in choice experiments. Choice experiment designs have typically addressed efficiency of utility function parameter estimates. The recently developed concept of C‐efficiency recognises the salience of willingness to pay estimates rather than utility function parameters in studies that seek to put money values on attributes. C‐efficiency design benefits have been illustrated in a theoretical context, but have not been tested in applied settings. This study reports a choice experiment field application that used initial responses to update statistical designs to maximise C‐efficiency. Consistent with theoretical predictions, the revised design delivered significant reductions in the variance of willingness to pay estimates, illustrating that C‐efficient designs can indeed decrease costs of choice experiments by reducing required sample sizes.     

Spatial and Scope Effects: Valuations of Coastal Management Practices

We explore how values for environmental management in the Kimberley region of Australia respond to changes in spatial scale and attribute scope. A discrete choice experiment was conducted that included the impacts of management on marine no‐take areas, Aboriginal rangers, recreational facilities, and coastal development. A split sample single‐site design was used to estimate values for the Kimberley region as a whole, and for two separate smaller sub‐regions, allowing us to test for spatial preference heterogeneity. Management outcomes for different regions were displayed on a map to show respondents explicitly where outcomes would occur. We show that willingness to pay results are similar between the two smaller sub‐regions, and that willingness to pay for the attributes increased when management occurred at the larger geographical scale. However, respondents were somewhat insensitive to changes in the scope of the two cardinal attributes: area of no‐take and number of rangers. We discuss the implications of this spatial and scope insensitivity for choice experiment research.     

Aquaculture imports from Asia: an analysis of U.S. consumer demand for select food quality attributes

The increasing share of imported food in the United States, coupled with highly publicized incidents of food contamination and adulteration in Asia, particularly China, is posing new challenges for consumers and food safety regulators. In this study, we focus on imported shrimp and tilapia, to evaluate consumer willingness‐to‐pay (WTP) for enhanced food safety, use of antibiotics, and eco‐friendly environmental practices. Results show that U.S. consumers were willing‐to‐pay more for enhanced food safety, followed by the use of no antibiotics and environmental friendly production practices. American consumers in our sample were found to have a higher WTP for domestic products and placed more trust on U.S. government verification of product attributes followed by third‐party certification.     

Information processing strategies and framing effects in developing country choice experiments: results from rice farmers in India

This study explores the effect of various information processing strategies specifically related to attribute nonattendance in stated choice experiments. Our approach includes two forms of stated choice task nonattendance, each derived from separately framed questions asked immediately following the completion of each choice task. We also evaluate a measure of inferred serial nonattendance based on the posterior distributions of random coefficient estimates. We find that choice task nonattendance question framing statistically impacts marginal utility coefficients and, to a lesser degree, willingness‐to‐pay estimates. While direct questions addressing attribute attendance or nonattendance affect these estimates, inferred indicators of serial nonattendance suggest that many attributes are not likely ignored as often as respondents may indicate. Further research is needed to assess inferred versus stated approaches to modeling respondent information processing strategies.     

A Holistic vs. an Attribute‐based Approach to Agri‐Environmental Policy Valuation: Do Welfare Estimates Differ?

Different economic valuation methodologies can be used to value the non‐market benefits of an agri‐environmental scheme. In particular, the non‐market value can be examined by assessing the public’s willingness to pay for the policy outputs as a whole or by modelling the preferences of society for the component attributes of the rural landscape that result from the implementation of the policy. In this article we examine whether the welfare values estimated for an agri‐environmental policy are significantly different between an holistic valuation methodology (using contingent valuation) and an attribute‐based valuation methodology (choice experiment). It is argued that the valuation methodology chosen should be based on whether or not the overall objective is the valuation of the agri‐environment policy package in its entirety or the valuation of each of the policy’s distinct environmental outputs.     

Chinese consumers’ willingness to pay for pork traceability information—the case of Wuxi

In this study, consumers’ willingness to pay for farming, slaughter and processing, distribution and marketing, and government certification information was investigated in Wuxi, Jiangsu Province, China using an experimental auction and real choice experiment based on incentive compatibility of the nonhypothetical elicitation method. No significant differences in consumers’ willingness to pay were revealed by the experimental auction and real choice experiment on the whole, and results from both nonhypothetical experimental methods demonstrated that consumers were willing to pay certain premiums for all four types of traceability information and had the highest willingness to pay for government certification information. These results indicate that consumers trust in pork safety protection under governmental supervision. Moreover, it was found that government certification information played a significant role in improving consumer utility, demonstrating that consumers paid close attention to safety risks in farming. Therefore, this study predicts that the introduction of governmental supervision into the pork traceability system and establishment of a system for collecting traceability information starting from the stage of pig farming will play important roles in meeting consumer demands for pork quality and safety, as well as promoting the development of traceable food policies.     

Pesticides,Preference Heterogeneity and Environmental Taxes

In this paper we present results from two choice experiments (CE), designed to take account of the different negative externalities associated with pesticide use in agricultural production. For cereal production, the most probable impact of pesticide use is a reduction in environmental quality. For fruit and vegetable production, the negative externality is on consumer health. Using latent class models we find evidence of the presence of preference heterogeneity in addition to reasonably high willingness to pay (WTP) estimates for a reduction in the use of pesticides for both environmental quality and consumer health. To place our WTP estimates in a policy context we convert them into an equivalent pesticide tax by type of externality. Our tax estimates suggest that pesticide taxes based on the primary externality resulting from a particular mode of agricultural production are a credible policy option that warrants further consideration.     

Beef Credence Attributes: Implications of Substitution Effects on Consumers’ WTP

Consumers’ food choices are influenced by a wide variety of credence attributes, but the food industry faces problems assessing whether the price premiums that consumers are willing to pay for these attributes will be sufficient to offset higher production costs. In this context, consumers’ willingness to pay (WTP) for safer, cleaner and animal friendlier beef was investigated through a choice experiment. The relative importance of WTP for these attributes shows that consumers place the highest values on food safety, followed by animal welfare and finally environmental protection. WTP for different combinations of the three attributes cannot be obtained by independent valuation and summation due to the presence of significant substitution relationships. However, some suggestions for the relationships between these attributes can be proposed through an after‐survey analytical solution. The bias involved in separately valuing closely related attributes can potentially jeopardise the success of a differentiation strategy.     

Willingness to Pay for Rural Landscape Improvements: Combining Mixed Logit and Random‐Effects Models

This paper reports the findings from a discrete‐choice experiment designed to estimate the economic benefits associated with rural landscape improvements in Ireland. Using a mixed logit model, the panel nature of the dataset is exploited to retrieve willingness‐to‐pay values for every individual in the sample. This departs from customary approaches in which the willingness‐to‐pay estimates are normally expressed as measures of central tendency of an a priori distribution. Random‐effects models for panel data are subsequently used to identify the determinants of the individual‐specific willingness‐to‐pay estimates. In comparison with the standard methods used to incorporate individual‐specific variables into the analysis of discrete‐choice experiments, the analytical approach outlined in this paper is shown to add considerable explanatory power to the welfare estimates.     

Consumer Valuation of Environmentally Friendly Production Practices in Wines,considering Asymmetric Information and Sensory Effects

Agricultural producers and food marketers are increasingly responding to environmentally friendly cues from consumers, even though privately appropriated values associated with a range of food products commonly rank above their public‐good counterparts. Wine can be considered an ideal product to examine these issues given consumers’ highly subjective sensory preferences towards wine, and a winegrape production process that is relatively intensive in the use of chemical inputs for the control of disease and infection. Semi‐dry Riesling wines made from field research trials following environmentally friendly canopy management practices were utilised in a lab experiment to better understand preferences for environmental attributes in wine. A combined sensory and monetary evaluation framework explicitly considered asymmetric order effects. Empirical results revealed that sensory effects dominate extrinsic environmental attributes. Once consumer willingness to pay (WTP) was conditioned on a wine’s sensory attributes, the addition of environmentally friendly information did not affect their WTP; however, adding sensory information significantly influenced WTP initially based only on environmental attributes. The results confirm the idea that promoting environmentally friendly winegrape production practices would increase demand and lead to higher premiums for the products, but are only sustainable if consumers’ sensory expectations are met on quality.     

Demand for Crop Insurance in Developing Countries: New Evidence from India

Determining farmers’ real demand for crop insurance is difficult, especially in developing countries, where there is a lack of formal financial sector integration and a high reliance on informal risk mitigation options. We provide some new estimates of farmers’ willingness‐to‐pay for insurance in the context of a large‐scale subsidised programme in India. We conducted a discrete choice experiment with agricultural households across four states in India, enabling us to estimate preferences for specific insurance policy attributes such as coverage period, method of loss assessment, timing of indemnity payments and the cost of insurance. Our results suggest that farmers do value crop insurance under certain conditions and some are willing to pay a premium for such coverage in excess of the subsidised rates they are currently required to pay under this programme. In particular, farmers value the assurances that they will receive timely payouts when they incur losses, and may not have a strong preference for the method with which losses are assessed. On the other hand, farmers are quite sensitive to coverage periods. Our baseline assessment shows that when optimised to farmer requirements, there can be a sizeable demand for crop insurance by developing country farmers.     

Consumer’s Preference and Willingness to Pay for Apple Attributes: A Choice Experiment in Large Retail Outlets in Bologna (Italy)

ABSTRACT

We analyze the relevant quality attributes of apples which drive and influence consumer choice in the city of Bologna (Italy). A hypothetical choice experiment was conducted to elicit Italian consumer’s willingness to pay for apple attributes and was included as a part of a questionnaire survey. A group of 301 consumers were surveyed in Bologna in July and August 2016. Data were analyzed using a multinomial logit model. Results suggest Italian consumers are willing to pay more for yellow apples and for apples harvested in Trentino-Alto Adige region, compared with other Italian areas. Furthermore, results highlight a preference for locally produced apples, whereas organic apples are only slightly preferred to the not organic alternative. Results of this study could be used to develop marketing strategies for apple differentiation or for a new product development and target the right product to the right consumer.     

Comparing Serial,and Choice Task Stated and Inferred Attribute Non‐Attendance Methods in Food Choice Experiments

A number of choice experiment (CE) studies have shown that survey respondents employ heuristics such as attribute non‐attendance (ANA) while evaluating food products. This paper addresses a set of related methodological questions using empirical consumer data from a CE on poultry meat with sustainability labels. First, it assesses whether there are differences in terms of marginal willingness to pay estimates between the two most common ways of collecting stated ANA (serial and choice task level). Second, it validates the self‐reported ANA behaviour across both approaches. Third, it explores the concordance of stated methods with that of the inferred method. Results show that WTP estimates from serial‐level data differ from those from choice task‐level data. Also, self‐reported measures on choice task ANA are found to be more congruent with model estimates than those for serial ANA, as well as with inferred ANA.     

Design Factors Influencing Willingness‐to‐Pay Estimates in the Becker‐DeGroot‐Marschak (BDM) Mechanism and the Non‐hypothetical Choice Experiment: A Case of Biofortified Maize in Zambia

Two of the experimental methods used to estimate willingness‐to‐pay (WTP) for a non‐market good, the Becker‐DeGroot‐Marschak (BDM) mechanism and the non‐hypothetical choice experiment (nHCE) often lead to significantly different WTP estimates, complicating the choice between the methods. In Zambia the same group of researchers used both techniques to evaluate WTP for orange maize, which provides more vitamin A than other varieties. This provided an opportunity to analyse the sources of the difference. In the BDM experiment, one group of respondents was provided with more training opportunities than the other, and made higher bids. Accounting for lexicographic behaviour in the nHCE reduced the estimated WTP. These two design factors together resulted in a decrease in the WTP difference for orange maize (1,279–632 ZMK) although the difference remains statistically significant. More training was also shown to eliminate the effects of different orders in which maize varieties were presented.     

The impact of deal‐proneness on WTP estimates in incentive‐aligned value elicitation methods

Even after controlling for hypothetical biases, some incentive‐aligned value elicitation methods still produce different willingness‐to‐pay (WTP) estimates. In this study, we compare WTP estimates from three incentive‐aligned value elicitation methods: real choice experiment (RCE), real double‐bounded dichotomous contingent valuation (RCVM), and Becker–DeGroot–Marschak auction (BDM). We find that participants’ aggressiveness in obtaining low prices (i.e., “deal‐proneness”) influences WTP estimates in the BDM auction, but not those elicited from the RCE and RCVM. The participants with higher levels of deal‐proneness tend to submit lower bids in the BDM auction. The discrepancies in WTP estimates between different incentive‐aligned procedures are narrower for participants with lower levels of deal‐proneness. Our results indicate that the bids in BDM auctions may be understated and the auction mechanism may induce the “gambling behavior” of people who are deal‐prone. That is, whether the BDM auction is truly incentive‐aligned is again called into question. We also discuss the practical implications for food retailers.     

Consumers' Preferences for Nanotechnology in Food Packaging: A Discrete Choice Experiment

We examine consumers' preferences for chickens under different levels of foodborne health risk, animal welfare and pric attributes. We analyse how their preferences vary according to the risk reduction method. Our comparison is between risk reductions achieved by conventional improvements in the meat supply chain system (e.g. more stringent regulations and inspection regimes), and risk reductions achieved by food packaging nanosensors. Our comparison uses a two‐treatment discrete choice experiment in which each treatment sample is only presented with one of the risk reductions: either nanotechnology or conventional methods. We also investigate heterogeneity in preferences for two consumer groups: (i) consumers who usually buy conventional raw, whole chickens, and (ii) consumers who usually buy niche, welfare‐improved chickens, such as free‐range and organic. Our results show evidence of heterogeneity in preferences and willingness‐ to‐pay values of the both consumer groups. We find that consumers, on average, prefer raw, whole chicken with a lower risk of food poisoning, better animal welfare, and lower costs, regardless of the presence of nanosensors. Although consumers in general showed no strong preferences towards or resistance to nanotechnology, those who buy chickens with better animal welfare, on average, showed higher WTP for food risk reduction and animal welfare relative to conventional chicken consumers.     

Heterogeneous Demand and Supply for an Insurance‐linked Credit Product in Kenya: A Stated Choice Experiment Approach

We employ a discrete choice experiment to elicit demand and supply side preferences for insurance‐linked credit, a promising market‐based tool for managing agricultural weather risks and providing access to credit for farmers. We estimate preference heterogeneity using primary data from smallholder farmers and managers of lenders/insurers combined with household socio‐economic survey data in Kenya. We analyse the choice data using maximum simulated likelihood and Hierarchical Bayes estimation of a mixed logit model. Although there are some similarities, we find that there is conflicting demand and supply side preferences for credit terms, collateral requirements, and loan use flexibility. We also analyse willingness to buy and willingness to offer for farmers and suppliers, respectively, for the risk premium for different attributes and their levels. Identifying the preferred attributes and levels for both farmers and financial institutions can guide optimal packaging of insurance and credit providing market participation and adoption motivation for insurance‐bundled credit product.     

Consumer Acceptance of Second‐Generation GM Foods: The Case of Biofortified Cassava in the North‐east of Brazil

Biofortified staple foods are currently being developed to reduce problems of micronutrient malnutrition among the poor. This partly involves use of genetic modification. Yet, relatively little is known about consumer acceptance of such second‐generation genetically modified (GM) foods in developing countries. Here, we analyse consumer attitudes towards provitamin A GM cassava in the north‐east of Brazil. Based on stated preference data, mean willingness to pay is estimated at 60–70% above market prices for traditional cassava. This is higher than the results from similar studies in developed countries, which is plausible given that micronutrient malnutrition is more severe in developing countries. GM foods with enhanced nutritive attributes seem to be well received by poor consumers. However, the results also suggest that acceptance would be still higher if provitamin A were introduced to cassava through conventional breeding. Some policy implications are discussed.