Willingness to Pay for Organic and Natural Foods

Download or read book Willingness to Pay for Organic and Natural Foods written by Alexis A. Solano and published by ProQuest. This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In the late 1990s and early 2000s the organic trend emerged. Many food companies began offering organic products that were like many of the conventional product that were stocked on grocery shelves. These organic foods have gained a two percent share of grocery store purchases. Soon after organic foods began to appear, natural foods came into the spotlight. These products were labeled as containing "no preservatives" or "no artificial colors" or "no artificial flavors." What remains unknown is if consumers really know what organic and natural mean, and, if they do know what these terms include, do consumers want to buy these products. Using an experimental auction, specifically the Vickrey auction, subjects from the state of Delaware were asked to bid their willingness to pay for natural, organic, and conventional foods. Between rounds the subjects were given the definitions of natural and organic. Average bids of the products were compared to find if there were any significant changes in the bids before and after the subjects were given the definitions. Bids for most of the organic products increased significantly after the definitions were given. The subjects' knowledge of the requirements of natural and organic was examined as were their opinions of what natural and organic should include. It was found that consumers have little knowledge of both natural and organic. To determine why subjects bid the way they did, the data was analyzed using two models, the Tobit and the Heckman. The Tobit uses one equation to determine both why a subject bid and how much they bid. The Heckman uses two equations: one to determine if a subject bid and one to determine why the subject bid the amount he or she did. These models included demographic, opinion, and confidence variables that explained subjects' buying behavior for before and after the definitions were distributed. The organic products experienced the great changes in the significance of the variables.