Open AccessAn index number approach to estimating organic price premia at retail
Author(s) -
Çakır Metin,
Beatty Timothy K. M.,
Boland Michael A.,
Li Qingxiao,
Park Timothy A.,
Wang Yanghao
Publication year - 2022
Publication title -
journal of the agricultural and applied economics association
Language(s) - English
Resource type - Journals
ISSN - 2769-2485
DOI - 10.1002/jaa2.7
Subject(s) - index (typography) , economics , price premium , price index , metropolitan area , econometrics , product (mathematics) , point (geometry) , risk premium , agricultural economics , willingness to pay , microeconomics , mathematics , geography , geometry , archaeology , world wide web , computer science
A full understanding of the retail price premia commanded by organic foods is essential to production, marketing, and public policy decisions. But there is no systematic information on magnitudes of the premia and how they change over time and across space. This article uses index number methods to estimate spatially and temporally consistent retail price premia for organic fresh fruits and vegetables (FFV). The indices are constructed using weekly point‐of‐sale scanner data from grocery stores and mass merchandisers in 24 contiguous metropolitan statistical areas (MSA) between 2009 and 2017. Our main result is that the national average organic price premia in the FFV market are persistent, ranging between 58% and 92%, and trending upward over the study period. The differences in premia across MSAs are large, while they have slightly converged during the study period. The premia also differ substantially across products. Lastly, we construct the price indices and estimate the premia using alternative compositions of index baskets. We show that price premia are substantially overestimated if the price of the conventional product basket is not calculated with the same weights used to calculate the price of the organic basket.