Premium
What Is It About Organic Milk? An Experimental Analysis
Author(s) -
Bernard John C.,
Bernard Daria J.
Publication year - 2009
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.1467-8276.2009.01258.x
Subject(s) - tobit model , willingness to pay , demographics , economics , heteroscedasticity , econometrics , agricultural economics , agricultural science , microeconomics , biology , demography , sociology
Auction experiments were used to examine demand relationships and willingness to pay (WTP) for organic, rBST‐free, no antibiotics used, and conventional milk. Elasticities showed strong substitute and complement relationships between organic, rBST‐free, and no antibiotics varieties. The sum of the latter two's premiums were not significantly different than the organic premium, suggesting diminishing marginal utility for added attributes. Results from a two‐stage heteroskedastic tobit model demonstrated that WTP premiums for the varieties differ significantly by demographics and beliefs regarding the conventional version. These suggest market segments for rBST‐free and no antibiotics versions could succeed alongside organic, benefiting consumers and producers.