CONSUMER PERCEPTIONS, PREFERENCES, AND WILLINGNESS TO PAY FOR SUSTAINABLY LABELED FOOD PRODUCTS

CONSUMER PERCEPTIONS, PREFERENCES, AND WILLINGNESS TO PAY FOR SUSTAINABLY LABELED FOOD PRODUCTS By Hillary M. Sackett “Sustainably produced” food labels have rapidly grown in popularity over the past decade. However, because there is no government agency overseeing certification of these production methods, consumers may be generally confused about the production attributes that may or may not be present in a sustainable food system. Moreover, the ability of a firm to differentiate their product depends critically on an accurate understanding of the perceptions consumers hold about the implications of a credence labeling claim. Building upon existing work evaluating other food attribute labels and the impact of consumer inferences, this work begins to address gaps in the literature regarding food products with sustainable production claims. To achieve these goals, a comprehensive set of information was gathered from consumers, through two complementary activities: a nation-wide survey on food consumption habits including simulated shopping scenarios designed to reveal tradeoffs perceived by the consumer and a valuation field experiment designed to capture the same information in an in-person, non-hypothetical setting. The juxtaposition of the hypothetical and non-hypothetical results enhances the reliability and appropriateness of the economic analysis and marketing recommendations. Collectively, these two approaches yield a more detailed understanding of consumer behavior. The first essay initiates the process of examining consumer inferences and valuations of food products making “sustainably produced” claims utilizing a Best-Worst scaling framework to identify what consumers believe “sustainably produced” labels mean and their preferences for each of the sustainable farming practices considered. The results of which suggest that consumers perceive farm size and local production as highly important elements of sustainable agriculture. Additionally, consumer preferences over economic attributes such as consumer food prices and financial stability of farmers exhibit high heterogeneity, indicating segmentation in the sample and potential for targeted marketing management. The second essay analyzes data from a hypothetical choice experiment to better understand consumer purchasing behavior when faced with competing food production attributes such as “sustainable”, “organic” and “local”. The primary goal in this piece is to estimate preferences for “sustainably produced” food products and determine how they may be affected by varying degrees of information about sustainable agricultural systems. Additionally, the willingness to pay measurements estimated in this essay provide insight into the trade-offs perceived between current eco-labeling schemes, and the potential for differentiating “sustainably produced” products from their “organic” and “local” counterparts. The third and final essay compares the results of the experimental auction and the hypothetical choice experiment to further examine the influence of sustainable, organic, and local production labels on food choice and to estimate consumer willingness to pay for sustainably produced apples and steak. The findings suggest a preference ordering in experimental bids, differing from that found in the hypothetical choice experiment. However, upon deeper investigation, the estimates do not provide sufficient evidence of hypothetical bias in survey responses. Furthermore, the data indicate statistically insignificant differences in willingness to pay for the sustainable, organic, and local products, implying a weak level of differentiation between labels. Overall, this work supports other experimental findings in the literature of positive price premiums on these credence attributes.