Form7(by MS Word data)
Grant No.

17－056

Research Report
Name : VO HONG TU
Organization (at the start of the grant): Graduate School of Bioresources and Bioenvironmental Sciences, Kyushu
UniversityTitle of Research: Consumers' willingness to pay for conserving floating rice's multifunctional values in theMekong Delta of Vietnam

Purpose of Research:
Floating rice, which is a unique farming in the Vietnamese Mekong Delta, is cultivated only one crop per year during
flooding season. Floating rice consumes no pesticide and very little amount of fertilizer. Thus, floating rice is good for
not only producers and consumers but also our natural environment. In fact, floating rice fields are home to 43 fish
species and 54 plant species. Moreover, floating rice also play an important role in preserving valuable genetic
resources. However, these roles of floating rice to environment and conservation of genetic resources was not fullyrecognized by farmers. Therefore, the majority of rice farmers in the Mekong Delta have shifted from floating ricecultivation to high-yielding rice production, leading to the significant reduction of total cultivated area of floating rice,from about 0.5 million ha in 1974 to only 50 ha in 2015. This reduction has affected adversely on agro-environment(biodiversity losses, disappearance of valuable genetic resources,...). The most important reason for such noticeable
reduction is probably due to the underestimation of multifunctional values (home to species, alive genetic resources,non-chemical products, ...) of floating rice.
Therefore, to conserve floating rice, the multifunctional values of floating rice need to be correctly estimated. The
economic values of multifunctional floating rice will be estimated by using discrete choice modeling. This method willconsider some hypothetical scenarios about the attributes of floating rice (lower use of agro-chemicals, increase ofbiodiversity,…) then these scenarios are presented to ask for urban residents’ willingness to pay.
For a long-lasting history, urban rice consumers have been consuming a lot of rice but their responsibility on agroenvironment is quite limited. For this reason, the objective of this study is also to investigate urban rice consumers’
preferences on floating rice conservation and consumption behavior, from which we can estimate the multifunctional
values of floating rice.
In addition, under the increasingly serious impacts of climate change, floating rice is considered as one of the valuablegenetic resources that help scientists to cross-breed some new rice varieties that can tolerate to new environmental
conditions. Therefore, conserving floating rice (consumer-based conservation) is one of the crucial ways to adapt toclimate change.
Content/Methodology of Research
Conceptual framework on latent class choice modelling
The latent class model utilized to deal with choice experiment data has been developed by Swait (1994) . Latent classmodel (sometimes referred as finite mixture model) is considered as one of the most preferable alternatives as theassumption of the IIA property is violated. In the other words, the latent class model can capture or identify the sourcesof the heterogeneous preferences among respondents by revealing a number of classes/segment that share relatively
common tastes. Reviews from literature show that in the analysis of discrete choice data it is important to consider thelatent individual characteristics in the decision-making processes (Kontoleon and Yabe 2006; Ben-Akiva et al. 2002;
McFadden et al. 1999; McFadden 1986). Previous studies also show that the heterogeneity is often found in market
analysis, especially in developing countries (Dillon 1994; Wedel and Kamakura 2012; Kontoleon and Yabe 2006). The
latent class model assumes that the sampled respondents can be classified into two or more groups based on theirassociated attitudinal and and socio-demographic characteristics.
According to Boxall and Adamowicz (2002); Louviere et al. (2000); and Swait (1994), the latent class model
representing the composite utility function is expressed as below
𝑈𝑖𝑗/𝑠 = 𝛽𝑠 𝑋𝑗𝑖′ + 𝑒𝑖𝑗/𝑠(4)The equation (4) indicates the utility of the ith respondent in a particular class or segment s selects the alternative j in achoice set C. Please note that in the latent class model the vector 𝑋𝑗𝑖′ consists of both choice-specific attributes andindividual socio-demographic characteristics. The probability that a respondent chooses alternative j on the segment sin a choice set is expressed as(5)′𝑃𝑖𝑗/𝑠 = exp⁡(𝛽𝑠 𝑋𝑗𝑖′ )⁄∑ exp⁡(𝛽𝑠 𝑋𝑘𝑖)𝑘𝜖𝐶The probability of segment membership can be determined by following the approach developed by Ben-Akiva et al.
(1997); and Swait (1994). These authors suggested using a separate logit model to determine the membershipprobabilities for individual respondents. The process to identify the segment membership is specified as(6)

𝑃𝑗𝑠 = exp⁡(𝛿𝑠 𝑍𝑖′ )⁄∑ exp⁡(𝛿𝑘 𝑍𝑖′ )𝐽𝜖𝐶Where, 𝑍𝑖′ are socio-demographic, attitudinal and perceptual variables of the ith respondent; 𝛿𝑘 is the parameters to beestimated.
The latent class model accounting for choice and latent segment membership can be derived simultaneously as joint
probabilities of equations (5) and (6). Let Pijs be the joint probability that respondent i belongs to segment s and choose
alternative j, we get′𝑃𝑖𝑗𝑠 = (𝑃𝑖𝑗/𝑠 ). (𝑃𝑗𝑠 ) = [exp⁡(𝛽𝑠 𝑋𝑗𝑖′ )⁄∑ exp⁡(𝛽𝑠 𝑋𝑘𝑖)] . [exp⁡(𝛿𝑠 𝑍𝑖′ )⁄∑ exp⁡(𝛿𝑘 𝑍𝑖′ )]𝑘𝜖𝐶(7)𝐽𝜖𝐶

According to Andrews and Currim (2003); Wedel and Kamakura (2012); and Louviere et al. (2000), there have beenvarious indicators suggested to determine the appropriate number of segment S (S ≤ N). The current study employs
three main criteria: the minimum Bayesian Information Criterion (BIC), the minimum Bozdogan Akaike Information
Criterion (AIC3) and the maximum Akaike Likelihood Ratio Index (𝜌̅ 2 ).
Study design and implementation
The data collection process for the current study is summarized within three main stages: attribute selection andquestionnaire design, pre-test survey and main survey.
First, attributes and questionnaire design is considered as the most important stage that determines the feasibility andvalidity of collected data. To determine the attributes of eco-friendly rice (particularly floating rice) and its levels, thestudy has conducted a focus group discussion with environmental, agricultural economics and agronomy experts andintensive literature reviews from reports and scientific papers relating to eco-friendly rice production in the Mekong
Delta. Most importantly, the current study is considered as a follow-up research in a series of work relating sustainableproduction in the Mekong Delta of Vietnam. Some attributes and its levels (water and ago-chemicals) were determinedbased on our previous findings. The previous findings were derived from statistical analyses of a dataset of 202 rice
farmers collected in 2016 (59 conventional rice and 143 eco-friendly rice). The levels of selling price attribute weredetermined based on two sources of information: the farmer survey and the observations of five rice selling stores andone supermarket.
The study conducted two interviews with consumers: one with 450 Vietnamese consumers and the other one with 400
UK consumers (using our other budgets). However, this current report focuses mainly on the dataset from Vietnamese
consumers. The valid sample of Vietnamese consumers for data analysis is 360 because some consumers are notfamiliar with the survey and choice experiment.
For the questionnaire design, based on these attributes and its levels, the study constructed a series of profiles oralternatives for one kilogram of eco-friendly rice. The current study employed orthogonal design to create 25 choicesets. For simplicity, 25 choice sets were randomly blocked into five versions of questionnaire. It means that every
respondent was asked to answer five choice sets. Each version of questionnaire was used randomly to interview
respondents.
Second, the pre-test survey is also considered as “must-do” stage in choice experiment. The study has conducted a pretest survey with ten researchers and lecturers who are working in Can Tho University to check the appropriateness andunderstandability of the questionnaires.
Third, the main survey was conducted via face-to-face interviews with 450 Vietnamese rice consumers in 2017. The
current study employed multi-stage sampling procedure developed by Lynn and Lievesley (1991) for drawing samples.
The study selected two most popular cities (i.e. Long Xuyen city of An Giang province and Ninh Kieu, Binh Thuy, Cai
Rang urban districts of Can Tho city) in the Mekong Delta of Vietnam. Can Tho city was selected as the representative
study site because it is considered as the “capital” of the Mekong Delta with the total population of 1.4 million peopleand the highest per capita income of 5.8 million VND/month. An Giang province being known as one of the major riceproducers in the Mekong Delta contributes more than 4 million tons of rice in 2016.

Conclusion/Observation（400 words）
Findings
The study found that the two-segment model is best fit to the data. Based on the estimated coefficients, the consumers
who belong to segment 1 are characterized with significantly higher income, less number of family members, higher
educational level, higher environmental concerns and particularly they had known and bought eco-friendly rice.
Therefore, this segment is labeled as eco-friendly “potential consumers”. For those who belong to segment 2 are pricesensitive and mistrust the labeling information, suggesting that these consumers pay much attention on selling priceand do not trust on eco-friendly labeled rice or floating rice. Accordingly, we labeled this segment as eco-friendly“unwilling consumers”. The study also found that 205 (57% of total sample size) and 155 respondents (43% of total)
belong to segment 1 and segment 2, respectively.
The study showed that potential consumers are willing to pay for both private and public characteristics of eco-friendly
rice, particularly floating rice. The most interesting finding is that the potential consumers’ willingness to pay for theprivate characteristics (reduction of agro-chemicals) is 12,760 and 17,027 VND/kg for reductions of 75% and 100% oftotal agro-chemical use, respectively. The consumers’ willingness to pay for public characteristics is 2,477 VND/kg for100% increase of biodiversity, 5,785 VND/kg for 150% increase of biodiversity and 4,991 VND/kg for reduction ofwater use, which is much lower as compared to that for the private characteristics. These values reflect not only themultifunctional values of floating rice but also the market demands of eco-friendly rice products. It could be easily
explained that rice is a major staple food for Vietnamese. The Vietnamese still consumes a lot of rice per day, total
payment for rice, thus, also shares a significant proportion in total expenditure. Health risk aversion seems to be thebest choice for them. In addition, the living standard and income of Vietnamese in general are still low, which in part
result in their low social and environmental responsibilities. However, their high willingness to pay for reducing agrochemicals explicitly contributes significantly to biodiversity revitalization. For policy implications, in order to increase
the consumption of eco-friendly rice, it is strongly crucial to include and disseminate information of agro-chemicals
use rather than biodiversity revitalization.
Conclusions
The study employed latent class choice modeling which allows capturing simultaneously both market segment
analysis and product choice. Based on the analysis of socio-demographic and psychometric factors, the study foundthat there are two distinct consumer segments (i.e. potential and unwilling consumers). The market shares of potential
and unwilling segments are 57% and 43%, respectively. The study also found that the rice consumers are willing topay higher for private characteristics (reduction in agro-chemicals) than public characteristics (biodiversityrevitalization) of eco-friendly rice, particularly floating rice. The consumers in segment 1 are willing to pay apremium of 17,027 VND/kg for non-use of agro-chemicals, 170% over the price of normal rice. These consumers arealso willing to pay a premium of 2,477 VND/kg and 5,785 VND/kg for 100% and 150% increase of biodiversity,respectively. The consumers in the segment are high price sensitive and mistrust the eco-friendly labeled rice; theyare, thus, unwilling to buy eco-friendly rice.