Source: PENNSYLVANIA STATE UNIVERSITY submitted to
CONSUMER VALUATION OF FOOD QUALITY ATTRIBUTES
Sponsoring Institution
National Institute of Food and Agriculture
Project Status
TERMINATED
Funding Source
Reporting Frequency
Annual
Accession No.
0191382
Grant No.
(N/A)
Project No.
PEN03872
Proposal No.
(N/A)
Multistate No.
(N/A)
Program Code
(N/A)
Project Start Date
Jan 1, 2002
Project End Date
Dec 31, 2006
Grant Year
(N/A)
Project Director
James, J. S.
Recipient Organization
PENNSYLVANIA STATE UNIVERSITY
208 MUELLER LABORATORY
UNIVERSITY PARK,PA 16802
Performing Department
AGRI ECONOMICS & RURAL SOCIOL
Non Technical Summary
As incomes and agricultural productivity have increased, quality has become an increasingly important dimension of food and agricultural markets. This project will measure consumer demand for food products with particular quality attributes. It will also evaluate the effects of government policies designed to increase food quality or the availability of information regarding food quality.
Animal Health Component
70%
Research Effort Categories
Basic
20%
Applied
70%
Developmental
10%
Classification

Knowledge Area (KA)Subject of Investigation (SOI)Field of Science (FOS)Percent
6046299301020%
6076010301020%
6076299301020%
6096010301020%
6106010301020%
Goals / Objectives
1. To measure consumer demand for food products with particular quality attributes. Part of this work will focus on process-based quality attributes, such as whether the food was produced using genetically modified organisms, animal welfare practices used by the producers, and use of production practices with specific environmental implications. Another part of this work will focus on product-based quality attributes, such as safety, convenience, and nutritional characteristics. 2. To compare measures of consumer valuation of and demand for quality attributes obtained using different methods. 3. To evaluate the effects of policies designed to influence quality attributes in food, such as food safety standards, labeling policies, and certification programs.
Project Methods
1. Demand systems will be estimated using appropriate econometric techniques and market-level data, when available. However, data that includes enough detail to study the effects of product characteristics on the demand for products is scarce. In addition, products with particular attributes may not have been available or distinguishable in the market previous to a study. As a result, other less conventional methods will be used to generate and analyze data. 2. Surveys will be conducted as part of this project. Respondents will be asked about products they buy, how they feel about certain products, and what decisions they would make in certain circumstances. A disadvantage of this methodology is that it usually excludes economic influences, or any economic influences that are included are hypothetical in nature (i.e., "how would your consumption of product X change if the price increased by 20%?"). Survey data is relatively easy to collect and may indicate intended behavior, but the hypothetical nature of questions about economic behavior limits the value of survey data as a tool for predicting market behavior. 3. Experiments will be conducted in laboratory settings, by conducting experimental auctions of products and information, and in market settings, by offering specific differentiated goods for sale and controlling for as many sources of variation as possible. Experimental methodology provides a way of more closely approximating market behavior, as the influence of price and income variation is incorporated in a study explicitly. 4. These methodologies will be used to study similar questions, and findings will be compared across methods. This should reveal the biases inherent in particular methodologies, and the value of each method as a predictor of actual behavior.

Progress 01/01/02 to 12/31/06

Outputs
As incomes and agricultural productivity have increased, quality has become an increasingly important dimension of food and agricultural markets. This project focused on consumer acceptance of foods derived using modern biotechnology. Objectives: 1. Measure consumer demand for food products with quality attributes such as whether the food was produced using genetically modified organisms, animal welfare practices used by the producers, and use of production practices with specific environmental implications, plus safety, convenience, and nutritional characteristics. 2. Compare measures of consumer valuation of and demand for quality attributes. 3. Evaluate the effects of policies designed to influence quality attributes in food, such as food safety standards, labeling policies, and certification programs. Surveys of consumers in grocery store were conducted to measure relationships between consumer characteristics and the likelihood of purchasing biotech fresh sweet corn. The surveys were complemented with a telephone survey conducted in the same areas during the same period of time and with experimental auctions conducted at the participating stores. Results showed substantial willingness to purchase foods derived using modern biotechnology, but also revealed the time pressure that most consumers face when making their food-buying decisions. Of the consumers surveyed, 40 percent of consumers purchased biotech sweet corn over a conventional counterpart, 35 percent did not even notice that there were two types of corn for sale, and 87 percent of the sample spent a minute or less deciding which type of corn to purchase. Consumer concern about pesticide residues on fresh produce was the most important predictor of a consumer choosing the GM variety over the non GM variety. Variation in the relative prices of the two varieties indicated that consumer choices were not systematically responsive to relative prices: a price discount offered for the GM variety did not necessarily imply a larger market share. The influence of tax policies on incentives to produce and consume different qualities of a particular product was investigated in a theoretical framework. A model of the markets for low and high quality goods of the same basic type was used to determine how ad valorem and per unit tax policies differ in their distortions of the incentive to produce or consume high versus low quality. Solutions for effects on the price and quantity of each quality and the producer and consumer quality premiums were derived and expressed in terms of parameters that define market conditions. These analytical results point to parameters that are important determinants of market outcomes. A survey was developed to measure consumer valuation of different milk attributes. The computerized survey used the stated choice methodology, where consumers in urban grocery stores were presented with a set of three milk products, each with different attributes and prices. Consumers were also asked a series of questions designed to assess their awareness and attitudes toward different technologies used in milk production.

Impacts
This work increased our knowledge of the choices consumers made and what drives their decisions. Consumer acceptance of biotechnology is an important determinant of the returns to investments in new applications and the adoption of existing applications. While current biotech applications can provide benefits to agricultural producers, uncertainty about consumer acceptance can decrease those benefits, reducing the likelihood of adopting biotech crops. Research on consumer preferences for GM versus non-GM sweet corn demonstrated that consumers are not as widely opposed to genetically modified foods as some might think. This information should be of use to growers considering adopting GM varieties of crops, and retail stores considering labeling them. Research on the influence of tax policies on quality showed how the distribution of the costs of taxation can be influenced by the design of the tax policy, and highlighted parameters that will be important determinants of this distribution. This work showed that ad valorem and per unit tax policies that raise the same amount of tax revenue can differ drastically in terms of how the costs of the tax are distributed among producers and consumers of low versus high quality products.

Publications

  • Alston, J. M., Freebairn, J.W., and James, J.S. 2003. Distribution Issues in Check-Off Funded Programs. Agribusiness: An International Journal. 19:277-287.
  • Alston, J.M., Chalfant, J.A., and James, J.S. 2005. Doing Well by Doing a Body Good: An Evaluation of the Industry-Funded Nutrition Education Program Conducted by the Dairy Council of California. Chapter 13 (pp. 287-314) in H.M. Kaiser, J.M. Alston, J.M. Crespi, and R.J. Sexton (eds.), The Economics of Commodity Promotion Programs: Lessons from California, New York: Peter Lang Publishing Inc. 428 pp.
  • Alston, J.M., Freebairn, J.W., and James, J.S. 2004. Levy-Funded Research Choices by Producers and Society. Australian Journal of Agricultural and Resource Economics 48 (1): 33-64.
  • James, J.S. 2004. Consumer Acceptance of Agricultural Biotechnology. California Agriculture 58(2): 99-105.


Progress 01/01/05 to 12/31/05

Outputs
Activity on this project has focused on the analysis of data collected in previous years, and the collection of data measuring consumer preferences for milk attributes. Data collected in a market experiment continue to be analyzed. These data include purchases of sweet corn labeled as either biotech or conventional, along with several consumer characteristics. A model has been developed to measure correlations between consumer characteristics and the likelihood of purchasing biotech corn, and model estimation continues. A survey was developed to measure consumer valuation of different milk attributes. This computerized survey used the stated choice methodology, where consumers were presented with a set of three milk products, each with different attributes and prices. Consumers were also asked a series of questions designed to assess their awareness and attitudes toward different technologies used in milk production. Surveys were collected in four grocery stores - two in Pittsburgh PA and two in Camp Hill PA. In each city, students were stationed at a health-food store and a more conventional grocery store.

Impacts
Consumer demand is an important determinant of the returns to investments in different production technologies. This work increases our knowledge of the choices consumers make, and what drives their decisions.

Publications

  • No publications reported this period


Progress 01/01/04 to 12/31/04

Outputs
Activity on this project during 2004 has focused on consumer acceptance of agricultural biotechnology and consumer valuation of organic foods. Data collected in a market experiment in 2003 were analyzed. In this market experiment, biotech and conventional sweet corn was labeled and offered for sale in nine participating grocery stores. Consumers who purchased either type of corn were asked to complete a brief survey. Analysis of the survey data revealed consumer characteristics associated with increased likelihood of noticing that there were two types of corn for sale, and purchasing the biotech variety. Experimental auctions dealing with the same products were also conducted. These auctions revealed the price premium consumers were willing to pay for biotech or non-biotech corn. In addition, the design of the auction revealed consumers willingness to pay to know which type of corn they were buying. A separate project focused on organic food, and the potential market for processed organic apple products. Work on this project focused on the collection of secondary data, such as results from surveys conducted to measure consumer attitudes toward and purchasing habits related to organic food. Another major part of this work included research projects conducted by students in a Food Product Marketing class. As part of this assignment, students wrote, implemented, and analyzed data from a telephone survey conducted in the Philadelphia and Baltimore/DC areas.

Impacts
Consumer acceptance of biotechnology is an important determinant of the returns to investments in new applications and the adoption of existing applications. In a market experiment conducted in the summer of 2003, 40 percent of consumers surveyed purchased biotech sweet corn over a conventional counterpart. Importantly, 35 percent of the consumers surveyed did not even notice that there were two types of corn for sale, and 87 percent of the sample spent a minute or less deciding which type of corn to purchase. These results show substantial willingness to purchase foods derived using modern biotechnology, but they also reveal the time pressure that most consumers face when making their food-buying decisions. While the development of biotechnology is largely supply-driven, organic production is a technology whose adoption is driven by consumer demand. With increasing competition from foreign and domestic producers, Pennsylvania apple growers are seeking a means of differentiating their production from the competition. Certifying their production as organic is one option that growers are currently considering, but questions remain regarding whether consumer demand is adequate to justify the investment in the development and adoption of organic production methods. Work completed as part of this project seeks to assess the potential demand for organic apple products, the price premiums consumers are willing to pay for organic foods, and what are the most important influences on a consumers choice to purchase organic food over a conventionally grown counterpart.

Publications

  • James, J.S. 2004. Consumer Knowledge and Acceptance of Agricultural Biotechnology Vary. California Agriculture. 58 (2):99-105.


Progress 01/01/03 to 12/31/03

Outputs
Activity on this project during 2003 has focused on consumer acceptance of foods derived using modern biotechnology. Several consumer telephone surveys were reviewed, and the results were synthesized in an article to be published in 2004. Some basic conclusions were identified. First, consumers do not agree about whether biotech products are good or bad. Second, a small group of people strongly oppose them. Third, the majority of consumers are uninformed about the technology and, more generally, how food is produced. Because consumer knowledge is usually quite limited, there is a role for universities to provide clear, objective information about biotechnology. A problem with telephone surveys is that questions are often hypothetical, e.g., how likely would you be to purchase food produced using biotechnology. Previous work suggests that responses to such questions may not accurately predict consumer behavior. This is one of the motivations for a project conducted in the summer of 2003. The project included three components. In a market experiment, biotech and conventional sweet corn was grown, labeled, and sold side-by-side in nine participating stores in the Philadelphia area. The relative prices of the two types of corn were varied over time and location. A brochure was provided so that consumers had access to information about the differences between the two types of corn in terms of how they were developed, how worms were controlled, and how the varieties are regulated. In addition, students administered surveys of consumers who purchased either type of corn. The survey included questions about awareness and knowledge of biotechnology, attitudes toward it, and trust in grocery stores and the government to tell the truth about and to do the right thing about biotechnology. The market experiment was complemented with a telephone survey conducted in the same areas during the same period of time and experimental auctions conducted at the participating stores. Analysis of the data collected for the various aspects of this project is under way.

Impacts
While current biotech applications can provide benefits to agricultural producers, uncertainty about consumer acceptance can decrease those benefits, reducing the likelihood of adopting biotech crops. Work completed and in progress for this project investigates consumer attitudes toward and willingness to purchase foods produced using biotechnology. Three methods have been used to measure consumer acceptance in order to determine whether results depend on how data were collected.

Publications

  • No publications reported this period


Progress 01/01/02 to 12/31/02

Outputs
Progress on this project has focused in two main areas. First, consumer preferences for genetically modified (GM) versus non-GM fresh sweet corn in central Pennsylvania were measured and analyzed. This project included a market experiment in which GM and non-GM sweet corn were clearly labeled and offered for sale side-by-side in five participating stores. Approximately 45 percent of the corn sold as part of the study was the GM variety. Analysis of survey data indicated that consumer concern about pesticide residues on fresh produce was the most important predictor of a consumer choosing the GM variety over the non-GM variety. Variation in the relative prices of the two varieties indicated that consumer choices were not systematically responsive to relative prices: a price discount offered for the GM variety did not necessarily imply a larger market share. This relatively small pilot study was used to design a more extensive study planned for the summer of 2003. Second, the influence of tax policies on incentives to produce and consume different qualities of a particular product was investigated in a theoretical framework. A model of the markets for low and high quality goods of the same basic type was used to determine how ad valorem and per unit tax policies differ in their distortions of the incentive to produce or consume high versus low quality. Solutions for effects on the price and quantity of each quality and the producer and consumer quality premiums were derived and expressed in terms of parameters that define market conditions. These analytical results point to parameters that are important determinants of market outcomes. Quality distortions are particularly pronounced for taxes specified on a per unit basis, and because alcohol taxes are often specified in this manner, the quality effects of alternative taxes on Australian wine were analyzed. Australian wine taxes were recently restructured to accommodate the new sales tax.

Impacts
Research on consumer preferences for GM versus non-GM sweet corn demonstrated that consumers are not as widely opposed to genetically modified foods as some might think. It also helped to guide future research which will include a similar market experiment, but also a telephone survey and experimental auction. This information should be of use to growers considering adopting GM varieties of crops, and retail stores considering labeling them. Research on the influence of tax policies on quality showed how the distribution of the costs of taxation can be influenced by the design of the tax policy, and highlighted parameters that will be important determinants of this distribution. Alcohol taxes and other "sin" taxes are a popular source of tax revenue. This work showed that ad valorem and per unit tax policies that raise the same amount of tax revenue can differ drastically in terms of how the costs of the tax are distributed among producers and consumers of low versus high quality products.

Publications

  • James, J.S. and Alston, J.M. 2002. Taxes and Quality: A Market-Level Analysis. The Australian Journal of Agricultural and Resource Economics. 46: 417-445.
  • Parker, T.P. 2002. Consumer Reaction to Bt Sweet Corn: A Market Experiment in Central Pennsylvania. M.S. Thesis. The Pennsylvania State University, University Park, PA. 145 pp.