MSU Agricultural, Food, and Resource Economics
This paper estimates average household demand and marginal willingness to pay for ecolabeled apples. It tests several hypotheses about variables which affect consumer demand for ecolabeled foods including the comprehensiveness of the ecolabeled claim, the proof offered that it is honest and various personal factors such as income and familiarity with the claim.
A theoretical model is developed which explains how ecolabeling would affect a consumer's typical apple purchasing choice. The model asserts that the consumer faces a tradeoff between their utility from apple consumption and their disutility from the environmental damage caused by its production.
Data from a phone survey of U.S. households is used to estimate consumer demand for regular (i.e. unlabeled) apples and ecolabeled apples in markets with and without ecolabeling Because ecolabeled apples are new, a market scenario is created in which respondents were presented with prices and descriptions of regular and ecolabeled apples and asked which they would buy and how much they would buy in a single shopping trip. A Cragg Double Hurdle model and a Tobit model are used to estimate demand for each type of apple. The Cragg model appears to be the more appropriate model for estimating demand for a single shopping trip.
The results indicate significant consumer demand for ecolabeled apples and a willingness to pay a price premium for them. This result holds regardless of how environmental claims are worded or whether proof of their validity is stated in the label. Price is a very important determinant in consumers' decisions of whether to purchase regular and ecolabeled apples. Respondents bought ecolabeled apples primarily for environmental concern and health attributes. Respondents with more education and from larger households bought more ecolabeled apples.