Not everybody prefers organic food: unobserved heterogeneity in U.S. consumers’ preference for organic apple and milk

ABSTRACT

Despite organic food’s growing market share and the often-found premiums for organic foods in willingness-to-pay studies, the ultimate size of the organic food market remains unclear. Due to perceived taste, safety or appearance, some people may, in fact, not prefer organic. This study uses data from choice experiments to determine preference for organic versus conventional milk and apples. Using latent class and random parameter models, nontrivial shares (at least 33%) of consumers in both markets are not willing to pay a premium for organic. These results have implications for food marketers but also for economists modelling the organic food sector, which typically assume vertical differentiation.

KEYWORDS:

• Consumer
• organic
• unobserved preference heterogeneity
• organic market demand

JEL CLASSIFICATION:

• D12
• Q13

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ The LCM model with three segments shows the lowest AIC.

² In October 2016, the average price for conventional apples and milk price were $1.66/lb. and $2.33/half gallon, respectively, and organic apples and milk price were $2.41/lb. and $4.03 per half gallon, respectively (USDA 2016).

Additional information

Funding

The research was funded by the A.J. & Susan Jacques Chair, the Oklahoma Agricultural Experiment Station and USDA National Institute of Food and Agriculture [Hatch project number OKL02939].