What Is It About Organic Milk? An Experimental Analysis

J. C. Bernard and D. J. Bernard

Abstract
Auction experiments were used to examine demand relationships and willingness to pay (WTP) for organic, rBST-free, no antibiotics used, and conventional milk.

Elasticities showed strong substitute and complement relationships between organic, rBST-free, and no antibiotics varieties. The sum of the latter two’s premiums were not significantly different than the organic premium, suggesting diminishing marginal utility for added attributes.

Results from a two-stage heteroskedastic tobit model demonstrated that WTP premiums for the varieties differ significantly by demographics and beliefs regarding the conventional version. These suggest market segments for rBST-free and no antibiotics versions could succeed alongside organic, benefiting consumers and producers.


Source
American Journal of Agricultural Economics (2009) 91: 826-836
DOI:  10.1111/j.1467-8276.2009.01258.x


Author Locations and Affiliations
Department of Food and Resource Economics at the University of Delaware


Posted May 2011