Willingness to pay for imported and seasonal foods: a UK survey

We report results from an investigation into consumer preferences for locally produced foods. Using a choice experiment we estimate willingness to pay for foods of a designated origin together with certification for organic and free of genetically modified (GM)ingredients. Our results indicate that there is a preference for locally produced food that is GM free, organic, and produced in the traditional season.

Bayesian estimation of willingness-to-pay where respondents mis-report their preferences

We introduce a modified conditional logit model that takes account of uncertainty associated with mis-reporting in revealed preference experiments estimating willingness-to-pay (WTP). Like Hausman et al. [Journal of Econometrics (1988) Vol. 87, pp. 239-269], our model captures the extent and direction of uncertainty by respondents. Using a Bayesian methodology, we apply our model to a choice modelling (CM) data set examining UK consumer preferences for non-pesticide food. We compare the results of our model with the Hausman model. WTP estimates are produced for different groups of consumers and we find that modified estimates of WTP, that take account of mis-reporting, are substantially revised downwards. We find a significant proportion of respondents mis-reporting in favour of the non-pesticide option. Finally, with this data set, Bayes factors suggest that our model is preferred to the Hausman model.

Modifying willingness to pay estimates where respondents mis-report their preferences

The likelihood for the Logit model is modified, so as to take account of uncertainty associated with mis-reporting in stated preference experiments estimating willingness to pay (WTP). Monte Carlo results demonstrate the bias imparted to estimates where there is mis-reporting. The approach is applied to a data set examining consumer preferences for food produced employing a nonpesticide technology. Our modified approach leads to WTP that are substantially downwardly revised.

Consumer willingness to pay for in-flight service and comfort levels: A choice experiment

In the competitive aviation market as a result of the emergence of low cost carriers, charter airlines have had to reconsider their approach to service provision. Specifically, the reduction in service and comfort levels offered by the low cost airlines provides charter carriers with an opportunity to differentiate their product based on the quality of the offering. To consider this strategic option we employ an on-line choice experiment to examine consumer choices with respect to the bundle of services on offer when deciding to purchase a flight, With these data we use the Bayesian methods to estimate a mixed logit specification. Our results reveal that in principle passengers are willing to pay a relatively large amount for enhanced service quality. (C) 2008 Elsevier Ltd. All rights reserved.

Consumer attitudes towards and willingness to pay for pesticide residue limit compliant 'safe' vegetables in Northeast Thailand

Pesticide residue in vegetables is a major food safety issue in Thailand. A range of vegetable products (organic/pesticide-free/ hydroponic) has emerged in Thai markets that guarantee compliance with maximum residue limits. The Government of Thailand is eager to extend the benefits of this suite of alternative vegetables to the entire population, particularly the semi-urban/rural segments that are often bypassed by such speciality products. However, little information is available to guide such an effort, particularly with regard to up-country consumer attitudes, shopping and consumption habits and willingness to pay premiums for such produce. This research aims to fill this gap in knowledge. It reports the results of a survey of vegetable consumption and shopping habits and attitudes of 608 consumers in northeast Thailand. Willingness to pay premiums for pesticide residue limit compliant vegetables is also assessed by using a contingent valuation method, and determinants of willingness to pay are examined using an ordered probit empirical model. Results indicate that, given adequate awareness of relative risks, even up-country consumers are willing to pay market premium levels for these products, and that inadequate availability, rather than lack of demand is the constraining factor. Willingness to pay is found to increase with income, age and supermarket sourcing of vegetables. We also discuss the challenge of improving availability at mainstream outlets.

Consumers' willingness-to-pay for organic conversion-grade food: Evidence from five EU countries

In recent years, in overall value, the EU has become a net importer of organic food to supply increasing demand. Financial support for farmers during the conversion period has been made to help expand organic production as this was seen as a barrier to conversion. Meanwhile, farmers have been marketing products produced in this conversion period and labelled as such, the extent to which is described here for the UK, Portugal, Denmark, Ireland and Italy. Consumers' attitudes towards, and willingness-to-pay for, conversion-grade food in these countries is examined. It was found that consumers would be prepared to pay a premium for conversion-grade produce of around half the premium for organic produce with vegetables attracting a higher premium than meat. Finally, the potential of policies for marketing conversion-grade products to encourage more conversion is examined, together with barriers to achieving this. It is concluded that barriers to marketing such products, particularly from retailers, will be formidable. Thus, alternative policies are suggested. (C) 2009 Elsevier Ltd. All rights reserved.

Can adapting the homes of older people and providing assistive technology pay its way?

Background: Adaptations and assistive technology (AT) have an important role in enabling older people to remain in their own homes. Objective: To measure the feasibility and cost of adaptations and AT, and the scope for these to substitute and supplement formal care. Design: Detailed design studies to benchmark the adaptability of 82 properties against the needs of seven notional users. Setting: Social rented housing sector. Main outcome measures: Measures of the adaptability of properties, costs of care, adaptations and AT, and relationships between these costs. Results: The adaptability of properties varies according to many design factors and the needs of occupiers. The most adaptable properties were ground floor flats and bungalows; the least were houses, maisonettes and flats in converted houses. Purpose-built sheltered properties were generally more adaptable than corresponding mainstream properties but the opposite was the case for bungalows. Adaptations and AT can substitute for and supplement formal care, and in most cases the initial investment in adaptations and AT is recouped through subsequently lower care costs within the average life expectancy of a user. Conclusion: Appropriately selected adaptations and AT can make a significant contribution to the provision of living environments which facilitate independence. They can both substitute for traditional formal care services and supplement these services in a cost-effective way.

Local versus organic: a turn in consumer preferences and willingness-to-pay

Demand for local food in the United States has significantly increased over the last decade. In an attempt to understand the drivers of this demand and how they have changed over time, we investigate the literature on organic and local foods over the last few decades. We focus our review on studies that allow comparison of characteristics now associated with both local and organic food. We summarize the major findings of these studies and their implications for understanding drivers of local food demand. Prior to the late 1990s, most studies failed to consider factors now associated with local food, and the few that included these factors found very little support for them. In many cases, the lines between local and organic were blurred. Coincident with the development of federal organic food standards, studies began to find comparatively more support for local food as distinct and separate from organic food. Our review uncovers a distinct turn in the demand for local and organic food. Before the federal organic standards, organic food was linked to small farms, animal welfare, deep sustainability, community support, and many other factors that are not associated with most organic foods today. Based on our review, we argue that demand for local food arose largely in response to corporate cooptation of the organic food market and the arrival of “organic lite.” This important shift in consumer preferences away from organic and toward local food has broad implications for the environment and society. If these patterns of consumer preferences prove to be sustainable, producers, activists, and others should be aware of the implications that these trends have for the food system at large.

Farm animal welfare, consumer willingness to pay, and trust: results of a cross-national survey

Higher animal welfare standards increase costs along the supply chain of certified animal-friendly products (AFP). Since the market outcome of certified AFP depends on consumer confidence toward supply chain operators complying with these standards, the role of trust in consumer willingness-to-pay (WTP) for AFP is paramount. Results from a contingent valuation survey administered in five European Union countries show that WTP estimates were sensitive to robust measures of consumer trust for certified AFP. Deriving the WTP effect of a single food category on total food expenditure is difficult for survey respondents; hence, a budget approach was employed to facilitate this process.

Making the least active pay: a simulation of rewards and penalties under Demand Side Participation programs

The orthodox approach for incentivising Demand Side Participation (DSP) programs is that utility losses from capital, installation and planning costs should be recovered under financial incentive mechanisms which aim to ensure that utilities have the right incentives to implement DSP activities. The recent national smart metering roll-out in the UK implies that this approach needs to be reassessed since utilities will recover the capital costs associated with DSP technology through bills. This paper introduces a reward and penalty mechanism focusing on residential users. DSP planning costs are recovered through payments from those consumers who do not react to peak signals. Those consumers who do react are rewarded by paying lower bills. Because real-time incentives to residential consumers tend to fail due to the negligible amounts associated with net gains (and losses) or individual users, in the proposed mechanism the regulator determines benchmarks which are matched against responses to signals and caps the level of rewards/penalties to avoid market distortions. The paper presents an overview of existing financial incentive mechanisms for DSP; introduces the reward/penalty mechanism aimed at fostering DSP under the hypothesis of smart metering roll-out; considers the costs faced by utilities for DSP programs; assesses linear rate effects and value changes; introduces compensatory weights for those consumers who have physical or financial impediments; and shows findings based on simulation runs on three discrete levels of elasticity.

Executive pay and performance: did bankers’ bonuses cause the crisis?

This paper examines the pay-performance relationship between executive cash compensation (including bonuses) and company performance for a sample of large UK companies, focusing particularly on the financial services industry, since incentive misalignment has been blamed as one of the factors causing the global financial crisis of 2007–2008. Although we find that pay in the financial services sector is high, the cash-plus-bonus pay-performance sensitivity of financial firms is not significantly higher than in other sectors. Consequently, we conclude that it unlikely that incentive structures could be held responsible for inducing bank executives to focus on short-term results.