Experimental Methods for Measuring Demand

Goal: To set the optimum price for a new product Discrete choice models Assumptions – Participants must be knowledgeable – The decision rule is “buy-not buy” Select a subject pool (sample of existing clients) Divided them into groups (3, 5, etc.) of at least 100 Interview them (on-line survey)

GMO Wheat GMO wheat (like GMO soy) has a gene inserted that increases resistance to a common general herbicide (24-D) aka glyphosate or “Round-up” The advantage is that the farmer can apply 24-D to the field, even with the crops growing, to kill all weeds, but leave the crop standing. The lowers costs and also allows the farmer to reduce the use of herbicides (since one does not need to tailor herbicides to the type of weed.

Survey Process Famers answer a range of questions about herbicide use and understanding of GMO products (Most have a good understanding) These initial questions serve to orient the farmer to the topic. Then each group is asked a question… Would you buy Odyssey seed if it were $15 per acre (group 1); $20 per acre (group2)….

Assuming that farmers will not change their planting (not the case!), we can calculate the total revenue for each price

This is not the same TR as we studied in the course – why?