1. Valuing environmental, social, and ethical benefits using choice modeling: a comparison of the implicit price of food attributes for rural and urban consumers Sue May Yen and Paul J. Thomassin McGill University Presented at the ICABR Conference June 24-27, 2012 Ravello Italy

2. Outline of the Presentation  Objective of the presentation  Theory of consumer purchases and food attributes  Choice modeling experiment  Results and implications  Conclusion

3. Objective  To compare the willingness to pay of rural and urban consumers for food commodities that have health, environmental, and social attributes

4. Consumer Theory  Consumers will try to maximize their satisfaction given their budget constraint – choice  Multifunctional aspects of food  Choice of food product is a trade-off between various elements of a product or service – ex. food safety, environment, time, ethical issues

5. Consumer Theory – Con’t.  Food as a product contains both private and public good dimensions  Private good dimension  Public good dimension  Risk reduction – public good  Risk decisions are influenced by: information, past experience, demographic background, comprehension, and believes

6. Choice Modeling Experiment  Survey approach – choose among product alternatives  Each product has a set of attributes associated with it  Respondents will choose the product that maximizes their well-being  Three products were evaluated: Milk, Tomatoes and Pork

7. Choice Modeling Experiment – con’t  Attributes common to all goods included in the experiment: Price, Health, and Environmental Impact  Attributes specific to a particular good: Location of Production (Milk) Product Appearance (Tomato) Animal Welfare (Pork)  Surveyed 500 urban households – Response rate 81% - Usable response rate was 80%.  Surveyed 500 rural households –Response rate of 77% - Usable Response Rate was 76%.

8. Sample Question

9. Implicit Prices for Milk Attributes ($/2Litres) VariableRuralUrban GM Health EMS Health Organic Health $0.12 [0.00, 0.27] $0.13 [0.07, 0.22] $0.08 [0.01, 0.16] $0.18 [0.08, 0.30] $0.12 [0.08, 0.17] $0.08 [0.04, 0.14] GM Environment EMS Environment Organic Environment Not significant $0.10 [0.01, 0.16] $0.09 [-0.02, 0.17] $0.02 [0.00, 0.05] $0.05 [0.02, 0.08] Montreal Region Another Province Outside of Canada $0.81 [0.44, 1.40] -$0.51 [-1.04, -0.12] -$0.90 [-1.57, -0.47] $0.41 [0.18, 0.70] -$0.36 [-0.66, -0.11] -$0.70 [-1.06, -0.42]

10. Implicit Prices for Tomato Attributes($/Kg) VariableRural Urban GM Health EMS Health Organic Health $0.13 [0.05, 0.23] $0.22 [0,15, 0,35] $0.09 [0.03, 0.16] $0.22 [0.14, 0.32] $0.14 [0.10, 0.19] $0.07 [0.03, 0.11] GM Environment EMS Environment Organic Environment Not significant $0.10 [0.05, 0.17] Not significant $0.05 [0.03, 0.08] $0.06 [0.04, 0.10] GM Appearance EMS Appearance Organic Appearance $0.13 [0.05-0.23] $0.04 [0.00-0.10] $0.08 [0.03, 0.15] $0.06 [0.00, 0.13] Not significant $0.04 [0.00, 0.08]

11. Implicit Prices for Pork Attributes ($/Kg) VariableRuralUrban GM Health EMS Health Organic Health $0.48 [0.19, 1.03] $0.40 [0.23, 0.28] Not significant $0.59 [0.38, 1.01] $0.29 [0.13, 0.57] GM Environment EMS Environment Organic Environment Not significant $0.16 [0.05, 0.34] $0.27 [0.12, 0.56] Not significant $0.35 [0.20, 0.64] GM Animal Welfare EMS Animal Welfare Organic Animal Welfare Not significant -$0.14 [-0.39, 0.02] Not significant

12. Willingness to Pay for a Tomato  Using the models derived for the choice experiment it is possible to estimate the consumers willingness to pay for a tomato with different attributes.  For example: Rural consumers would be willing to pay $0.70/kg more for an EMS tomato that had a 5% reduction in risk to human health, a 3% reduction in its environmental impact, with a 10% decrease in its appearance, while urban consumers would be willing to pay $0.85.

13. Summary of Results  The health attribute was more significant to both rural and urban consumers than the environmental attribute.  Both rural and urban consumers were willing to pay for local production with rural consumers willing to pay almost twice as much.  Rural consumers are willing to pay more for appearance than urban consumers.  Animal welfare is not a large concern for either rural or urban consumers.