An Analysis of Consumers' Preferences for Quality-Graded Beef Products

This paper analyzes consumer preferences for quality-graded beef products within a vertical product differentiation framework. Based on a theoretical discussion of consumers demand for vertically differentiated products, we suggest an ordered probit model with sample selection as an empirical demand function for quality-graded beef products. We employ cross-sectional data sets obtained from the 2013 Consumers Survey on Food Consumption Behavior conducted by the Korea Rural Economic Institute and examine factors affecting consumers choice of the grade on purchasing beef products. The empirical results show that i) about half of sample consumers refer to various label information other than grade in order to choose beef products which match their preference, ii) those consumers who are younger and have higher income level are more likely to choose higher graded beef products, and iii) the on-going beef grading systems have not thoroughly solved out the asymmetry problem of quality information between producers and consumers because their evaluation schemes do not appropriately reflect consumers' preference for quality attributes of beef products.