Green market expansion by reducing information asymmetries: Evidence for labeled organic food products

We investigate how the provision of objective information about the environmental and health impact of organic labels by policy makers can influence the willingness-to-pay of consumers for labeled organic apples in Flanders (Belgium). Using a stated choice experiment, we initially find that Flemish consumers are willing to pay a positive price premium of some 33 eurocent per kilogram for labeled organic apples. After the provision of information on the actual environmental and health effects of organic apple production, this price premium becomes even more pronounced and increases to 57 eurocent per kilogram. Using a conditional logit model with covariates and a mixed logit model, we find evidence of preference heterogeneity. Also, the effect of information provision is more pronounced for certain groups of consumers such as non-vegetarians, infrequent buyers of organic products and members of a nature protection organization. As such, this paper illustrates that there is a role for policy makers and CSR producers in providing more accurate and reliable information about socially responsible production processes. Moreover, it is important to take the observed preference heterogeneity into account and tailor policies to specific consumer groups.