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Household demand analysis of organic and conventional fluid milk in the United States based on the 2004 Nielsen Homescan panel

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Author Info

  • Pedro A. Alviola

    (Department of Agricultural Economics and Agribusiness, University of Arkansas, Fayetteville, AR 72701)

  • Oral Capps

    (Department of Agricultural Economics, Texas A&M University, College Station, TX 77843-2124)

Abstract

Using the 2004 AC Nielsen panel consisting of over 38,000 households, the authors ascertain the influence of selected demographic variables associated with the purchase of organic fluid milk through the estimation of a probit model. From the use of the Heckman two-step procedure, they also calculate own-price, cross-price, and income elasticities by estimating demand relationships for both organic and conventional milk. They find that demographic factors play a crucial role in the household choice of purchasing organic milk. Furthermore, households are more sensitive to own-price changes in the case of organic milk versus conventional milk. Evidence from estimated cross-price elasticities indicates that organic and conventional milk are substitutes. However, quantities purchased of organic milk are more sensitive to changes in prices of conventional milk than vice versa. Consequently, an asymmetric pattern exists with regard to the substitution patterns of the respective milk types. Moreover, evidence indicates that organic milk is responsive to income changes, but conventional milk is not responsive to income changes. Finally, a 1% increase in the price of organic milk reduces total milk sales by 0.20%, but a 1% increase in the price of conventional milk raises total milk sales by 0.31%. [EconLit citations: C25, D12]. © 2010 Wiley Periodicals, Inc.

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File URL: http://hdl.handle.net/10.1002/agr.20227
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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Agribusiness.

Volume (Year): 26 (2010)
Issue (Month): 3 ()
Pages: 369-388

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Handle: RePEc:wly:agribz:v:26:y:2010:i:3:p:369-388

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Web page: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1520-6297

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  1. Capps, Oral, Jr. & Love, H. Alan & Williams, Gary W. & Adams, Wendi L., 1999. "Examining Packer Choice Of Slaughter Cattle Procurment And Pricing Methods," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, Northeastern Agricultural and Resource Economics Association, vol. 28(1), April.
  2. Arthur Lewbel, 1997. "Constructing Instruments for Regressions with Measurement Error when no Additional Data are Available, with an Application to Patents and R&D," Econometrica, Econometric Society, Econometric Society, vol. 65(5), pages 1201-1214, September.
  3. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  4. Bernard, Daria J. & Mathios, Alan D., 2005. "Factors Affecting Consumer Choice and Willingness to Pay for Milk Attributes," 2005 Annual meeting, July 24-27, Providence, RI, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) 19366, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  5. Nakamura, Alice & Nakamura, Masao, 1998. "Model specification and endogeneity," Journal of Econometrics, Elsevier, Elsevier, vol. 83(1-2), pages 213-237.
  6. Gary D. Thompson, 1998. "Consumer Demand for Organic Foods: What We Know and What We Need to Know," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 80(5), pages 1113-1118.
  7. Jaehong Park & George C. Davis, 2001. "The Theory and Econometrics of Health Information in Cross-Sectional Nutrient Demand Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 83(4), pages 840-851.
  8. Diansheng Dong & Chanjin Chung & Harry Kaiser, 2004. "Modelling milk purchasing behaviour with a panel data double-hurdle model," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 36(8), pages 769-779.
  9. John L. Park & Oral Capps, 1997. "Demand for Prepared Meals by U.S. Households," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 79(3), pages 814-824.
  10. Glaser, Lewrene K. & Thompson, Gary D., 2000. "Demand For Organic And Conventional Beverage Milk," 2000 Annual Meeting, June 29-July 1, 2000, Vancouver, British Columbia, Western Agricultural Economics Association 36346, Western Agricultural Economics Association.
  11. Diansheng Dong & J.S. Shonkwiler & Oral Capps, 1998. "Estimation of Demand Functions Using Cross-Sectional Household Data: The Problem Revisited," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 80(3), pages 466-473.
  12. Schmit, Todd M. & Dong, Diansheng & Chung, Chanjin & Kaiser, Harry M. & Gould, Brian W., 2002. "Identifying The Effects Of Generic Advertising On The Household Demand For Fluid Milk And Cheese: A Two-Step Panel Data Approach," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, Western Agricultural Economics Association, vol. 27(01), July.
  13. Atanu Saha & Oral Capps & Patrick Byrne, 1997. "Calculating marginal effects in dichotomous - continuous models," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 4(3), pages 181-185.
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Cited by:
  1. Zhuang, Yan & Dimitri, Carolyn & Jaenicke, Edward C., 2010. "Price Reactions And Organic Price Premiums For Private Label And Branded Milk," 115th Joint EAAE/AAEA Seminar, September 15-17, 2010, Freising-Weihenstephan, Germany, European Association of Agricultural Economists;Agricultural and Applied Economics Association 116388, European Association of Agricultural Economists;Agricultural and Applied Economics Association.
  2. Lars Gårn Hansen & Laura Mørch Andersen, 2013. "Does Organic Crowding Out Influence Organic Food Demand? – evidence from a Danish micro panel," IFRO Working Paper 2013/2, University of Copenhagen, Department of Food and Resource Economics.
  3. Schroeck, Rebecca, 2011. "A Demand System Analysis of Organic and Conventional Fresh Milk in Germany Segmented by Consumer Groups," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland, European Association of Agricultural Economists 115995, European Association of Agricultural Economists.
  4. Li, Xianghong & Peterson, Hikaru Hanawa & Xia, Tian, 2012. "U.S. Consumer Demand for Organic Fluid Milk by Fat Content," Journal of Food Distribution Research, Food Distribution Research Society, Food Distribution Research Society, vol. 43(1), March.
  5. Bonnet, Céline & Bouamra-Mechemache, Zohra, 2014. "Organic label, bargaining power, and profit sharing in the French fluid milk market," TSE Working Papers, Toulouse School of Economics (TSE) 14-493, Toulouse School of Economics (TSE).
  6. Choi, Hee Jung & Wohlgenant, Michael K., 2012. "Demand Analysis of Fluid Milk with Different Attributes," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington, Agricultural and Applied Economics Association 124746, Agricultural and Applied Economics Association.

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