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Price Determinants in Top Quality E-Auctioned Specialty Coffees

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Author Info

  • Donnet, M. Laura
  • Weatherspoon, Dave D.
  • Hoehn, John P.

Abstract

The US specialty coffee industry has grown from $1 billion in 1990 to $11 billion in 2006 and is expected to continue to grow into the foreseeable future. This growth particularly depends on prices coordinating the specialty coffee supply chain through two-way information exchange between roasters and producers. We analyze the determinants of specialty coffee prices by estimating a hedonic price function for specialty Central and South American coffees traded at e-auctions. We hypothesize that since specialty coffee is a differentiated product, prices will be determined by both sensory and reputation attributes. The results show that prices are influenced by the quality rating, which is a sensory variable, and by the quality rankings established in the cupping competition previous to the auction, the country of origin and the coffee variety, which are reputation variables. In addition, the macro variables, harvest year and commodity price were found to be significant.

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Bibliographic Info

Paper provided by Michigan State University, Department of Agricultural, Food, and Resource Economics in its series Staff Papers with number 9310.

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Date of creation: 2007
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Handle: RePEc:ags:midasp:9310

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Postal: Justin S. Morrill Hall of Agriculture, 446 West Circle Dr., Rm 202, East Lansing, MI 48824-1039
Phone: (517) 355-4563
Fax: (517) 432-1800
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Web page: http://www.aec.msu.edu/agecon/
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Keywords: Specialty coffee; hedonic price analysis; differentiated food pricing; sensory attributes; reputation attributes; Demand and Price Analysis;

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References

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  1. Halvorsen, Robert & Pollakowski, Henry O., 1981. "Choice of functional form for hedonic price equations," Journal of Urban Economics, Elsevier, vol. 10(1), pages 37-49, July.
  2. David Kreps & Robert Wilson, 1999. "Reputation and Imperfect Information," Levine's Working Paper Archive 238, David K. Levine.
  3. Oczkowski, Edward A., 1994. "A Hedonic Price Function For Australian Premium Table Wine," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 38(01), April.
  4. Rosen, Sherwin, 1981. "The Economics of Superstars," American Economic Review, American Economic Association, vol. 71(5), pages 845-58, December.
  5. Combris, Pierre & Lecocq, Sebastien & Visser, Michael, 1997. "Estimation for a Hedonic Price Equation for Bordeaux Wine: Does Quality Matter?," Economic Journal, Royal Economic Society, vol. 107(441), pages 390-402, March.
  6. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132.
  7. Shapiro, Carl, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, MIT Press, vol. 98(4), pages 659-79, November.
  8. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
  9. G¸nter Schamel & Kym Anderson, 2003. "Wine Quality and Varietal, Regional and Winery Reputations: Hedonic Prices for Australia and New Zealand," The Economic Record, The Economic Society of Australia, vol. 79(246), pages 357-369, 09.
  10. Pierre Combris & Sebastien Lecocq & Michael Visser, 2000. "Estimation of a hedonic price equation for Burgundy wine," Applied Economics, Taylor & Francis Journals, vol. 32(8), pages 961-967.
  11. Landon, Stuart & Smith, Constance, 1997. "The Use of Quality and Reputation Indicators by Consumers: The Case of Bordeaux Wine," MPRA Paper 9283, University Library of Munich, Germany.
  12. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-29, March-Apr.
  13. Miguel Carriquiry & Bruce A. Babcock, 2004. "Reputation, Quality Observability, and the Choice of Quality Assurance Systems," Center for Agricultural and Rural Development (CARD) Publications 04-wp373, Center for Agricultural and Rural Development (CARD) at Iowa State University.
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Cited by:
  1. Herrmann, Roland & Marauhn, Thilo & Teuber, Ramona, 2008. "Der Schutz geographischer Herkunftsangaben: Herausforderungen für agrarökonomische, rechtswissenschaftliche und interdisziplinäre Forschung," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 57(7).
  2. Wilson, Adam P. & Wilson, Norbert L., 2013. "The Economics of Quality in the Specialty Coffee Industry: Insights from the Cup of Excellence Auction Programs," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150721, Agricultural and Applied Economics Association.
  3. Teuber, Ramona, 2010. "Estimating the Demand for Sensory Quality – Theoretical Considerations and an Empirical Application to Specialty Coffee," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 59(3).
  4. Zhang, Huifang & Gallardo, Rosa Karina & McCluskey, Jill J. & Kupferman, Eugene M., 2010. "Consumers' Willingness to Pay for Treatment-Induced Quality Attributes in Anjou Pears," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 35(1), April.
  5. Satimanon, Thasanee & Weatherspoon, Dave D., 2010. "Hedonic Analysis of Sustainable Food Products," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 13(4).
  6. Teuber, Ramona & Herrmann, Roland, 2012. "Towards a Differentiated Modelling of Origin Effects in Hedonic Analysis:An Application to Auction Prices of Specialty Coffee," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126235, International Association of Agricultural Economists.
  7. Donnet, M. Laura & Weatherspoon, Dave D. & Hoehn, John P., 2007. "What Adds Value in Specialty Coffee? Managerial Implications from Hedonic Price Analysis of Central and South American E-Auctions," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 10(03).
  8. Teuber, Ramona, 2008. "Geographical Indications and the Value of Reputation - Empirical Evidence for Cafe de Marcala," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 43835, European Association of Agricultural Economists.

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