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Retail Intermediation and Local Foods

Author

Listed:
  • Timothy J. Richards
  • Stephen F. Hamilton
  • Miguel Gomez
  • Elliot Rabinovich

Abstract

Direct sales of local foods, for instance through farmer’s markets, have reached a plateau, while intermediated sales (through more traditional retailers) are still rising rapidly. We provide an explanation for the growth of intermediated local foods based on the observation that consumers prefer to buy local foods as part of a shopping basket that includes both local and non-local items. We test our hypothesis using data from a natural experiment conducted by Relay Foods, an online retailer based in the U.S. state of Virginia, and a multi-variate logit model of shopping-basket demand. We find significant complementarities among items in a sample shopping basket that are not reflected in estimates from a discrete-choice model of category demand. Estimates of a structural pricing-and-local-content model reveal important incentives for retailers to offer local foods as part of a broader selection of grocery items.

Suggested Citation

  • Timothy J. Richards & Stephen F. Hamilton & Miguel Gomez & Elliot Rabinovich, 2017. "Retail Intermediation and Local Foods," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 99(3), pages 637-659.
    • Handle: RePEc:oup:ajagec:v:99:y:2017:i:3:p:637-659.
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    File URL: http://hdl.handle.net/10.1093/ajae/aaw115
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    More about this item

    Keywords

    Local food; retail prices; food retailing; shopping-basket model;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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