Reputation And State Commodity Promotion: The Case Of Washington Apples
A dynamic multiple-indicator multiple-cause (MIMIC) framework was used to estimate the latent variable reputation with price premiums for Washington apples and attributes that covered the period July 1996 to November 1999. A maximum likelihood two-stage approach was employed. For comparison purposes, a hedonic regression was also estimated. Results from the first stage of the estimation procedure in the MIMIC reputation model suggest that price premiums are good indicators of reputation. The indicator coefficients, also called factor loadings, imply that the estimated reputation variable is common to the five indicators chosen and that the measurement of reputation is not likely to be obscured by a wide diversity in the indicators. The common factor issue suggests a possible existence of collective 'Washington' reputation. Results from the second stage of the MIMIC reputation model are compared to those from the Hedonic proxy model. In general, results from the MIMIC reputation model make more intuitive sense and are in line with the theoretical literature on reputation than the results from the Hedonic proxy model. Reputation is found to be stationary and that shocks to Washington's reputation are temporary. In the MIMIC reputation model, all the estimated coefficients on the explanatory cause variables had positive signs, except the Red Delicious variety variable. The magnitude of the coefficient on the logo term is large, suggesting a strong impact on reputation. The estimated constant term in the MIMIC reputation model is negative and relatively large, which suggests that reputation is declining. The concerns of declining perceived "eating" quality in Washington varieties thus appear to be real. It appears then that the apple industry is currently benefiting from past/accrued reputation. The current standards in the apple industry give room for some Washington producers to free ride on the collective reputation. Hence, there may be some justification for minimum quality standards. For efficient public policy purposes, our findings suggest that policymakers and the apple industry as a whole should consider reputation in their cost-benefit analysis for purposes of resource allocation.
|Date of creation:||2001|
|Date of revision:|
|Contact details of provider:|| Postal: 555 East Wells Street, Suite 1100, Milwaukee, Wisconsin 53202|
Phone: (414) 918-3190
Fax: (414) 276-3349
Web page: http://www.aaea.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Borenstein, Severin & Zimmerman, Martin B, 1988. "Market Incentives for Safe Commercial Airline Operation," American Economic Review, American Economic Association, vol. 78(5), pages 913-35, December.
- Karpoff, Jonathan M & Lott, John R, Jr, 1993. "The Reputational Penalty Firms Bear from Committing Criminal Fraud," Journal of Law and Economics, University of Chicago Press, vol. 36(2), pages 757-802, October.
- Tirole, Jean, 1994.
""A Theory of Collective Reputations" with Applications to the Persistence of Corruption and to Firm Quality,"
IDEI Working Papers
38, Institut d'Économie Industrielle (IDEI), Toulouse.
- Jean Tirole, 1996. "A Theory of Collective Reputations (with applications to the persistence of corruption and to firm quality)," Review of Economic Studies, Oxford University Press, vol. 63(1), pages 1-22.
- Tirole, J., 1993. "A Theory of Collective Reputations with Applications to the Persistence of Corruption and to Firm Quality," Working papers 93-13, Massachusetts Institute of Technology (MIT), Department of Economics.
- Richards, Timothy J. & Gao, Xiaoming & Patterson, Paul M., 1998.
"Advertising and Retail Promotion of Washington Apples: A Structural Latent Variable Approach to Promotion Evaluation,"
28547, Arizona State University, Morrison School of Agribusiness and Resource Management.
- Richards, Timothy J. & Gao, Xiaoming & Patterson, Paul M., 1999. "Advertising And Retail Promotion Of Washington Apples: A Structural Latent Variable Approach To Promotion Evaluation," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 31(01), April.
- Jill J. McCluskey & Gordon C. Rausser, 2001.
"Estimation of Perceived Risk and Its Effect on Property Values,"
University of Wisconsin Press, vol. 77(1), pages 42-55.
- McCluskey, Jill & Rausser, Gordon C., 2000. "Estimation of perceived risk and its effect on property values," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt46x0r71b, Department of Agricultural & Resource Economics, UC Berkeley.
- McCluskey, Jill Jennifer & Rausser, Gordon C, 2000. "Estimation of perceived risk and its effect on property values," CUDARE Working Paper Series 879R, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
- Kreps, David M. & Wilson, Robert, 1982.
"Reputation and imperfect information,"
Journal of Economic Theory,
Elsevier, vol. 27(2), pages 253-279, August.
- Caves, Richard E. & Greene, David P., 1996. "Brands' quality levels, prices, and advertising outlays: empirical evidence on signals and information costs," International Journal of Industrial Organization, Elsevier, vol. 14(1), pages 29-52.
- Landon, Stuart & Smith, Constance, 1998. "Quality expectations, reputation, and price," MPRA Paper 9774, University Library of Munich, Germany.
- Gregg A. Jarrell & Sam Peltzman, 1984.
"The Impact of Product Recalls on the Wealth of Sellers,"
University of Chicago - George G. Stigler Center for Study of Economy and State
33, Chicago - Center for Study of Economy and State.
- Jarrell, Gregg & Peltzman, Sam, 1985. "The Impact of Product Recalls on the Wealth of Sellers," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 512-36, June.
- Paul M. Patterson & Timothy J. Richards, 2000. "Newspaper advertisement characteristics and consumer preferences for apples: A mimic model approach," Agribusiness, John Wiley & Sons, Ltd., vol. 16(2), pages 159-177.
- Richards, Timothy J. & Gao, X.M. & Patterson, Paul M., 1999. "Advertising and Retail Promotion of Washington Apples: A Structural Latent Variable Approach to Promotion Evaluation," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 31(01), pages 15-28, April.
- Milgrom, Paul & Roberts, John, 1982.
"Predation, reputation, and entry deterrence,"
Journal of Economic Theory,
Elsevier, vol. 27(2), pages 280-312, August.
- Paul Milgrom & John Roberts, 1980. "Predation, Reputation, and Entry Deterrence," Discussion Papers 427, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Paul Milgrom & John Roberts, 1997. "Predation, reputation , and entry deterrence," Levine's Working Paper Archive 1460, David K. Levine.
- Carl Shapiro, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, Oxford University Press, vol. 98(4), pages 659-679.
- Gorton, Gary, 1996. "Reputation Formation in Early Bank Note Markets," Journal of Political Economy, University of Chicago Press, vol. 104(2), pages 346-97, April.
- Spanos, Aris, 1984. "Liquidity as a Latent Variable-An Application of the MIMIC Model," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 46(2), pages 125-43, May.
- Watson, Mark W. & Engle, Robert F., 1983. "Alternative algorithms for the estimation of dynamic factor, mimic and varying coefficient regression models," Journal of Econometrics, Elsevier, vol. 23(3), pages 385-400, December.
- X. M. Gao & Timothy Richards & Albert Kagan, 1997. "A latent variable model of consumer taste determination and taste change for complex carbohydrates," Applied Economics, Taylor & Francis Journals, vol. 29(12), pages 1643-1654.
- Leffler, Keith B, 1982. "Ambiguous Changes in Product Quality," American Economic Review, American Economic Association, vol. 72(5), pages 956-67, December.
- Eric J. Wailes & Gail L. Cramer, 1997. "A Microeconometric Analysis of Consumer Taste Determination and Taste Change for Beef," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 573-582.
- Maria Luz Loureiro & Jill J. McCluskey, 2000. "Assessing consumer response to protected geographical identification labeling," Agribusiness, John Wiley & Sons, Ltd., vol. 16(3), pages 309-320.
When requesting a correction, please mention this item's handle: RePEc:ags:aaea01:20592. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If references are entirely missing, you can add them using this form.