The Economics of Quality in the Specialty Coffee Industry: Insights from the Cup of Excellence Auction Programs
This study estimates price determinants for specialty green coffee auctions using records from the 2004-2010 Cup of Excellence programs hosted by the Alliance for Coffee Excellence. While most recent literature on coffee has focused on certifications and sustainability labels, the discussion of price determinants has been limited in the literature. This paper replicates one of the first publications on price determinants (Donnet, et al., 2008) and formulates a new model to more accurately describe the market. We include the necessary additional variables and estimate the model using a truncated maximum likelihood estimation technique. While sensory quality has a strong effect on price, the highest premiums stem from obtaining a top rank compared to other coffees from the same country, and North American buyers are more responsive to sensory quality than buyers in Asian and European markets.
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