Discounting Spotted Apples: Investigating Consumers’ Willingness to Accept Cosmetic Damage in an Organic Product
Chengyan Yue, Frode Alfnes, Helen H. Jensen
November 2006 [06-WP 436]
Yue, C., F. Alfnes, and H.H. Jensen. 2006. "Discounting Spotted Apples: Investigating Consumers’ Willingness to Accept Cosmetic Damage in an Organic Product." Working paper 06-WP 436. Center for Agricultural and Rural Development, Iowa State University.
Organic producers have limited methods of avoiding plant diseases that result in cosmetic damage to produce. Therefore, the appearance of organic produce is often less than perfect. We use an experimental auction to investigate how cosmetic damage affects consumers' willingness to pay for organic apples. We find that 75% of the participants are willing to pay more for organic than for conventional apples given identical appearance. However, at the first sight of any imperfection in the appearance of the organic apples, this segment is significantly reduced. Furthermore, we find that there is a significant effect of interaction between cosmetic damage and product methods. Even though most consumers say they buy organic products to avoid pesticides, we find that cosmetic damage has a larger impact on the willingness to pay for organic apples than for conventional apples.
Keywords: appearance, apples, experimental auctions, organic, willingness to pay.