Browsing by Author "Li, Tongzhe"
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Item Auction versus Posted Price in Experiments: Comparisons of Mean and Marginal Effect(Department of Applied Economics and Statistics, University of Delaware, Newark, DE., 2017-06) Wu, Shang; Fooks, Jacob; Li, Tongzhe; Messer, Kent D.; Delaney, DeborahEconomic experiments have been widely used to elicit individuals’ evaluation for various commodities and non-market goods. Common elicitation methods include auctions and posted price mechanisms. Experimental auctions are theoretically incentive compatible so are assumed to give an unbiased estimate of individuals’ evaluation including willingness to pay (WTP). However, the vast majority of purchasing decisions are not made in auctions but in market settings, such as grocery stores, where consumers make yes/no decisions in response to a set price. In this research, we carefully design an experiment to compare homegrown-value WTP estimates between an auction and a posted price elicitation format. This design enables us to make both within- and between-subjects comparisons of the mean WTP and marginal effect estimates. Results from 115 adult consumers indicate that WTP estimates obtained from an auction are approximately 32% - 39% smaller than WTP estimates obtained from a posted price mechanism. In addition, we compare the statistical significance and conclude that auctions require a smaller sample size than posted price mechanisms in order to detect the same preference change. Nevertheless, the signs of marginal effects for different product characteristics are consistent in both mechanisms.Item Behavioral Responses to Science-based Eco-labeling: Gold, Silver, or Bronze(Department of Applied Economics and Statistics, University of Delaware, Newark, DE., 2018-02) Li, Tongzhe; Kecinski, Maik; Messer, Kent D.This study uses unique data collected from field experiments to investigate consumer willingness to pay (WTP) for otherwise homogeneous commodities that provide different levels of environmental services. On average, individuals are willing to pay more for products that provide a higher level of ecosystem services. This effect is larger when the label contains symbols that explicitly differentiate the levels and the magnitude is further amplified when it contains brief information on the scientific basis for the levels. However, our results also suggest that the WTP premium for the superior product is smaller than the discount in WTP for the inferior product. JEL Classifications: D12, Q55, M31, L10Item Does Food Processing Mitigate Consumers’ Concerns about Crops Grown with Recycled Water?(Department of Applied Economics and Statistics, University of Delaware, Newark, DE., 2018-09) Savchenko, Olesya M.; Li, Tongzhe; Kecinski, Maik; Messer, Kent D.This paper presents results of a field experiment designed to evaluate whether food processing alleviates consumers’ concerns about crops grown with recycled water. Recycled water has emerged as a safe and cost-effective way to increase supplies of irrigation water. However, adoption of recycled water by U.S. agricultural producers has been modest, in part, because of concerns that consumers will be reluctant to accept recycled water for uses that involve ingestion or personal contact. Therefore, both policymakers and food producers must understand how consumers’ aversion to recycled water can be mitigated, especially when the products are safe. To date, most of the existing literature has focused on fresh food, yet our results suggest that, for food, simple processing such as drying or liquefying can relieve some of consumers’ concern about use of recycled irrigation water. We find that consumers of processed foods are indifferent between irrigation with recycled and conventional water, however, they are less willing to pay for fresh foods irrigated with recycled water relative to conventional water. We also find that the demographic and behavioral characteristics tested in the experiment mostly had no statistically significant effect. The one exception is age—older consumers are less likely than younger ones to purchase processed foods irrigated with recycled water. Our analysis further reveals that informational nudges that provide consumers with messages about benefits, risks, and both the benefits and risks of using recycled water have no statistically significant effect on consumers’ willingness to pay for fresh and processed foods irrigated with recycled water relative to a no-information control group.Item Fresh Foods Irrigated With Recycled Water: A Framed Field Experiment on Consumer Response(Department of Applied Economics and Statistics, University of Delaware, Newark, DE., 2018-01) Xu, Huidong; Savchenko, Olesya; Kecinski, Maik; Messer, Kent D.; Li, TongzheRecycled water is one potential solution to meeting the growing demand for irrigation water in the U.S. and worldwide. However, widespread adoption of recycled water by agriculture will depend on consumers’ acceptance of food crops grown with this water. In a revealed-preference dichotomous-choice framed field experiment, this study elicits consumers’ willingness to pay (WTP) for fresh produce irrigated with recycled water. It also evaluates consumers’ behavioral responses to information about the environmental benefits and potential health risks of recycled irrigation water. The results suggest that consumers are less willing to pay for produce irrigated with recycled water than for produce irrigated with water of an unspecified type. Information about potential health risks associated with recycled water reduces consumers’ WTP by nearly 50% while information about its environmental benefits does not have a substantial impact. However, a behavioral intervention that presents individuals with a balanced information treatment leads to a 30% increase in mean WTP for produce irrigated with recycled water relative to the experimental control. However, this effect is only found with vegetables and not with fruit, perhaps because fruit is usually consumed raw. Most of the demographic characteristics analyzed in the experiment did not influence consumers’ likelihood of purchasing produce irrigated with recycled water; the exception was presence of a child in the household—those consumers were less likely to purchase the produce, particularly fruits, irrigated with recycled water.Item Heterogeneous Preferences and Demographic Differences for Oysters: Evidence from Field Experiments(Department of Applied Economics and Statistics, University of Delaware, Newark, DE., 2016-10-25) Li, Tongzhe; Kecinski, Maik; Messer, Kent D.This study uses field experiments to highlight attributes and heterogeneous characteristics of oyster consumers to draw conclusions about overall oyster preferences. In the study, 486 adult participants complete a series of revealed-preference dichotomous-choice tasks and a demographic survey. Using a random effects logit model, we investigate factors that influence participants’ decisions to purchase oysters. As expected, price has a significant negative effect while income has a positive effect. Consumers are more likely to purchase oysters when they know the nutrient level of the water in which the oysters were produced. Older individuals and those who are relatively selective regarding shell color or smell are relatively less likely to buy oysters, but consumers who value size, oyster species, and harvest location are willing to pay more. We also estimate the marginal effects of the variables on consumer willingness to pay.Item How Safety Recalls Affect Consumer Preferences for Eggs: An Experimental Analysis(Department of Applied Economics and Statistics, University of Delaware, Newark, DE., 2016-03) Li, Tongzhe; Bernard, John C.; Johnston, Zachary A.; Messer, Kent D.; Kaiser, Harry M.This study analyzes a unique data set to estimate how consumers respond to food-‐safety recalls. In August 2010, more than half a billion eggs were recalled because of a Salmonella outbreak. We conducted experimental auctions shortly before and after the recall outside the affected area. Our results suggest that the recall had a heterogeneous effect on consumers’ willingness to pay for both conventional and organic eggs rather than causing a unidirectional shift, and in general, the recall did not lead to a statistically significant change in consumer preferences for shell eggs. This seemingly counter-‐ intuitive finding coincides with prior empirical evidence regarding how safety recalls affect consumer behavior. In addition, we examined if providing additional positive information on the recall can mitigate the negative media information. Results show that it has a marginally significant positive effect on consumer willingness to pay for conventional eggs.Item Is there a potential market for seaweed? A framed field experiment on consumer acceptance(Department of Applied Economics and Statistics, University of Delaware, Newark, DE., 2019-12) Li, Tongzhe; Ahsanuzzaman; Messer, Kent D.Novel foods, such as seaweed, often meet resistance in consumer markets even though their cultivation can largely benefit the environment. Therefore, research in consumer acceptance is needed before launching a novel food product into the market. We use a framed field experiment to investigate U.S. consumers’ willingness to pay (WTP) for three seaweed products – seaweed salad, kelp noodles, and a seaweed snack. The results suggest that there is a potential market for seaweed food products in the United States as 35% of participants chose to purchase at least one seaweed product. Demographic variables matter in consumers’ choices. For instance, we found a negative WTP premium for female shoppers and primary household shoppers and a positive WTP premium for individuals who had a higher level of education and who were interested in improving the healthfulness of their diets.Item Is this Food “Local?” Evidence from a Framed Field Experiment(Department of Applied Economics and Statistics, University of Delaware, Newark, DE., 2019-04) Li, Tongzhe; Ahsanuzzaman; Messer, KentIn the marketplace, consumers often see foods labeled as “local.” But laws regarding what foods can be labeled as local vary, and how consumers perceive the definition of such labels has received little attention. To study this question, we designed a framed field experiment that took advantage of the small distances in the Mid-Atlantic region of the United States and oyster harvesting locations. In this novel study, consumers were presented with purchase decisions for a food that could be accurately characterized by multiple definitions of the term local, some definitions based on mileage and others on political boundaries. We analyze responses from 374 adult consumers to estimate willingness to pay (WTP) for oysters labeled as local using these various definitions. We find that consumers are responsive to the label definitions. Consumers are less willing to pay for local oysters defined as harvested within 400 miles (the USDA definition of a local food) than for local oysters harvested within 100 miles and 25 miles. Consumers’ WTP increases when local is defined as being harvested in a region associated with the same state of the purchase decision than when harvested in an adjacent state. Interestingly, the highest WTP is when no specific definition of local is provided to consumers.Item Reclaimed Water and Food Production: Cautionary Tales from Consumer Research(Department of Applied Economics and Statistics, University of Delaware, Newark, DE., 2018-09) Savchenko, Olesya M.; Kecinski, Maik; Li, Tongzhe; Messer, Kent D.Reclaimed water has been identified as a viable and cost-effective solution to water shortages impacting agricultural production. However, lack of consumer acceptance for foods irrigated with reclaimed water remains one of the greatest hurdles for widespread farm-level adoption. Using survey data from 540 adults in the mid-Atlantic region of the U.S., this paper examines consumer preferences for six sources of reclaimed irrigation water and identifies statistically significant relationships between consumers’ demographic characteristics and their preferences for each type of reclaimed water. Key findings suggest that consumers prefer rain water to all other sources of reclaimed water. Women are less likely than men to prefer reclaimed irrigation water sources and are particularly concerned about the use of black and brackish water. Consumers who had heard about reclaimed water before are more likely to accept its use. Drawing on evidence from survey and experimental research, this paper also identifies disgust, neophobia and health concerns as the key issues that lead consumers to accept or reject foods produced with reclaimed water. Finally, we identify avenues for future research into public acceptance of reclaimed water based on our analysis and evidence from prior research.Item Reverse Auctions for Purchases of Ecosystem Services: The Effect of Information on Auction Structure Performance(Department of Applied Economics and Statistics, University of Delaware, Newark, DE., 2016-03) Duke, Joshua M.; Messer, Kent D.; Lynch, Lori; Li, TongzheDifferences between private and public decision-making are quantified using willingness-to-accept (WTA) data collected in artefactual field experiments. Participants first makedecisions in a second-price auction (private rounds) followed by majority-rule voting (public rounds) on the median price collected in the private rounds. Results suggest that other-regarding behavior in the public rounds regarding stigma and disgust can significantly reduce WTA. Chatbox communication can further reduce WTA, and social preferences, education, and unrelated communication are the primary drivers that lead participants to accept significantly lower prices for potentially disgusting tasks. The results have application for sustainable, cost-effective recycled water projects.Item Tourist Preferences and Externalties of Views of Wind Turbines(Department of Applied Economics and Statistics, University of Delaware, Newark, DE., 2016-10-25) Fooks, Jacob; Messer, Kent D.; Duke, Joshua M.; Johnson, Janet B.; Li, Tongzhe; Parsons, George R.Previous research about the potential visual disamenity of wind turbines has used stated preference methods or hedonic studies of home prices. This study uses a field experiment of tourists on a ferry to evaluate the impact of wind turbines on tourism. Tourists are given an opportunity to purchase a chance for a weekend hotel stay that varied in quality and by its distance from and view of a large turbine. Results from a within-subject study of 65 tourists suggest that tourists prefer higher quality hotel rooms, being farther from the turbine (up to 1.5 miles), and views that do not include the turbine. Thus, the placement of on-shore turbines may have a larger negative economic impact that previously estimated.Item Transaction costs, competitiveness, and participation in reverse auctions: Evidence from a laboratory experiment(Department of Applied Economics and Statistics, University of Delaware, Newark, DE., 2021-11) Li, Tongzhe; Palm-Forster, Leah H.; Bhuiyanmishu, SiddikaAbstract Reverse auctions are designed to cost-effectively allocate agri-environmental program funds that support the adoption of best management practices. However, transaction costs and concerns about bid acceptance can limit the performance of reverse auctions, particularly for more complex working lands programs. We use a laboratory experiment to examine how various levels of transaction costs and budgets influence participation and bidding behavior in discriminatory-price reverse auctions. Consistent with economic theory, our experimental results show that transaction costs can limit auction participation and reduce program cost-effectiveness. The negative effect of transaction costs on participation is particularly amplified when the budget level is low, and therefore, the auction is more competitive. However, increased competition also places downward pressure on rent-seeking, which allows scarce program funds to support more projects. Using the results of our experiment, we design a simulation to investigate whether subsidies that offset participants’ transaction costs could increase program cost-effectiveness under various conditions. Our findings highlight the importance of considering how transaction costs and subsidizing strategies affect auction performance when implementing reverse auctions. Key words: agri-environmental policy, conservation tender, participation rate, payment for environmental services, reverse auction, transaction costs. JEL Codes: C90, D44, Q24, Q28Item When Does Public Information Undermine the Efficiency of Reverse Auctions for the Purchase of Ecosystem Services?(Department of Applied Economics and Statistics, University of Delaware, Newark, DE., 2016-03) Messer, Kent D.; Duke, Joshua M.; Lynch, Lori; Li, TongzheGovernment conservation agencies that conduct reverse auctions traditionally provide a significant amount of public information about past auction results. This information includes not only the amount of money spent by the government but also can include the number of offers received, number of offers accepted, highest accepted bid, lowest accepted bid, and the average accepted bid. This research uses induced-value experiments to evaluate the effect of past auction information on seller rent seeking. Results from 140 participants suggest that sellers use some public information to learn how to secure higher rents. However, when sellers are given information only about the buyers’ budget, they secure lower rents. Results also suggest that relative budget size affects rents and that budget variability in the presence of market information diminishes the effect. Thus, in the presence of public information and equivalent total outlays, variable budgets are more likely than stationary budgets to achieve conservation auction fiscal efficiency. Finally, this research finds that auctions with greater heterogeneity in seller opportunity costs are less fiscally efficient than when the distribution is more homogeneous.