The effects of a local label conveying minimal additional information on consumer willingness to pay: a field experiment
Date
2017
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Publisher
University of Delaware
Abstract
To begin to understand consumers’ preferences for labels, it must be understood what consumers believe they are obtaining from the labels, and whether their perceptions deviate from what they are truly being guaranteed by a label. To study the impact of a label conveying minimal additional information on consumer willingness to pay (WTP) and perceptions, this thesis examined the impact of adding such a label on consumer WTP for a watermelon. The label conveying minimal additional information was a Mar-Del Watermelon Association label. The main information that the label conveyed was that the watermelon had been grown in either Maryland or Delaware, meaning that this label conveyed the potential for the watermelon to be local. However, consumers were told that all watermelons available to them regardless of labeling had been grown in Delaware, theoretically negating the main additional information being conveyed by the Mar-Del label. ☐ Field experiments were conducted in eight locations with a total of 328 participants in farmer’s markets and parks in Cecil County, Maryland, Chester County, Pennsylvania, New Castle County, Delaware, and Sussex County, Delaware (where a ferry terminal was used as opposed to a park). To study the impact of the Mar-Del label, changes in WTP were observed when the label was added both to no label and when added to a preserved farm label, which told participants that the watermelon had been grown on preserved farmland in Delaware. A Becker-DeGroot-Marschak (BDM) mechanism was used to elicit WTP. Participants then completed a survey on shopping habits, demographics, perceptions of taste, safety, and locality, and perceptions of preserved farmland. ☐ On average participants were willing to pay $1.82 more for a watermelon with the Mar-Del label compared to no label and $0.60 more for the Mar-Del label when added to the preserved farm label. When the Mar-Del label was added either to no label or the preserved farm label, consumers’ expectations of taste, food safety, and belief that the watermelon was local all increased at at least the 5% level of statistical significance. Therefore, the addition of a label conveying minimal information made participants believe that the watermelon would taste better, was safer in terms of food safety, and was more likely to meet their definition of local. ☐ Results showed that the addition of a local label, regardless of actual additional information provided, increases consumer’s trust that the food product will taste better, has a higher level of food safety, and is local. This finding could have significant impact for both farmers within the Mar-Del Watermelon Association, and have a more widespread impact on farmers across the U.S. In broader applications, simply including a label, even if it does not convey significant information, could result in consumers willing to pay more for a watermelon grown at any farm across the U.S., resulting in increased profits for the farmers, and a higher trust on behalf of the consumers that their food will taste good, will be safe, and is local. It is possible these findings could apply to any food product, although further studies would be required to establish this effect.
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Keywords
Social sciences, Agriculture, Field experiment, Labeling, Willingness to pay