What Is It About Organic Milk? An Experimental Analysis

John Bernard () and Daria J. Bernard

American Journal of Agricultural Economics, 2007, vol. 91, issue 3, 826-836

Abstract: Auction experiments were used to examine demand relationships and willingness to pay (WTP) for organic, rBST-free, no antibiotics used, and conventional milk. Elasticities showed strong substitute and complement relationships between organic, rBST-free, and no antibiotics varieties. The sum of the latter two’s premiums were not significantly different than the organic premium, suggesting diminishing marginal utility for added attributes. Results from a two-stage heteroskedastic tobit model demonstrated that WTP premiums for the varieties differ significantly by demographics and beliefs regarding the conventional version. These suggest market segments for rBST-free and no antibiotics versions could succeed alongside organic, benefiting consumers and producers. Copyright 2007, Oxford University Press.

Date: 2007
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