Market potential for pork products with embedded environmental attributes: an experimental approach

Sean Patrick Hurley

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: This dissertation focuses on determining benefits or value of environmental improvements in agricultural production, specifically, with an application to the pork industry. Values or benefits from reduced odor, reduced manure run-off, and reduced manure spills were elicited from consumers from Iowa, Kansas, Vermont, Oregon, and North Carolina. For the study, two pound packages of pork chops with selected combinations of air, ground water, and surface water environmental attributes were used to obtain consumer willingness-to-pay for environmental improvements. These benefits or willingness-to-pay for improved environmental practices have been obtained through research using a multiple trial second-price sealed-bid auction;A focus of this dissertation is to investigate the relationship between willingness-to-pay for embedded environmental attributes and socioeconomic characteristics. The dependent variables analyzed had a mix of continuous and discrete points within the distribution because of self-selectivity. Given this, a two-stage econometric procedure employing a polychotomous choice function, specifically an ordered probit, was used to investigate this relationship. Predictive ability of the model was limited and sensitive to the variables included;Two measures of willingness-to-pay for improved environmental attributes were developed and examined. It was found that under both these measures, approximately two-thirds of the participants indicated they would be willing to pay a premium for pork products with embedded environmental attributes. The average premium paid by premium payers under both measures ranged from 1.62 to 2.23 for the package with all three embedded environmental attributes. Statistical methods were used to examine whether there were differences in premiums with differing levels of embedded environmental attributes. Examining the premiums across the different locations in this study shows that there were no significant differences in the premium level by location. Demographic and attitudinal data of the participants in this study are presented. Statistical tests are employed to see whether they are significantly different across premium payers and non-premium payers.

Date: 2000-01-01
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