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Assessing the market potential for a local food product: Evidence from a non-hypothetical economic experiment

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Purpose ‐ The purpose of this paper is to analyze the market potential of a locally produced and high quality food product (i.e. white bean "Mongeta Ganxet" (MG)) from Catalonia, Spain. Consumers' willingness to pay (WTP) for the product is elicited using a non-hypothetical economic experiment and then the sensitivity of WTP values is analyzed with regard to additional information provided to participants that includes reference prices, leaflets and tasting. Finally, a sample-selection model is estimated to assess the factors that significantly affect consumers' WTP for the product. Design/methodology/approach ‐ To elicit the willingness to pay a premium for the local food product, 90 subjects were invited to participate in a random nth price experimental auction. Before auctioning the product, participants were asked to complete a questionnaire about consumer attitudes and purchase habits. Findings ‐ Only 7 percent of participants are willing to pay a price higher than the minimum price from which the MG product may be purchased directly from a producer or the local producing market. Also, it was found that providing reference prices of substitute products (both conventional and alternative high quality white beans) positively affects WTP for the MG. Interestingly, however, provision of information on organoleptic, nutritional and cooking characteristics of the MG and product tasting do not significantly influence WTP. Finally, the level of consumption, the degree of knowledge about the product and the participants' previous experience increase the purchasing intention for the MG. Originality/value ‐ In contrast to traditional market research studies that use hypothetical methods, the authors use non-hypothetical elicitation mechanism to elicit consumers' valuation for an important local food product in Catalonia, Spain. Since actual products and cash were used in the experiments, the authors provided the respondents with an incentive to reveal their true preferences and valuation for the product of interest. The authors also tested the effect of provision of certain types of information on WTP and analyzed the factors that significantly influence consumers' WTP for the product.
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Keywords: Consumer behaviour; Willingness to pay; Experimental auctions; Market research; Mongeta Ganxet; Prices; Random nth price; Reference prices; Sample selection model; Spain; Food products

Document Type: Research Article

Publication date: 2012-01-20

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