Effects of quality claims on willingness to pay for organic food

What is it about?

Claims about environmental impact, health effects and taste of food products are restricted in the EU. The purpose of this paper is to quantify how much such claims would change the willingness to pay (WTP) for organic products in Croatia. For estimating the WTP under different claims the authors used an experimental auction. Participants (258) bid for real food products (organic and conventional tomatoes and apples) and are endowed with cash at a location where they usually go shopping. For the sample the authors find that consumers are willing to pay on average a premium of 42 percent for organic apples and 59 percent for organic tomatoes. On top of that, WTP increases between 16-20 percent for environmental claims and 12 percent for health claims. Taste-related claims are not significant.

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Why is it important?

So far there is no evidence from experimental auctions or other non-hypothetical methods in Croatia to measure and reveal true consumers’ WTP for organic food products in real market settings, their knowledge about organic food, how the effect of information affects their willingness to pay, and how the income and willingness to pay for organic food products are related. Sellers and producers of organic food can benefit from adding claims to organic labels. To protect consumers from manipulation, regulators are well advised to be cautions when allowing claims about credence attributes of food. The authors quantify the influence of claims about organic products on the WTP by using experimental auctions which are particularly suitable to investigate effects which cannot be observed on the market.