Consumer’s willingness to pay for organic coffee

: weight of each benefit, subaditivity effect and influence of a national brand

Abstract

Over the last years organic agriculture has presented a remarkable increase on production due, among other things, to the higher interest shown by the consumers regarding food safety. In the U.S., despite the difficult economic times, the organic food grew by 9,4% in 2010. Therefore organic products’ market represents a great opportunity for companies in this industry. In this research I investigate the price premium consumers’ in Portugal are willing to pay towards an organic product, more specifically organic coffee, estimating the weight of each benefit (private and public) implicit on the organic products for that price premium and if there is a subadditivity effect between public and private benefits. Furthermore, I explore what is the influence of a national brand in the price premium. I performed a survey in Portugal, using the Contingent Valuation Method (CVM), more specifically Double-bounded dichotomous choice, in order to achieve the objectives of my research. I found that consumers in Portugal are willing to pay 39,7% more for white label organic coffee and the private benefits of this organic product has two times the weight of its’ public benefits. Regarding the subadditivity effect, I discover that there is this effect between private and public benefits. Last but not least, concerning the influence of a national brand in the consumers’ price premium I found that the brand need to have a credible image that is consistent with the benefits of organic products if it wants to influence positively the price premium of consumers in Portugal.

Date of Award	17 Sept 2012
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Fernando Machado (Supervisor)