A Hedonic Analysis on the Implicit Values of Fresh Tomatoes

Abstract

Summary and Conclusions The study estimated a hedonic price model based on the 2003 ACNielsen Homescan panel data to assess consumers’ valuation of organic and other product attributes related to fresh tomatoes. Given the unique feature of household purchase information provided in the data set, the effects of household characteristics on tomatoes prices paid by panel members were estimated as well. For empirical implementation, parameters of the hedonic model were estimated using the Box-Cox transformation procedure. Based on the likelihood-ratio tests, the Box-Cox procedure strongly rejected the three commonly specified functional forms, i.e., linear, log-linear and inverse demand functions. The hedonic methodology proved useful as a tool for analyzing price variation for fresh tomatoes and as a mechanism for examining consumer preferences of product attributes. Marginal implicit prices for selected product and market attributes that affected the retail price of fresh tomatoes were estimated as well as household economic and demographic characteristics. The results indicated that consumers value the organic and packaging attributes positively and consistently among the major markets. For example, the study suggests that the organic feature contributes $0.41/lb to the price of fresh tomatoes that consumers paid in the Northeast market. For other markets, the organic premiums were estimated to be $0.38/lb in the North Central and $0.26/lb in the Southeast and West. Overall, the signs and magnitudes of the marginal implicit prices obtained in this study appear to be reasonable and plausible. The effects of household characteristics on prices paid for fresh tomatoes are in general consistent with previous studies. The study suggests that higher household income, household head with younger age and higher education, and white household all contribute positively and significantly to the prices paid for fresh tomatoes.