Consumer Preferences and Willingness to Pay for Country of Origin Labeled Product in Istanbul

Abstract

1. IntroductionConsumers are increasingly showing interest in foods that are produced (Carpio and Isengildina-Massa, 2009) and marketed as locally (Darby et ah, 2008). To assess consumers' perceptions and willingness to purchase COOL products, two different origin local products were used; Ezine Cheese, and Ayvalik Olive Oil. These two products were selected as Turkish consumers use them almost everyday in Turkish cuisine. The study took place in the urban area of Istanbul, a huge growing market for labeled food products and representative for other Turkish urban markets as well.Several studies have been implemented on COOL food products focusing either on safety issues, or on grown product preservation programs. Studies examining consumer perceptions of COOL show that there are considerable differences in consumer attitudes and willingness to purchase COOL products. For instance, the studies by Haucap et al. (1997), Hoffmann (2000), Umberger et al. (2003), Loureiro and Umberger (2003, 2005), Sterns et al. (2004) and Bemues et al. (2003) find that consumers have a strong preference for COOL and use it as an indicator of product quality and food safety. Dickinson and Bailey (2002) and Hobbs (2003) find that preference for COOL is low if not combined with other desirable safety attributes. Consumer preference for domestic products is an important criterion to analyze benefits of mandatory COOL implementation. A number of studies have illustrated that U.S. consumers are willing to pay a premium for U.S.-origin labeled beef and pork products over products from other countries (e.g., Umberger et ak, 2003; Ward et ah, 2005; Miranda and Konya, 2006; Loureiro and Umberger, 2007; Mennecke et al., 2007; Gao and Schroeder, 2009; Link, 2009).Over the last five years there are no known studies based on country of origin food products in Turkey based on consumer behaviors and willingness to buy COOL products. Turkey is still in the process of the definition of those kinds of products and labeling of them to secure products and producer in the market. This study aims at determining consumers' behavior and willingness to pay for various Country-of-Origin labeled food products in comparison to the conventional - no labels - products in the urban market of Istanbul. To assess consumer preferences regarding COOL food products, Heckman Demand Models were employed.2. MethodologyThe research questionnaire addressed to randomly selected consumers in Istanbul. Based on Turkish Statistical Institute census of population data, from 12 million consumers, we assume that every 4 of them represent a household and based on house consumption with 90 percentages confidence interval and with 7.5 percentages margin errors 121 household defined for consumers. Based on the intensity of the areas in Istanbul, we choose the consumers randomly from shopping centers, mass transportation areas, etc. Data were collected through a questionnaire and face to face interviews.The willingness to pay equation has been specified as a two-step decision process, taking into account the results obtained from the two consecutive questions. First, consumers decide if they are willing to pay a premium for certified country of origin food product over the price they are actually paying. Second, if they are willing to pay, they decide how much more can pay. Premiums are expressed as a percentage price increase over the prices they normally pay. Two models were estimated, one for each of the two studied products.If the decision is to consume COOL product, different demand models were estimated. For these products, different price sets were defined to the consumers to evaluate how much extra the consumers pay. Thus, shifts in demand will be calculated from conventional products to COOL products. For different shifts in demand, for the ones who choose conventional products, offer lower price COOL products, for the ones who choose COOL products, offer lower price conventional products. …