Credence attributes and the quest for a higher price – a hedonic stochastic frontier approach

Abstract

Food manufacturers that offer credence attributes, whose presence cannot be determined a priori, may fail to differentiate their products effectively and achieve higher prices if asymmetric information (on the producers' side) impairs their ability to reach consumers with higher willingness to pay. In this article, we assess whether manufacturers carrying products with credence attributes in their portfolio are able to obtain higher prices. To this end, we use a large database of yoghurt sales in Italy and a hedonic price model estimated using a stochastic frontier estimator. The results indicate that manufacturers that offer more credence attributes in their portfolios have the ability to price their products systematically at higher levels.