Economic Values of Pork Attributes: Hedonic Price Analysis of Experimental Auction Data

Abstract

Many fresh foods, such as fruits, vegetables, and meats, exhibit nearly continuous quality differences that cause consumers to value similar, but not identical, packages or lots of the food differently. Fresh pork chops are among the foods that typically exhibit these quality differences. Thus, although several packages of pork chops may be available at a particular price per pound, consumers will typically select among them based on perceived or expected quality differences. How consumers perceive and value these quality differences is of great interest to pork producers and grocery store managers. For example, it is unclear whether consumers perceive the same attributes when viewing advertising as they perceive in the actual product. Also unclear is how appearance relates to consumers' perceptions of taste or how attribute values change as consumers obtain new information (advertising versus appearance versus taste) about the product. Answers to these questions might signal changes in genetics and management of pork production and in the type of pork that grocery stores stock in meat counters. This may also provide advertisers, retailers, and other pork marketers with new information about fresh pork demand and how consumers perceive and value pork quality attributes. Such information is essential to effective pork advertising and marketing programs, such as the Other White Meat? campaign of the National Pork Producer's Council (NPPC). Methods of experimental economics the structured application of experimental methods to analyses of economic phenomena have recently become popular among economists as an effective means of examining consumer preferences and valuations (e.g., Hoffman et al.; Buhr et al.). However, these methods have historically been limited to binomial consumer choices (e.g., Shogren). In these studies, consumers have considered a single characteristic or set of characteristics which they observe at only one of two levels. As a result, experimental economics has been of limited use in valuing the multiple attributes that contribute to the nearly continuous variation observed in fresh pork quality. Melton et al., however, have extended the methods of experimental economics to analyze consumer preferences for multidimensional products. They integrated statistical methods of experimental design and methods of experimental economics so that it is possible to identify differences in consumers' preferences for products that exhibit continuous variance in multiple quality attributes or characteristics. They illustrated the method with an experimental auction of fresh pork chops that vary in color, marbling, and size. In this study, methods of hedonic price analysis are applied to derive new estimates of the economic value of these particular pork traits. Going a step beyond traditional approaches, the effects of socioeconomic variables on an attribute's economic value are also considered.