Geographical indications and organic labels: complements or substitutes? - the case of online rice consumption in China

Abstract

ABSTRACT Agricultural producers are increasingly adopting a multi-certification approach for their agricultural products, which includes designations such as organic and geographical indications, instead of relying solely on a single certification. This inclination towards multiple certifications predominantly stems from a desire to optimize profits. Nevertheless, the ultimate profitability for producers hinges on whether consumers are genuinely inclined to pay a premium for these recognized certifications. This study employed the hedonic model to estimate consumers’ willingness to pay for the geographical indication and organic label in China and their interaction effect, focusing on rice as the product of interest. We collected data from one e-commerce platform in China, JD.com, and developed a dataset with 2484 observations based on the actual transaction price. The results reveal that Chinese consumers exhibit positive and significant price premiums for products with geographical indications, regardless of whether they are well-known or normal geographical indications. Furthermore, our findings suggest that the organic and geographical indication labels function as substitutes rather than complements. This underscores the importance of government efforts to intensify promotion, emphasizing the unique attributes of these labels and accentuating their differences.