How much trustworthy and salubrious an organic jam should be? The impact of organic logo on the Italian jam market

Abstract

This paper studies the impact of organic logo in the Italian jam market. Using data on true sales in Italian supermarkets in the 2002–2004 period we estimate the structural demand model developed by Berry (1994). This approach allows us to solve potential endogeneity problem in the estimation of the price coefficient in the demand equation, as well as other aspects related to multiple sources of differentiation. In a market where 62 percent of organic jams are diet this approach allows us to identify separately the market power induced by the organic logo and by the low content of sugar. The estimation results from various specifications of GEV class of models show that the organic attribute guarantees a degree of market power greater than the diet attribute. However, the protection from competition entailed by the organic logo is not particularly strong, and the diet attribute does not guarantees additional protection to organic jams. Most importantly, our findings show that consumers trust more big organic producers thus suggesting important policy implications on the supply and marketing side of the jam market.