The Price Relationship between Organic and Non-Organic Vegetables in the U.S.: Evidence from Nielsen Scanner Data

Abstract

This study investigates price relationships between organic and conventional carrots, tomatoes, and lettuce in the U.S. utilizing Nielsen scanner data from 2006 to 2015. We employ a threshold vector error correction model (TVECM), threshold vector autoregressive model (TVAR), and threshold cointegration test to test whether market integration exists between organic and conventional vegetables as well as the existence of asymmetric price transmission. The results find positive long-run relationships between organic and conventional prices of carrots and tomatoes and show the existence of asymmetric price transmission in price pairs of lettuce and tomatoes. Our findings suggest that the price relationship between organic and conventional vegetables varies by characteristics, such as shelf life and volatility in the price premium. Furthermore, the results indicate that consumers in the U.S. recognize organic and conventional carrots and tomatoes as partially substitutable goods, while U.S. consumers consider organic and conventional lettuces as different goods (no cross-price relationship).