Abstract
Using retail purchase data reported by Nielsen’s Homescan panel this study investigates the U.S. demand for organic and conventional fresh fruits. The study fills an important research void by estimating the much needed income and price elasticities for organic and conventional fruits utilizing a censored demand approach. Household income is found to affect organic fruit consumption. Consumers are more responsive to price of organic fruits than to price of conventional fruits. Cross-price effects suggest that a change in relative prices will more likely induce consumers to “cross-over” from buying conventional fruits to buying organic fruits, while it is less likely that organic consumers will “revert” to buying conventional fruits.
Highlights
Demand for food and agricultural products increases as our population continues to grow and expand
There is a widespread belief that organic food is substantially healthier and safer than conventional food, and these notions are fundamental for consumers‘ purchasing of and their willingness to pay price premiums for organics [2,3,4,5]
The results suggest that consumers are more likely to substitute organic fruits for conventional fruits than the other way around
Summary
Demand for food and agricultural products increases as our population continues to grow and expand. American consumers have been willing to pay price premiums of at least 20 to 60 percent for organic produce [7] to help make organic agriculture economically viable. In his review of organic demand literature, Thompson [11] concluded that ―Attitudes, motives, and willingness to pay for organic products have been measured, but apparently no retail data have been available to estimate own-price, cross-price, and income elasticities.‖. In 2007, fruits and vegetables by far comprised the largest retail sales value, accounting for 37 percent of the total organic food sector ($6.9 billion out of $18.9 billion) [1]. It is important to point out that our findings of the changes in consumers‘ demand for fresh organic and conventional fruits under different income and price conditions may or may not apply to other organic food sectors
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