Brenna Ellison, Barrett Kirwan, and Atul Nepal

1. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
The Economics and Marketing of Bioplastic
Containers
Brenna Ellison, Barrett Kirwan, and Atul Nepal
October 29, 2015
Ellison, Kirwan, Nepal Economics and Marketing of Biopots October 29, 2015 1 / 34

2. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Outline
1 Introduction
2 Cost-benefit Analysis
3 Food-market impacts
Proportion of world soy and corn production
4 Consumers’ WTP
Preliminary intercept survey
Moms’ day sale
Farmers’ market
5 Producers’ WTP
Producer Survey
6 Conclusions
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3. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Funding agency’s objective
One of SCRIs 2011 stakeholder priorities is “improving understanding
of environmental, economic, and social implications of specialty crop
production, processing, distribution, and marketing through the
application of Life Cycle Assessment or other methods of
systems-based analysis.”
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4. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Goals of cost-benefit analysis
• Compare projects
• Choose the most profitable projects
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5. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
The fallacies of cost-benefit analysis
1 The chain-reaction game
• Secondary benefits vs. secondary losses
2 The regional multiplier game
• Keynesian-type multiplier is simply irrelevant to the
fundamental goal of cost-benefit analysis
3 The labor game
• Can only count labor that would otherwise be unemployed
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6. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Direct annual savings
Saving Items Lower Bound Upper Bound
Recycling Costs $ 180,000,000.00 $ 180,000,000.00
Transportation Costs $ 15,000,000.00 $ 52,500,000.00
Fertilizer Reduction (50-80%) $ 90,000,000.00 $ 232,500,000.00
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7. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Proportion of world soy and corn production
Total bushels required to produce 4 billion pots
Biopots Corn Use (Bushels) Soybean Use (Bus
PLA-Biores(80/20) 58,928,571
PLA-Soy-BioRes (50/30/20) 36,830,357 63,706,780
PLA-Soy-BioRes (55/35/10) 40,513,393 74,324,576
PLA-Soy(60/40) 44,196,429 84,942,373
PLA-Lignin (90/10) 66,294,643
PHA-DDGs (80/20) 78,226,817
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8. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Proportion of world soy and corn production
Percent of world corn and soybeans used to
produce 4 billion pots
Biopots Corn Soybeans
PLA-Biores(80/20) 0.153%
PLA-Soy-BioRes (50/30/20) 0.096% 0.544%
PLA-Soy-BioRes (55/35/10) 0.105% 0.634%
PLA-Soy(60/40) 0.115% 0.725%
PLA-Lignin (90/10) 0.173%
PHA-DDGs (80/20) 0.204%
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9. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Proportion of world soy and corn production
Impact on world commodity prices
Corn Soybeans
Lower Bound Price Effect 0.404% 0.633%
Upper Bound Price Effect 2.289% 2.254%
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10. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Preliminary intercept survey
Setting
ExplorACES: open house on freshmen campus visit day
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11. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Preliminary intercept survey
The survey
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12. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Preliminary intercept survey
Results
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13. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Moms’ day sale
Dutch auction: tomatoes
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14. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Moms’ day sale
Overall price sensitivity
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15. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Farmers’ market
Setting
• Urbana, IL farmers’ market, Fall 2014
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16. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Farmers’ market
Experimental design—Setup
1 Participants were given a Maranta or Dracaena in a 4.5-inch
traditional petroleum-plastic pot
2 Plant was theirs to keep
3 Have a chance to purchase one of the bioplastic-pot prototypes
4 If they won the auction, a member of the research team would
transplant their free plant into the appropriate bioplastic pot to
take home
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17. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Farmers’ market
Experimental design—Auction
1 Roll two dice to randomly select two of the six different bio-pots
2 We provided information cards describing the pots & the
participant was given the opportunity to physically examine them
3 Bid their willingness to pay for each pot
4 We bounded bids to be between $0 and $2
5 Participants rolled a single die; an odd number would make the
bid for the first pot binding and an even number would make the
bid for the second pot binding
6 Binding bid was compared to a randomly drawn price, and in the
cases where the participants bids were higher than the price
drawn, the participants paid the price drawn and the research
team transplanted their plants to the relevant bio-pot.
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18. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Farmers’ market
Participant characteristics
Table: Summary of Consumer Characteristics—Demographics
Variable Description Sample Proportion (%)
Gender Female 65.31
Male 34.69
Age 18-24 30.61
25-35 26.53
35-44 12.24
45-54 12.24
55-64 10.2
65 or above 8.16
Highest Education Some High School 1.02
GED/High School diploma 2.04
Some College 22.45
Associates/Technical degree 6.12Ellison, Kirwan, Nepal Economics and Marketing of Biopots October 29, 2015 18 / 34

19. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Farmers’ market
Participant characteristics—income
Table: Summary of Consumer Characteristics—Demographics
Variable Description Sample Proportion (%)
Annual Income in dollars 0-24,999 36.08
25,000-49,999 17.53
50,000-74,999 16.49
75,000-99,999 13.4
100,000-124,999 7.22
125,000-149,999 5.15
150,000+ 4.12
Resident Status Own House 46.94
Rent House 16.33
Rent Apartment 30.61
Other 6.12
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20. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Farmers’ market
Distribution of willingness to pay
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21. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Farmers’ market
Bids
Table: The premium consumers are willing to pay for bioplastic pots (in
dollars)
Pot Type Mean Std.
Dev.
N
PLA/Soy 1.123 0.585 26
PLA/BioRes 1.051 0.656 42
PLA/Lignin 0.669 0.626 31
Recycled PLA 0.862 0.624 33
PHA/DDGS 1.015 0.615 33
Paper Fiber (Polyurethene coated) 0.76 0.618 31
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22. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Farmers’ market
Pot Characteristics
Table: Pot Characteristics
Pot Type Improves
Plant
Health
BiodegradableSoil
Residue
in 2
Years
PLA/Soy 1 1 1
PLA/BioRes 1 1 0
PLA/Lignin 0 0 1
Recycled PLA 0 0 1
PHA/DDGS 0 1 0
Paper Fiber (Polyurethene coated) 0 1 1
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23. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Farmers’ market
The Value of Pot Characteristics
Table: Regression analysis of consumer and pot characteristics for
bioplastic pots
Variables Bid
Improves Plant Health 0.178
(0.110)
Biodegradable 0.0754
(0.125)
Soil Residue in 2 Years -0.0917
(0.111)
Observations 196
R2
0.044
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24. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Farmers’ market
Consumer Characteristics
Table: Regression analysis of consumer and pot characteristics for
bioplastic pots
Variables Bid
Male -0.0904
Annual Income ($) 25,000–49,999 0.270*
50,000–74,999 0.103
75,000–99,999 0.184
100,000–124,999 -0.125
125,000–149,999 0.439*
150,000+ 0.220
Resident Status Rent House 0.195
Rent Apartment 0.418**
Other 0.521**
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25. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Farmers’ market
Consumer Characteristics
Table: Regression analysis of consumer and pot characteristics for
bioplastic pots
Variables Bid
Purchase Plant Once a year 0.278*
2 times a year 0.166
3–5 times a year 0.247
6 or more times a year -0.605***
Reusable Bags Rarely -0.736***
Sometimes -0.866***
Often -0.861***
Always -0.686***
Compost Waste Rarely 0.238*
Sometimes 0.215
Often 0.209Ellison, Kirwan, Nepal Economics and Marketing of Biopots October 29, 2015 25 / 34

26. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Online survey instrument
Producers Survey
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27. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Producer Survey
1
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28. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Producer Survey
2
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29. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Producer Survey
3
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30. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Producer Survey
4
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31. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Producer Survey
5
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32. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Producer Survey
6
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33. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Producer Survey
7
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34. Introduction Cost-benefit Analysis Food-market impacts Consumers’ WTP Producers’ WTP Conclusions
Conclusions
• Impact on the price of food/feed commodities: 0.4–2.3%
• Consumers exhibited a willingness to pay a $0.67–$1.12 premium
for a bioplastic pot over a traditional plastic pot
• Consumers most value a bioplastic pot that improves plant
health and biodegrades relatively quickly
• Consumers care about aesthetics
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