Thesis Defense Presentation FINAL
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Thesis Defense Presentation FINAL
- 1. Jonathan Adam Watson Dr. Allen Wysocki Dr. Michael Gunderson Food & Resource Economics Department Dr. Jeff Brecht Horticultural Sciences Department University of Florida
- 2. Current shipping methods make it more difficult for handlers to successfully ship fruits and vegetables, such as pears, at their peak maturity or ripeness. 7.1 7.4 5.4 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 Pounds-FarmWeight Total Per Capita U.S. Pear Consumption Total
- 5. Stemilt Growers Inc. Pears sizes are given in accordance to how many pears of a given size can fit in a traditional 44 pound corrugated cardboard container. This experiment used size “80” fresh Bartlett pears.
- 6. Photo taken October 25th, 2011
- 7. Bulk Pack Hammock Pack Photos taken October 25th, 2011 Bartlett Pears Upon Arrival at UF Sensory Lab Treatment 3 6 lbs.
- 8. Determine consumers’ appearance preferences. Determine consumers’ WTP. Determine how changes in sensory ratings affect WTP. Determine the break-even price.
- 9. Bartlett pears shipped in hammock packs are more protected. Consumers are willing to pay premiums. 𝑯 𝟎: 𝑾𝑻𝑷 > 𝑴𝒂𝒓𝒌𝒆𝒕 𝑷𝒓𝒊𝒄𝒆 𝑯 𝟏: 𝑾𝑻𝑷 ≤ 𝑴𝒂𝒓𝒌𝒆𝒕 𝑷𝒓𝒊𝒄𝒆 Bartlett pears shipped in hammock packs yield a positive ROI.
- 10. Increase consumer demand. Price premiums. Reduce losses and/or increase efficiency. Value must be created for consumers. ◦ Product Differentiation & Branding.
- 11. Both quantitative and qualitative losses occur in horticultural commodities between harvest and consumption. (Shewfelt & Prussia, 1993) External attributes such as size, grade, cultivars and reputation are important determinants of price. (Tronstad, 1990) Optimal quality characteristics are associated with willingness to pay for premiums in fruit. (McCluskey, 2007). There are many postharvest technologies that extend the marketable life of fruits and vegetables. (Kader, 2006)
- 12. Data Collection Data Analysis Conjoint Analysis Econometric Modeling Break-Even Analysis
- 13. 6 lbs. Firmness Treatment 99 Participants Day 2 8 lbs. Firmness Treatment 88 Participants
- 14. Hammock Pack, Hammock Pears Vs. Tray, Hammock Pears Hammock Pack, Hammock Pears Vs. Tray, Bulk Pears Tray, Hammock Pears Vs. Tray, Bulk Pears Dislike Extremely Dislike Very Much Dislike Moderately Dislike Slightly Neither Like nor Dislike Like Slightly Like Moderately Like Very Much Like Extremely 1 2 3 4 5 6 7 8 9 1 2 3
- 16. Age Under 18 18-29 30-44 45-65 Over 65 Total Male 1 32 6 1 1 41 Female 2 54 2 0 0 58 TOTAL 3 86 8 1 1 99 41% 59% Day 1 - Gender Male Female 2 54 2 0 0 Under 18 18-29 30-44 45-65 Over 65 Female Female 1 32 6 1 1 Under 18 18-29 30-44 45-65 Over 65 Male Male
- 17. Age Under 18 18-29 30-44 45-65 Over 65 Total Male 2 25 3 3 1 34 Female 0 51 1 2 0 54 TOTALS 2 76 4 5 1 88 39% 61% Day 2 - Gender Male Female 0 51 1 2 0 Under 18 18-29 30-44 45-65 Over 65 Female Female 2 25 3 3 1 Under 18 18-29 30-44 45-65 Over 65 Male Male
- 18. Hammock Pack, Hammock Pears vs. Tray, Hammock Pears Sample 1 – Hammock Pack, Hammock Pears. Sample 2 – Tray, Hammock Pears. Day 1 – 6 lb. Firmness Pears. Day 2 – 8 lb. Firmness Pears. Participants ◦ Rate pears on APPEARANCE ONLY. ◦ State Preferred Choice. ◦ State WTP.
- 19. 6 lbs. Firmness Pears 8 lbs. Firmness Pears Hammock Pack, Hammock Pear Tray, Hammock Pear Hammock Pack, Hammock Pear Tray, Hammock Pear Mean ***6.43 ***4.85 ***6.43 ***4.67 Standard Error 0.12 0.16 0.15 0.18 Median 7.00 5.00 7.00 4.50 Mode 7.00 4.00 7.00 4.00 Standard Deviation 1.19 1.64 1.49 1.76 Sample Variance 1.43 2.71 2.22 3.12 Note: (*, **, ***) represent statistical significance at the 10%, 5% and 1% levels, respectively.
- 20. 86% 14% 6 lb. Firmness Pears Participant Preferences Hammock Pack, Hammock Pears Tray, Hammock Pears 90% 10% 8 lb. Firmness Pears Participant Preferences Hammock Pack, Hammock Pears Tray, Hammock Pears
- 21. 6lbs. Firmness Pears 8 lbs. Firmness Pears Hammock Pack, Hammock Pear Tray, Hammock Pear Hammock Pack, Hammock Pear Tray, Hammock Pear Mean ***$1.77 ***$1.46 ***$1.66 ***$1.22 Standard Error 0.08 0.07 0.01 0.05 Median $1.69 $1.40 $1.67 $1.22 Mode $1.69 $1.69 $1.69 $1.00 Standard Deviation 0.83 0.76 0.66 0.47 Sample Variance 0.69 0.58 0.43 0.22 Note: (*, **, ***) represent statistical significance at the 10%, 5% and 1% levels, respectively.
- 22. Hammock Pack, Hammock Pears vs. Tray, Bulk Pears Sample 1 – Hammock Pack, Hammock Pears. Sample 2 – Tray, Bulk Pears. Day 1 – 6 lbs. Firmness Pears. Day 2 – 8 lbs. Firmness Pears. Participants ◦ Rate pears on APPEARANCE ONLY. ◦ State Preferred Choice. ◦ State WTP.
- 23. 6 lbs. Firmness Pears 8 lbs. Firmness Pears Hammock Pack, Hammock Pear Tray, Bulk Pears Hammock Pack, Hammock Pear Tray, Bulk Pears Mean ***6.39 ***3.85 ***6.52 ***3.65 Standard Error 0.13 0.19 0.15 0.17 Median 7.00 4.00 7.0 3.50 Mode 7.00 2.00 7.0 4.00 Standard Deviation 1.26 1.89 1.42 1.57 Sample Variance 1.59 3.58 2.02 2.46 Note: (*, **, ***) represent statistical significance at the 10%, 5% and 1% levels, respectively.
- 24. 94% 6% 6 lb. Firmness Pears Participant Preferences Hammock Pack, Hammock Pears Tray, Bulk Pears 95% 5% 8 lb. Firmness Pears Participant Preferences Hammock Pack, Hammock Pears Tray, Bulk Pears
- 25. 6lbs. Firmness Pears 8 lbs. Firmness Pears Hammock Pack, Hammock Pear Tray, Bulk Pears Hammock Pack, Hammock Pear Tray, Bulk Pears Mean $1.77 $1.13 $1.65 $1.01 Standard Error 0.05 0.07 0.07 0.06 Median $1.69 $1.00 $1.67 $1.00 Mode $1.69 $1.00 $1.69 $1.69 Standard Deviation 0.85 0.69 0.66 0.59 Sample Variance 0.72 0.47 0.43 0.35 Note: (*, **, ***) represent statistical significance at the 10%, 5% and 1% levels, respectively.
- 26. Tray, Hammock Pears vs. Tray, Hammock Pears ½ Pear per sample. ◦ Day 1 – 6 lb. Firmness Pears ◦ Day 2 – 8 lb. Firmness Pears. Sensory Attributes: ◦ Overall Appearance ◦ Overall Aroma ◦ Overall Acceptability ◦ Overall Flavor ◦ Firmness Interaction Terms ◦ Treat3 ◦ Package
- 27. 𝑾𝑻𝑷𝒊 = 𝜷 𝟎 + 𝜷 𝟏 𝑨𝒑𝒑𝒆𝒂𝒓𝒂𝒏𝒄𝒆𝒊 + 𝜷 𝟐 𝑨𝒓𝒐𝒎𝒂𝒊 + 𝜷 𝟑 𝑨𝒄𝒄𝒆𝒑𝒕𝒂𝒃𝒊𝒍𝒊𝒕𝒚𝒊 + 𝜷 𝟒 𝑭𝒍𝒂𝒗𝒐𝒓𝒊 + 𝜷 𝟓 𝑭𝒊𝒓𝒎𝒏𝒆𝒔𝒔𝒊 + 𝜷 𝟔 𝑻𝒓𝒆𝒂𝒕𝟑𝒊 + 𝜷 𝟕 𝑷𝒂𝒄𝒌𝒂𝒈𝒆𝒊 + 𝜺𝒊 𝑾𝑻𝑷𝒊 Participant Willingness to pay 𝑨𝒑𝒑𝒆𝒂𝒓𝒂𝒏𝒄𝒆𝒊 Overall appearance 𝑨𝒓𝒐𝒎𝒂𝒊 Overall aroma 𝑨𝒄𝒄𝒆𝒑𝒕𝒂𝒃𝒊𝒍𝒊𝒕𝒚𝒊 Overall acceptability 𝑭𝒍𝒂𝒗𝒐𝒓𝒊 Overall flavor 𝑭𝒊𝒓𝒎𝒏𝒆𝒔𝒔𝒊 Firmness (Hedonic scale 1-5) 𝑻𝒓𝒆𝒂𝒕𝟑𝒊 Treatment 3 6 lb. firmness pears (1=yes, 0=no) 𝑷𝒂𝒄𝒌𝒂𝒈𝒆𝒊 Hammock packaged pears (1=yes, 0=no)
- 28. WTP Linear Robust Regression Estimates Variable Parameter p-value Intercept *0.2385 0.0334 Appearance 0.0151 0.2282 Aroma 0.007 0.6458 Acceptability *0.0675 0.0026 Flavor *0.0746 0.0001 Firmness *0.0487 0.0473 Treat3 0.0208 0.5489 Package -0.0043 0.9012 R-Squared 0.1972 *Denotes significance at α=0.05
- 29. Case Weekly FOB Total Total Weekly Cases Loads Frt Weekly Transp Transp Total Pack Case Unit Box Cost Cost Product Per Per Rate Trans Cost Cost Weekly Volume Cost Cost Per Pear Per lb. Cost Load Week PrLd Cost Pr Cs Per Pear Cost 90 N 717 $22.88 $0.95 $0.254 $0.520 $16,396 869 0.82 $5,500 $4,537 $6.33 $0.0703 $20,933 fruit/ case Iced? 44 lb. Tightfill Corrugated Boxes Product Cost Transportation Cost Case Weekly FOB Total Total Weekly RPCs Loads Cost Weekly Transp Transp Total Pack Case Unit RPC Cost Cost Product Per Per Per Trans Cost Cost Weekly Volume Cost Cost Per Pear Per lb. Cost Load Week Load Cost Pr RPC Per Pear Cost * 72 D N 896 $23.37 $0.95 $0.325 $0.618 $20,932 950 0.94 $5,500 $5,187 $5.79 $0.0804 $26,120 fruit/ case Iced? 38 lb. Hammock Pack RPCs 3-Layer Product Cost Transportation Cost Weekly Annual Volume Volume In LBS In LBS 64,500 3,354,000 Courtesy of The Kroger Company
- 30. Weekly Annual Volume Volume In LBS In LBS 64,500 3,354,000 Annual Annual Annual Annual Cases Product Trans Total + or- (Cost) or (Cost) or (Cost) or RPC vs Bx Savings Savings Savings 9,317 ($235,887) ($33,826) ($269,713) Increased Cost: $0.08/lb. Participants were told the market price was $1.69/lb. Results showed participants were WTP up to $1.77/lb. WTP Premium: $0.08/lb.
- 31. Sample bias. Who is going to capture the revenues and how do we model that in our system. Value might not be seen until later in the process. How do we account for this in the ROI model. Would retailers be willing to pay more. Economies of Scale. Where do we calculate ROI? ◦ Packers, Distributors, Retailers? Concept of the Value-Chain.
- 32. Who captures the benefit of new technologies and at what stage in the supply chain? ◦ Manufacturers? ◦ Packagers? ◦ Wholesalers? ◦ Retailers? Other variables in the ROI model to include. ◦ Shrinkage ◦ Transportation Costs ◦ Equipment etc. How have revenues increased/decreased? How have expenses decreased/increased? What is the effect on demand from adoption. Implications for players in the supply chain.
Editor's Notes
- Good afternoon everyone, thank you for your audience. I would like to begin by thanking all in attendance, especially the members of my committee, Dr. Allen Wysocki, Dr. Michael Gunderson and Dr. Jeff Brecht from the Horticultural Sciences Department. I would also like to thank all collaborators from the USDA Specialty Crops Project. It is a pleasure to see you all here today. Let’s talk a little about packaging. Hammock Packing for Specialty Crops: A Study Using Fresh Bartlett Pears.
- Current shipping methods make it more difficult for handlers to successfully ship fruits and vegetables at their peak maturity and ripeness. Data shows that consumers are unhappy with the quality of fresh pears in the marketplace, in terms of taste, appearance and aroma. As a result total per capita consumption of pears in the United States has decreased 31% from 7.1 pounds to 5.4 pounds from 1976 to 2008 while consumption of other fruits has increased over the same time period. It appears that marketing campaigns and the promotion of health benefits have had little effect at increasing. There must be some reason why this occurs.
- Careful analysis of the distribution channel for fresh pears may reveal opportunities and expose weaknesses. Let’s begin by looking at how pears move through the chain. In many cases, the fresh pear distribution channel starts with the grower/packer, moves to the shipper, then wholesaler, retailer and finally to the end consumer. However, the distribution channel can also move in various other ways. For example, a grower/packer could sell directly to a retailer or consumer or the grower/packer may sell only to a shipper who then distributes the product through an assortment of channels.
- Traditionally, pears have been bulk packed. In bulk packing, corrugated cardboard boxes are filled in a variety sizes at the customers requests. Pears are fit in tight fill boxes or placed on trays and can be wrapped or left unwrapped.
- Traditionally, pears are shipped in the standard 44 pound corrugated cardboard containers, or 4/5 box. Pear sizes are given in accordance to how many pears can fit into this standard size. The smaller the count size number, the larger the pear and vice versa. Unfortunately, these types of delivery systems provide minimal protection against damage to the fruit. Oftentimes, the product ends up with bruises, abrasions and potential rot as pictured above. These types of boxes are also not ideal for stacking and can cause the walls of the box to collapse, further damaging the product from the weight above. Click * For the sensory panel, size “80” fresh Bartlett pears were used, which have an approximate diameter of 3.00” and individually weigh 9.3 oz. *Click However, much of the financial analysis used size “90” pears.
- An alternative delivery system may prove beneficial in supplying higher quality, consistently great tasting produce which can result in increased consumer satisfaction and confidence. This should ultimately lead to higher sales and greater profitability in the supply chain. The hammock pack system is comprised of a polyethylene terephthalate thermoplastic polymer clamshell container with a removable insert. The insert can be removed and replaced with various sizes and shapes, therefore the container is very adaptable and versatile. These 6-count packages can be placed 8 at a time stacked in 2-layers inside corrugated cardboard produce Euro boxes. The hammock pack system can also fit into a 2-layer or 3-layer RPC configuration, depending on the demands of the customer. Polyethylene terephthalate (sometimes written poly(ethylene terephthalate)), commonly abbreviated PET, PETE, or the obsolete PETP or PET-P, is a thermoplastic polymer resin of the polyester family and is used in synthetic fibers; beverage, food and other liquid containers; thermoforming applications; and engineering resins often in combination with glass fiber. The term polyethylene terephthalate is a source of confusion because this substance, PET, does not contain polyethylene. Thus, the alternate form, poly(ethylene terephthalate), is often used in scholarly journals for the sake of accuracy and clarity
- So in comparison… Bulk boxes hold upwards of 75-80 fruit (size ’80’) vs. hammock packs placed into a 3-layer RPC which can hold 12 (six-pack) hammock packs or 72 fruit. Pears shipped in tightfill boxes are more susceptible to bruising during transportation while hammock packed fruit are more secure. Pears shipped in tightfill boxes not be ready-to-eat at PoS while hammock packed pears are ready-to-eat at PoS.
- This study has 4 main objectives. Determine consumer’s preference, based on appearance, for fresh mature Bartlett pears in two packaging formats. Bulk and hammock packs. Determine consumer’s willingness to pay for fresh Bartlett pears packaged in bulk and hammock packs. Determine how changes in panel participant’s sensory ratings of fresh Bartlett pears affect WTP. Determine the break-even price for utilizing hammock packaging in fresh Bartlett pears. This will help us determine if hammock pack systems provide a positive ROI.
- Bartlett pears shipped in hammock packs are more protected than bulk pears and consumers perceive this as higher quality in terms of taste, appearance and aroma. Consumers are willing to pay premiums for pears that are more protected and perceived to be of higher quality in terms of taste, appearance and aroma. Bartlett pears shipped in hammock packs yield a positive return on investment for producers, packers & shippers, wholesalers and retailers.
- Increase consumer demand by offering a higher quality product with attributes that consumers prefer. We would expect to see price premiums translate to higher returns for all players in the supply chain. Participant’s must receive premiums for utilizing hammock packs because there will be increased costs associated with their use. Therefore there must be an incentive for participants to adopt this technology. Reduce losses and/or increase efficiency while improving preferred attributes such as quality of flavor and appearance. A reduction in losses and/or an increase in efficiency from a qualitative and quantitate standpoint should result in fewer losses financially. What are any residual effects from adopting these technologies? i.e. increases in efficiency? Changes in shrink? Finally, value must be created for the consumer or else they will not be able to distinguish any difference. Product differentiation, such as branding is one possible strategy, but we must be careful on the wording that we use.
- Both quantitative and qualitative losses occur in horticultural commodities between harvest and consumption. (Shewfelt & Prussia, 1993) There are many postharvest technologies that extend the marketable life of fruits and vegetables. However, some of these technologies do not have a positive return on investment (ROI) due to the large capital investments needed for their implementation and/or the increasing competition related to globalization of produce marketing. (Kader, 2006) Several studies have also shown that optimal quality characteristics, defined by consumers, are associated with willingness to pay for premiums in fruit (McCluskey, Mittelhammer, Marin, & Wright, 2007
- A survey was used to collect sensory attribute information regarding individual consumer’s preference for fresh Bartlett pears. That information was analyzed using techniques such as descriptive statistics, t-tests and hypothesis testing. Conjoint analysis will be used to determine how people value different features of fresh Bartlett pears. An econometric linear model will be used to estimate the parameters of the sensory attributes to determine their individual effect on consumers’ WTP. Ultimately, we will use this model to determine how changes in participants’ sensory ratings affect WTP. Finally, we can perform a break-even analysis by comparing the increase in costs/lb. relative to participants’ WTP.
- Our first set of data comes from the sensory panel conducted in October. We used 2 treatments in total and split the sensory panel among the treatments for Day 1 with 6 lb. firmness level pears and Day 2 with 8 lb. firmness level pears. These firmness level measurements refer the force it takes (measured in pounds) to puncture the scored flesh of the fruit with an instrument known as a pentrometer
- The survey instrument for the sensory panelists is essentially broken down into 3 main sections when comparing the pears for preferred attributes. Therefore we will present our results in that manner. *Click -The first set of questions are related to the appearance of fresh Bartlett pears in a hammock pack system compared to identical hammock pears removed from their containers and placed on a tray. Pears placed on a tray represent how consumers normally view pears. The participants are asked to rate the appearance on a 9-point hedonic scale, provide their preferred choice and state their WTP based on appearance for both samples. We used $1.69/lb. as a reference point for price. In a way, because the pears are identical, this test measures the premium participants place on the hammock package itself. *Click *Click - In the second set of questions those same hammock packed pears are then compared to bulk pears, which were shipped in the traditional method, but also placed on a tray. Again, participants are only being asked to rate the pears based on appearance by using a 9-point hedonic scale. They are also asked to state their preferred choice and provide their WTP based on for both samples. *Click *Click – In the final comparison hammock packed pears are removed from their containers and placed in a serving cup alongside a bulk pear. One pear from each sample is cut in half and the participants receive ½ of each pear; they do not know which pear they have and blinding codes are used to identify the samples. The participants are then asked to rate the samples on overall appearance, aroma, acceptability, flavor and firmness This last comparison will help us identify how the individual sensory attributes affect WTP *Click
- Based on initial demographics from Day 1, of the 99 participants, 41% were male and 59% were female. Of all males, 1 was under the age 18, 32 were between 18-29, 6 were between 30-44, 1 was between 45-65, and 1 was over 65. Of all females, 2 were under 18, 54 were between 18-29, 2 were between 30-44 and no participants over age 44 participated in this panel.
- Unsurprisingly, day 2 demographics showed very similar results. 39% of respondents were Males while 61% were Females. Of all males, 2 were under 18, 25 were between 18-29, 3 were between 30-44, 3 were between 45-65 and 1 was over 65. Of all females, none were under 18, 51 were between 18-29, 1 was between 30-44, 2 were between 45-65 and there were no Females over 65.
- In paired comparison 1 we wanted to see how the packaging influences participants sensory ratings and WTP. Because the pears are identical, we can compare the differences between the samples on each day. The differences between the mean responses for each sample reveal how the packaging effects consumers preferences in terms of overall appearance.
- These are the descriptive statistics for the hedonic responses based on appearance for Hammock Pack, Hammock Pear vs. Tray, Hammock Pear. Again, in this first paired comparison, we are comparing identical pears presented in different packaging formats. For both treatments, participants overwhelming rated the hammock pack, hammock pears higher than the hammock pears presented on the tray. *Note - These differences were statistically significant at alpha=0.01
- Considering the mean ratings for overall appearance, it should come as no surprise that a majority of participants preferred the hammock package system over the traditional loose pears. On day 1 86% of the participants preferred the hammock packed pears while 90% preferred the hammock packed pears on day 2.
- These are the descriptive statistics for WTP based on appearance for Hammock Pack, Hammock Pear vs. Tray, Hammock Pear. Predictably, participants stated they would be WTP more for the hammock packaging. For the 6 lb. and 8 lb. pears there was a difference of $0.31/lb. and $0.44/lb. respectively. At the 6lb. firmness level participants were WTP a premium of $0.08/lb. for hammock packaged pears while the 8 lb. pears were discounted by $0.03/lb. *Note - These differences were statistically significant at alpha=0.01
- In paired comparison 2 we wanted to see how the packaging influences participants sensory ratings and WTP when compared to a different product. Similarly, we can compare the differences between the samples on each day. The differences between the mean responses for each sample reveal how the packaging effects consumers preferences in terms of overall appearance.
- These are the descriptive statistics for the hedonic responses based on appearance for Hammock Pack, Hammock Pear vs. Tray, Bulk Pear. Once again, participant’s rated the hammock packaged pears higher than the bulk pears. However, it is interesting to note that on both days pears shipped in the traditional method and displayed on a tray, scored much lower than their hammock pear counterpart. This indicates that the participants recognized higher quality in the appearance of the hammock pears themselves and not just the packaging.
- Again, it should not be surprising that participants preferred the hammock packaged pears. 94% of participants preferred hammock pears on day 1 while 95% preferred the hammock pears on day 2.
- Here are the descriptive statistics for WTP based on appearance for Hammock Pack, Hammock Pear vs. Tray, Bulk Pears. Similarly, participants stated they would be WTP more for the hammock packaged pears. On day 1 and day 2 there was a difference of $0.64/lb. at both firmness level. Also, as in paired comparison 1, participants stated they would be WTP a premium of $0.08/ lb. for 6 lb. firmness level pears.
- In paired comparison 3, we were interested in seeing how individual sensory attributes contribute to WTP. In this comparison, we have the participants evaluate the hammock-shipped pears and bulk pears without them viewing any packaging. A linear regression model was used to see how WTP will change as the sensory rating increase by 1.
- The proposed model includes an intercept, 5 independent variables, 2 dummy variables and measures their affect on consumers’ WTP. The Treat3 variable denotes the treatment that was used, either 6 lbs. firmness pears or 8 lbs. firmness pears which are the pears individual firmness levels chosen at the start of the study. The Package variable denotes whether the sample was a hammock packaged pear. Both Treat3 and Package are treated as dummy variables and are included in the model because they have the ability to act as interaction terms and can ultimately effect the independent variables simultaneously and/or independently. An overall test of significance was conducted to determine if they have any significant effect on WTP. STOP!!!! Why Robust Regression? Heteroscedastic errors One instance in which robust estimation should be considered is when there is a strong suspicion of heteroscedasticity. In the homoscedastic model, it is assumed that the variance of the error term is constant for all values of x. Heteroscedasticity allows the variance to be dependent on x, which is more accurate for many real scenarios. For example, the variance of expenditure is often larger for individuals with higher income than for individuals with lower incomes. Software packages usually default to a homoscedastic model, even though such a model may be less accurate than a heteroscedastic model. One simple approach (Tofallis, 2008) is to apply least squares to percentage errors as this reduces the influence of the larger values of the dependent variable compared to ordinary least squares. [edit]Presence of outliers Another common situation in which robust estimation is used occurs when the data contain outliers. In the presence of outliers that do not come from the same data-generating process as the rest of the data, least squares estimation is inefficient and can be biased. Because the least squares predictions are dragged towards the outliers, and because the variance of the estimates is artificially inflated, the result is that outliers can be masked. (In many situations, including some areas ofgeostatistics and medical statistics, it is precisely the outliers that are of interest.) Although it is sometimes claimed that least squares (or classical statistical methods in general) are robust, they are only robust in the sense that the type I error rate does not increase under violations of the model. In fact, the type I error rate tends to be lower than the nominal level when outliers are present, and there is often a dramatic increase in the type II error rate. The reduction of the type I error rate has been labelled as the conservatism of classical methods. Other labels might includeinefficiency or inadmissibility.
- From our results we can see how changes in participants sensory ratings affect their stated WTP as measured in $/lb. Of the variables in the model, Overall Acceptability, Overall Flavor and Overall Firmness were statistically significant at alpha=0.05 and they had the largest impact on WTP of all variables. Our r-square tells us that almost 20% of the variation in WTP can be explained by the variation in our independent variables. When tested for overall significance, we failed to reject the null hypotheses that the parameters for Treat3 and Package were simultaneously equal to zero. Therefore, we can determine that they had no effect as intervening variables.
- Using a spreadsheet we can begin to compare costs for both packaging configurations, as seen by the retailer. We will compare the traditional 44 lb. tightfill configuration to a 3-layer RPC with a net weight of approximately 38 lbs.*Click Unsurprisingly, the 44 lb. tightfill configuration has lower total costs because the hammock package configuration requires more packaging and more labor despite a lower per case fruit cost. *Click However, this comparison is assuming that weekly volume does not change and in reality this may not be the case. We can assume that if the increased costs per pound do not exceed consumer WTP, the hammock package can produce a positive return on investment.
- So to quickly compare return on investment potential, we begin by looking at how total annual costs have increased, and divide that estimate by total annual volume as measured in lbs. This will tell us how costs have increased per pound. We then compare that to the premium the sensory panel participants placed on the hammock packed pears. Coincidently, the premium and the increased cost are exactly the same.
- Discuss issues above.
- End with these topics.
- Thank you for your time today. Does anyone have any questions?