Estimating consumer willingness to pay for aflatoxin free food

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Estimating consumer willingness to pay for aflatoxin free food

  1. 1. Estimating Consumer Willingness to Payfor Aflatoxin-free Food in Kenya Hugo De Groote 1, Charles Bett 2, Simon Kimenju 3, Clare Narrod 4, Marites Tionco4, Rosemarie Scott4 1 International Maize and Wheat Improvement Centre (CIMMYT) 2 Kenya Agricultural Research Institute (KARI), 3 University of Kiel, Giessen 5 International Food Policy Research Institute (IFPRI) Nairobi Aflacontrol Project Meeting Nairobi, November 30, 2011
  2. 2. The Problem● Aflatoxins are a major health problem in tropical countries● New technologies for production, storage and testing have been developed,● These are not cheap: quality costs money● How much are consumers willing to pay for maize of superior quality?● How do we estimate this WTP?
  3. 3. Estimating Consumer WTP – Stated preferences (Contingent valuation)● ask the consumer directly: cheap, but hypothetical  open question: often hard on respondents  yes/no question: easier, but limited information  usually: with one follow-up question● But:  hypothetical, no real money (not incentive-compatible)  respondents reply to what we would like to hear  overestimation of WTP
  4. 4. Consumer WTP – Revealed preferences (experimental auctions) Real money is exchanged Group auctions Individual auctions (BDM)  Bid compared to random number incentive compatible: respondents have no reason not to reveal their real WTP
  5. 5. For aflatoxin: individual auction ● Product: maize grain, in 2 kg bags, clear plastic ● Type of products  Clean, untested  Clean, tested (with no measurable trace of aflatoxin)  Moldy poor market quality = “contaminated”: 5% of moldy, discolored grain ● Participation fee: twice the estimated value of the highest quality product  KShs 110/person ($1.5)
  6. 6. Procedure individual auctions ● Participants are offered the participation fee ● They are asked to bid on different products ● They draw a number from a random distribution, from 1 to 80 (40) ● If their bid is higher than the random number, they purchase the product at the random price
  7. 7. Consumer survey ● Stratified, 2-stage ● Six maize AEZ ● 120 sublocations ● 10 households/ subloc. ● 1 man or woman per household (1344)
  8. 8. Kenya – Premium/discount● Premium for clean maize over poor quality product: KSHS 20-30 / 2 kg● Premium for labeled maize: Kshs 10-15/2 kg
  9. 9. Analysis – random effects model• We estimate the WTP for different product characteristics through regression • Dependent variable bij the bid of individual i for product j • Independent variables: product characteristics, respondent characteristics, cross effects • Random effects model (bids of one individual are related) Where -i are the different products, j are the different respondents, - xj is a vector or traits of the product j - ki is a vector of characteristics of individual I - C is a vector of cross effects - i xj s a random error term for the individual ●
  10. 10. Kenya – long regression: effect of consumer characteristics Direct effects Cross effects x contaminated Cross effects x testedVariable Coef. Std. Err. P>|z| Coef. Std. Err. P>|z| Coef. Std. Err. P>|z|Constant 33.9 0.8 0.000Poor market quality -19.5 3.1 0.000Tested 11.1 2.8 0.000Aware of aflatoxins -4.6 1.0 0.000AEZ 2. Dry mid-altitudes -0.7 1.7 0.671 3.3 1.639 0.045AEZ 3. Dry transitional 4.6 1.8 0.010 5.2 1.582 0.001AEZ 4. Moist transitional 1.6 1.6 0.334 1.4 1.432 0.337AEZ 5. High tropics -0.5 1.7 0.778 0.0 0.001 0.566AEZ 6. Moist mid-altitudes -1.1 2.3 0.625 7.2 2.146 0.001Age -0.1 0.1 0.315 -0.1 0.035 0.012Awareness 1.3 1.4 0.359 0.7 1.358 0.631Cattle 0.0 0.1 0.862 0.1 0.132 0.688Experience 0.0 0.1 0.536 0.0 0.005 0.924Female -0.7 1.0 0.512 -0.4 1.014 0.720Income 0.0 0.0 0.857 0.0 0.001 0.001Knowledge 0.4 1.4 0.790 -0.7 1.369 0.628Land owned (ha) -0.3 0.2 0.142 0.0 0.188 0.964Schooling -0.1 0.1 0.321 0.3 0.143 0.068
  11. 11. Conclusions● Consumer WTP can conveniently measured with individual auction● Consumers are clearly willing to pay a premium for  visually clean maize  maize tested and labeled aflatoxin-free● WTP is influenced by age (-) and income (+)● Needs to be clear differentiation in the market and needs low cost labelling to have credibility among consumers
  12. 12. Thank you

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