What Exactly Are They Paying For? Decomposing the Price Premium for Organic Fresh Produce of Heterogeneous Consumers

This article investigates consumer preferences for organic fresh produce, and decomposes the organic price premium into some of the key attributes of organic products, using data from a survey of Sacramento area households. Stated choices for four produce items (bananas, Fuji apples, broccoli, and red leaf lettuce) with four experimentally-varied attributes (presence of pesticide residues, use of genetic modification, use of environmentally friendly production techniques, and unit price) are modeled within a panel mixed-logit discrete choice framework. Respondents are segmented into regular organic buyers and non-regulars/non-buyers in the choice model, and willingness to pay (WTP) for the attributes was calculated for each group, accounting for the individual heterogeneity in perceptions towards organic fresh produce. We find that regulars have significantly positive WTP for all three non-price attributes at their means, while only the absence of pesticide residues has the significant and positive WTP for non-regulars, at means. This indicates that the private health benefit drives non-regular buyers to choose organic produce, whereas the improved environmental quality is as important for regular organic buyers as private health benefit for reasons to choose organic produce. The consumers