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Higher prices are one very important reason not to buy products marketed as respecting high standards of animal welfare in production. People generally state to be willing to pay more for these products, but actual buying behaviour is often opposed to this. A major methodological problem is to measure stated willingness to pay in a way which reflects actual buying behaviour. Therefore we will discuss common measurement methods in section 3.2.1 and will afterwards summarise empirical results relevant in our context in sections 3.2.1 to 3.2.4.
Willingness to pay is understood to be the maximum amount people are prepared to pay in order to e.g. secure high standards of animal welfare to a product. Studies suggest that the stated willingness to pay does not sum up to people’s total income or even wealth (WILDNER, 1998, p. 33). Whereas willingness to pay is defined for a given quantity and product properties, it is for marketing purposes of interest to obtain some idea of how people trade off price, quantity and different realisations of product properties. This can be done using the concept of elasticity. The elasticity of demand for a product quantity or property with respect to prize is defined as the relative change of demand for quantity/property per relative change of the price. The value of this elasticity can change with the level of price and quantity/degree of property. The general data are then called price response data.
Data on willingness to pay for animal welfare are often collected by directly asking consumers. This procedure does not yield high validity for the following reasons: (a) Statements are distorted by an induced atypical price consciousness. (b) Trade-offs with other utility aspects are largely neglected, although these are important in shopping situations.(c) The variable quantity case can not be easily or adequately dealt with. (d) Generally interviewees are not asked to behave as stated, there is no incentive to minimise discrepancies between stated and practised behaviour. (e) Answers to closed-ended questions might simply reflect intention to make a good impression. (f)Results will vary with the type of question and interview technique. (g) Finally use of direct questioning for innovative products has been questioned. Therefore this approach has to be used with caution, best in a multi-method approach to check-cross validity.
Conjoint-analysis puts people in a more realistic position, as they have to value a whole set of properties at once. Price response data can then indirectly be inferred. The approach therefore shows good validity. Yet certain methodological problems are unresolved and reliability therefore uncertain. Conjoint-measurement can be used for both established and new products.
Expert interviews are a low cost alternative with acceptable validity and reliability. When experts are asked in successive rounds, to first give an estimate and then correct it on the basis of estimates, this approach is called “Delphi technique”. Expert interviews can be used for both established and new products and are especially good for the latter.
Price-experiments can be used either in field or laboratory. Field experiments are rather costly. Compared to laboratory experiments they have lower internal but higher external validity. Generally experiments yield high validity and can be used for both established and new products.
Finally market and behavioural data should naturally reflect peoples willingness to pay in real situations. The validity is therefore high, but the reliability can be low. With respect to animal welfare no exact market data are reported. A further problem might be that prices in the market do not vary enough to allow inferences about large price changes.
This section reviews whether saturation, involvement and positive attitude towards products with animal welfare influence willingness to pay.
One hypotheses about willingness to pay for animal welfare is that it increases as people get more saturated. This hypotheses can be evaluated by comparing, how willing to pay people are for products respecting high animal in the new and old counties of Germany. Several German surveys looked at this question. In sum, people in the new counties were less willing to pay more for animal welfare than people in the old counties since unification. Evidence also suggests that the difference between the two regions is narrowing down. Both of these findings support the saturation hypothesis. The data are presented by WILDNER (1998, pp. 36 - 38).
The hypothesis is also supported by differing willingness to pay for people with different incomes: 63% of interviewees in a representative sample of the German population with an income above DM 5000,- stated to be willing to pay 10-20% more for food with high animal welfare standards. This was so only for 48% of people with an income below DM 2500,- (SAMPLE-INSTITUTE, cited in BALSER, 1994, p. 44). Different surveys and approaches came up with similar results (BAADE, 1988, p. 161; VOLLBEHR, 1990, p. 61; ALVENSLEBEN, SCHLEYERBACH, 1994).
Willingness to pay for animal welfare is also higher for people with higher formal education. But the most important difference in stated willingness was detected between consumers and non-consumers of organic produce. 64% of interviewees belonging to the first group as opposed to 42% of the latter group stated to be willing to pay 10-20% more. Similarly nearly 50% of interviewed non-consumers of organic produce agreed to the statement “Appropriate husbandry would be good, but who can pay it?”. Only 34% of consumers of organic produce did so (BALSER, 1994, p. 43 - 44). Interviewed people who changed their consumption behaviour as a consequence of BSE stated to be more willing to pay for higher degrees of animal welfare in meat production. The difference was tested to be statistically significant at the 0.1% level (SCHULZ, 1997, p. 165). A survey conducted in 1997 with people, who had already bought products from appropriate keeping found 88% of interviewees to accept higher prices for these products. All this suggests that consumers with a higher degree of involvement towards food consumption and a positive attitude towards products respecting high standards of animal welfare have a higher willingness to pay.
Figure 3.2.3(a) and 3.2.3(b) graph results for price response data obtained in consumer surveys by direct questioning. These are cumulated with decreasing mark-ups on conventional price.38 One can easily imagine a continuous price-response function to produce these data.39
Fig. 12: Stated price premia: free-range eggs
Source: EMNID 1998, n = 1000
“VgtM” is an abbreviation for “Verein gegen tierquälerische Massentierhaltung” which translates as “charity against cruel factory farming”. A careful inspection of both Fig. 3.2.3(a) and Fig. 3.2.3(b) suggests that people expressed a higher willingness to pay for “VgtM”-certified eggs than for ordinary free-range eggs. This is so because 30 Pfennig per egg in Fig. 3.2.3(b) corresponds to about 100% mark up in Fig. 12. While a significant proportion of interviewees stated to be willing to pay more than 100% more for “VgtM”-certified eggs, only very few people would do that for ordinary free-range eggs.
Why is this so? First of all, the two samples are not directly comparable due to differing sample spaces. But this is probably not all of the explanation. LEHRSTUHL FÜR AGRARMARKETING KIEL found people to be more hesitant to accept higher prices for free-range eggs as well (compare WILDNER, 1998, p. 35). It might be that “VgtM”-certified is simply right on and therefore induces people to social answering. Finally people might be more willing to pay due to the high credibility of “VgtM” to assure high standards of animal welfare.
Fig. 13: Stated price premia: “VgtM”-certified eggs
Source: unpublished results of INSTITUT FÜR AGRARÖKONOMIE, LEHRSTUHL FÜR AGRARMARKETING KIEL (1996), n = 197, sample of Kiel, summer 1996
HARIS (1986) asked people a very general question about price-willingness: “To avoid battery keeping, one should be willing to pay a little more for deep litter eggs”. 78% of interviewees agreed in 1983, which reflects a high stated willingness to pay. Quite in contrast only 38% bought deep litter eggs and 62% battery eggs, i.e. only half the people followed their stated willingness to pay. This was probably partly due to the relatively high price mark up of 6 Pfennigs/egg and reveals a drawback of the question used, which did not lead to quantifiable willingness to pay. Furthermore, answers were probably distorted for social reasons and price was not the only influence on the decision to buy eggs. Finally, 12 % of purchasers were not aware of the choice situation. According to the compatibility principle a good point about HARIS´ question is that he inquired into something directly relevant in the purchase situation.
Price and consumer concerns about animal welfare are two determinants of purchasing behaviour for „animal-friendly“ products. Which one is more important? Evidence presented in section 2.3.5 suggests that the keeping system is more important than the price, since the absolute amount of money spend on eggs is rather small. This would suggest that people are faced with a low cost situation in which consumers concerns normally are important.
A field experiment carried out in Switzerland adds an important finding about how to best influence people’s behaviour: demand for free-range eggs doubled after price was reduced to the level of deep litter eggs. Appeals to conscience brought about demand increases of only 10 - 20 % (DIEKMANN, 1998, S. 68). Thus price seems central after all and the perception of the keeping-system does not only appeal to conscience.
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