1. PEstimating and Investigating Organic Premiums for Retail-Level Food Products
Edward C. Jaenicke, Andrea C. Carlson
Name: Loan PHAM
Advisor: Prof. Seung Chul CHOI
Department: Livestock Business and Marketing Economics
Agribusiness 2015, Vol. 31, No 4, 453–471

2. INTRODUCTION Market Organic food market Future Price
Grow dramatically fast
market annual growth that averages 7.7% for 2010, and about 19% before the 2008 recession (OTA, 2011)
Market
60% of survey respondents are willing to pay 1% to 10% more for healthier, safer food (Context Marketing, 2009)
Organic food market
Consumers pay a substantial premium for organic food
Future
Price
among fruits: strawberries have the highest price premium (about 42%), while grapes have the lowest (20%); among vegetables, potatoes have the highest (60%), while carrots have the lowest (15%) (Lin et al. 2008).
What are the determinants of organic price premium levels across retail food products?

3. Total Nonorganic Sales and Total Organic Sales of Milk in the Homescan Data
Total Nonorganic Sales and Total Organic Sales of Milk in the Homescan Data (Year‐Quarter Counts, with Projection Factors).
IF THIS IMAGE HAS BEEN PROVIDED BY OR IS OWNED BY A THIRD PARTY, AS INDICATED IN THE CAPTION LINE, THEN FURTHER PERMISSION MAY BE NEEDED BEFORE ANY FURTHER USE. PLEASE CONTACT WILEY'S PERMISSIONS DEPARTMENT ON OR USE THE RIGHTSLINK SERVICE BY CLICKING ON THE 'REQUEST PERMISSIONS' LINK ACCOMPANYING THIS ARTICLE. WILEY OR AUTHOR OWNED IMAGES MAY BE USED FOR NON-COMMERCIAL PURPOSES, SUBJECT TO PROPER CITATION OF THE ARTICLE, AUTHOR, AND PUBLISHER.
Agribusiness Volume 31, Issue 4, pages , 9 APR 2015 DOI: /agr

4. BACKGROUND ON ORGANIC PRICE PREMIUM ESTIMATION
Hedonic pricing model (Rosen, 1974)
internal characteristics of the good being sold
Price is determined both by 01
external factors affecting it 02
The linear model of the hedonic price equation
P: price premium
X: a vector of product attributes
M: a vector of market identifiers
ε: unobserved error
α , β: parameter vectors to be estimated

5. DATA AND VARIABLES X: product attributes M: market identifiers
The Nielsen Homescan panel: 40,000 U.S. households who purchase food products at food retailers
VECTORS
VARIABLES
Organic
Private label
Low fat
Baby cut
Other cut
Gallon−plus
Big bag
X: product attributes
M: market identifiers
Discount
Types of retail channels: Supercenters, Convenience Stores, Other Stores

6. RESULTS Milk $/gallon Carrots $/pound Organic 2.9139*** 0.4059***
Private label
−0.6092***
0.0853***
Low fat
0.0415***
Baby cut
0.5023***
Other cut
0.6001***
Gallon−plus
−1.6889***
Big bag
−0.2066***
Discount
−0.5170***
−0.1914***
Supercenters
0.0153***
−0.0144***
Convenience Stores
−0.0748***
0.0104
Other Stores
−0.3223***
−0.2126***
∗∗∗,∗∗,∗ Significance at 0.01 level, 0.05 level, and 0.10 level

7. Thank You!