1. Rini Mukhopadhyay 1, Vicki McCracken 1, Joan Ellis 2 WSU School of Economic Sciences 1 WSU Department of Apparel Merchandising, Design and Textiles 2 Funded by CAHNRS Undergraduate Research and Creative Projects Grant There has been a steep rise in the demand for organic food products from $1 billion to $14 billion in the last 14 years (Forbes, 2010). Though the cost of producing organic food products is higher, consumers value locally or organically produced foods. This is because they perceive those products to be healthier, more environmentally friendly or more supportive of small scale agriculture and local rural communities than their conventionally produced counterparts (Darby et al, 2006). The overall objective of this research was to determine the impact of factors like organic and functional product preferences, beliefs about organic and functional products, and demographic variables on a consumer’s willingness to pay (WTP) for organically produced apples and milk, and flax seed bread. ABSTRACT  Data was collected through a consumer intercept model in a regional chain grocery store  Participants bid on four distinct products  organic apples, milk, organic milk and flax seed bread  Bidding occurred in two rounds - one product in the first round and 3 products (simultaneously) in the second round  Only one randomly selected product was binding in the second round  Products had to be purchased if the drawn price was lower than the bid price  Participants completed a questionnaire after the experiment MULTIPRODUCT BIDDING PROCEDURE Price Offer Random Determination of Buying Prices Price Offer ≥ Random Drawn Price Price Offer < Random Drawn Price Buying Obligation No Buying Obligation GENERAL HYPOTHESES I.Consumers who tend to shop at natural food types of stores have a higher WTP II.Consumers with younger children or with higher income have higher WTP III. Health conscious consumers have a higher WTP for functional foods IV. Environmentally conscious consumers have higher WTP for organic foods ANALYSIS  143 usable observations with 60 variables from survey questions.  Variables were classified into groups of related components and Principal Component Analysis (PCA) was performed on each of the groups  From each group the component with the highest Eigen value was extracted.  These components represent the principal factors for the WTP models.  The following critical components were identified Credibility of the store ( Credence ) Preference of the consumer ( Preference ) Visual appearance of the products ( Appearance ) Size of the household ( Size ) Family income ( Income) Environmentally friendly Products. ( Environment)  These components represent the principal factors which may influence WTP:   Regression analysis for willingness to pay (WTP) was then carried out, using these components and additional socio-economic information provided by participants RESULTS * The variables that are significant (t-value ≥ 1.80) are in bold. GENERAL HYPOTHESES TEST CONCLUSIONS  Hypothesis I: Results support hypothesis Factor - Which store (includes natural food market) is significant.  Hypothesis II: Results support hypothesis Factors - Education, Race, Age and Income of consumers were significant.  Hypothesis III: Results support hypothesis. Factor - Food Nutrition was significant.  Hypothesis IV: Results not support hypothesis Factor - Food Info was not significant... *Principal components for each product considered in this research.  Generally the results suggest that the largest impacts on Willingness to Pay included the general importance of price, previous purchase of product, the amount usually purchased, where the participant usually shopped, the importance of nutrition, and specific information about the consumer such as their Race/Ethnicity, Education, Age.  The importance of included variables, however, varied across products.  The specific variables that were most often significant are Which store milk was usually purchased Previous amount and purchase of milk Food Nutrition Information. Education, Race and Age of individuals purchasing organic products Field Price for all four products DISCUSSION