Edward Jaenicke, Professor of Agricultural Economics at Penn State, will present the EEEP Seminar Series, “Valuing Local Food Across the Rural-Urban Spectrum: Unconventionality vs. Scanner Data Practicality” on February 7, 2024.
Abstract:
Because of data unavailability and definitional inconsistency, no study to date that investigates price premiums for local food relies on estimates from structural demand models using micro-level scanner data, a method that is widespread in many other consumer studies. With scanner data methods in mind, this study proposes an unconventional but highly practical definition for local food that is based not on where a product is produced but rather where it is sold. Using potato chips as an example, we say a brand of chips purchased by Pennsylvania consumers is local if a majority of the brand’s national sales occur within the state. We first test the validity of this unconventional definition using an incentivized lab-in-the-field experiment and find no statistical differences in consumers’ local premiums across the two definitions. We next proceed to structural estimation of potato chip demand using Circana/IRI consumer panel data after first adding an indicator for chip brands with majority sales in the state of Pennsylvania. Rather than finding a local premium, we find that consumers are willing to pay about $0.82 less for a bag of local potato chips than they are for non-local chips. However, this “discount” varies over the rural-urban landscape and switches from a discount to a premium in areas that are highly agricultural or have low population density. These results are partially consistent with the lab-in-the-field experimental results, which found that consumers are willing to pay a small premium for local potato chips (rather than a discount) but, as with the scanner data, consumers’ valuations for the local attribute increase with rurality.
Speaker Bio:
Edward Jaenicke teaches courses in the Agribusiness Management (AG BM) undergraduate major and in the Energy, Environmental, and Food Economics (EEFE) graduate program. Currently, much of his research investigates (i) pricing and marketing behavior by food manufacturing and retailing firms, (ii) food purchasing behavior by households, and (iii) the impact of the food environment on the overall healthfulness of food purchases. His research often relies on micro-level scanner data that reflects the food purchases of individual households. Organic food and agriculture is one of Edward’s specific interests.