Assessing Consumers Valuation of Cosmeticaly Damaged Apples Using a Mixed Probit Model

Transcription

1 Assessng Consumers Valuaton of Cosmetcaly Damaged Apples Usng a Mxed Probt Model Chengyan Yue, Helen H. Jensen, Daren S. Mueller, Gal R. Nonnecke, and Mark L. Gleason Workng Paper 05-WP 419 December 005 Center for Agrcultural and Rural Development Iowa State Unversty Ames, Iowa Chengyan Yue s a graduate research assstant and Helen Jensen s a professor n the Department of Economcs and the Center for Agrcultural and Rural Development at Iowa State Unversty. Daren Mueller s an assstant scentst and Mark Gleason s a professor n the Department of Plant Pathology; and Gal Nonnecke s a professor n the Department of Hortculture, all at Iowa State Unversty. Ths research receved fnancal support from the USDA/CSREES Rsk Management Agency. The authors acknowledge and thank Joseph Herrges and Douglas Bonnet for helpful advce on the model set-up and analyss. Ths paper s avalable onlne on the CARD Web ste: Permsson s granted to reproduce ths nformaton wth approprate attrbuton to the authors. Questons or comments about the contents of ths paper should be drected to Helen Jensen, 578E Heady Hall, Iowa State Unversty, Ames, IA ; Ph.: (515) ; Fax: (515) ; E-mal: hhjensen@astate.edu. The U.S. Department of Agrculture (USDA) prohbts dscrmnaton n all ts programs and actvtes on the bass of race, color, natonal orgn, gender, relgon, age, dsablty, poltcal belefs, sexual orentaton, and martal or famly status. (Not all prohbted bases apply to all programs.) Persons wth dsabltes who requre alternatve means for communcaton of program nformaton (Brale, large prnt, audotape, etc.) should contact USDA s TARGET Center at (0) (voce and TDD). To fle a complant of dscrmnaton, wrte USDA, Drector, Offce of Cvl Rghts, Room 36-W, Whtten Buldng, 14th and Independence Avenue, SW, Washngton, DC or call (0) (voce and TDD). USDA s an equal opportunty provder and employer. Iowa State Unversty does not dscrmnate on the bass of race, color, age, relgon, natonal orgn, sexual orentaton, gender dentty, sex, martal status, dsablty, or status as a U.S. veteran. Inqures can be drected to the Drector of Equal Opportunty and Dversty, 3680 Beardshear Hall, (515)

2 Abstract A mxed probt model was appled to survey data toanalyze consumers wlngnes to buy apples wth cosmetc damage caused by the sooty blotch and flyspeck (SBFS) dsease complex. The analyss fnds consumers wll pay a premum for organc producton methods and for apples wth low amounts of SBFS damage. Behavoral varables such as experence n growng frut sgnfcantly affect the wllngness to buy apples of dferent damage levels. Consumers tolerance of very blemshed apples s lmted and they trade off producton technology attrbutes for cosmetc appearance. Better understandng of ths trade-of s mportant to organc producers decsons about dsease control. Keywords: apples, sooty blotch and flyspeck, organc, cosmetc damage, wllngness to buy, mxed probt model.

3 Assessng Consumers Valuaton of Cosmetcaly Damaged Apples Usng a Mxed Probt Model Introducton Coherent rsk management strateges are crucal to makng good economc and producton decsons for apple growers. Apple growers face a complex rsk envronment that ncludes sngle- and multple-year rsks from nsect pests, dseases, weeds, vertebrate pests, nutrtonal mbalances, and volatle apple prces. Decreased proft margns have forced many apple growers out of busness, and others have consdered shftng to valueadded actvtes, ncludng organc producton, to gan a prce premum for ther frut (Earles et al., 1999). Organc apples have become popular n farmers markets as well as n grocery stores (Kremen, Greene, and Hanson, 004). Compared wth conventonally grown frut, the prce of fresh organc apples ranges from $3 to $15 hgher per 40-pound box (or $0.075 to $0.375 per pound) (Granatsten, 00). At the same tme, the cost of organc producton s lkely to be hgher than that of conventonal producton because of the lack of chemcal thnnng agents, less-effectve organc pestcdes and weed control practces, and less rapdly actng fertlty management. One mportant feature of organc producton s ts avodance of perceved toxc and persstent chemcal pestcdes and fertlzers. When pest management breaks down, apple crop losses can approach 100% (Grove et al., 003; Prokopy and Avlla, 003). Major early-season dseases nclude apple scab, rust, and powdery mldew. Fre blght occurs sporadcally but can devastate hghly susceptble cultvars. Late-season dseases nclude the sooty blotch and flyspeck

4 (SBFS) complex and summer frut rots (black rot, whte rot, and btter rot). Most of these dseases pose multple-year as well as producton-season threats snce the pathogens survve the wnter n the orchard and then re-nvade apple crops n subsequent growng seasons. The threat of economc losses from SBFS s the man reason that apple growers n the northeastern quarter of the Unted States apply four to eght fungcde sprays from shortly after petal fall untl harvest. Dark-colored colones of the SBFS fung blemsh the frut cutcle, especally n wet growng seasons. Such defects, although prmarly cosmetc and not affectng fresh eatng qualty, result n culled frut and reduce the value of an apple crop by up to 90%. Blemshed frut are downgraded from fresh-market to cder grade and become desccated durng storage (Wllamson and Sutton, 000). Organc apple producers face addtonal challenges n addressng pest control. For example, organc producers must control weeds, montor and respond rapdly to harmful dseases and nsects, and dentfy effectve and approved products for pest control. Many organc methods are more costly and somewhat less effectve than methods used n commercal producton (Reganold et al., 001). Consequently, organc apples may not be as attractve n appearance as conventonally grown apples. Dsease or nsect damage may occur under certan clmatc condtons (e.g., hgh ranfall) and s more common n certan regons than n others. SBFS s controlled by fungcdes durng the growng season; f dsease s not too severe, the damage may be removed from harvested apples by washng and brushng (Batzer et al., 00). Although the addtonal ncome from the hgher prce of an organc product may be atractve, hgher costs and rsks n producton as wel as consumers dscountng of

5 nferor appearance may deter apple producers from transtonng from conventonal to organc producton. These condtons leave open the questons of the extent to whch consumers dscount apples wth cosmetc damage and whether the prce response s modfed by organc producton methods. Only a few studes consder how appearance afects consumers preference for a partcular food product. The characterstcs nclude ntrnsc attrbutes of color, texture, and other vsble dfferences (see, for example, Acebron and Dopco, 000, for beef; Alfnes et al., 005, for salmon; and We et al., 003, for mandarn oranges). Bunn, Lynch, and Sommer (1990) analyzed survey data from a supermarket and found a low acceptance of cosmetcally damaged oranges. The acceptance rate ncreased substantally after consumers were nformed that few pestcde sprays were used to produce the oranges. Most prevous studes related to organc foods focus on consumers preference for organc attrbutes by assumng equal cosmetc appearance (Larue et al., 004; Blend and van Ravenswaay, 1999; and Lourero, McCluskey, and Mttlehammer 001). Studes focusng on the effect of cosmetc problems fnd that consumers dscount cosmetc damage, but the trade-off wth producton method and cosmetc appearance s not as well understood. Thompson and Kdwell (1998) estmated the choce between organc and conventonal fruts and vegetables (ncludng apples) wth consderaton of the cosmetc defects. They found that the cosmetc defects that can frequently be observed, such as broken skn, bruses, and degree of waxness of apples, and flowerng bud clusters n broccol, afected consumers choce between organc and conventonal produce. 3

6 Baker (1999) estmated consumer preferences for food safety attrbutes (specfcally, reduced or no pestcde use) n fresh apples and took account of the damage level on the apples. By usng cluster analyss, he found consumers n the Perfect Produce segment to have hgher ncome levels and a strong preference for cosmetcaly undamaged fruts. For other dentfed consumer groups, cosmetc damage was less of a factor n ther consumer choces. Roosen et al. (1998) found that consumers bd lower for apples when there s cosmetc damage and that consumers are not wllng to buy cosmetcally blemshed apples. Although cosmetc damage reduced the probablty of purchase, t had lttle effect on the magntude of the premum for low pestcde nput. These studes suggest that cosmetc appearance n frut s an mportant attrbute n the consumer s purchase decson, though the efectof producton method s less well known. Our study addresses explctly the trade-off between cosmetc appearance and organc producton methods n order to provde estmates of consumers wlngnes to pay for organc apples n fresh frut markets. Unlke prevous studes, we use a mxed probt model to analyze consumers wlngnes to buy apples wth cosmetc damage that allows us to treat two factors smultaneously: producton method and cosmetc appearance. We analyze how the two factors affect the wllngness to purchase apples. We also analyze the effect of varables related to consumer behavor on the estmate of wllngness to purchase the apples. 4

7 Theoretcal Framework Consumers wlngnes to buy apples wth dferent amounts of cosmetc damage caused by SBFS s expressed as two categores, wllng to buy and unwllng to buy. The two categores are used to measure the correspondng latent utltes. Because the respondent varables are categorcal nstead of quanttatve, we use a mxed probt model to estmate the probablty of a consumer s wlngnes to buy the apples. In contrast to a general probt model, the mxed probt model ncludes a random effect. Because each partcpant evaluates multple apples, there s correlaton between responses on apples evaluated by the same person. The random ndvdual effect s ntroduced to capture ths correlaton. Suppose apple wth spot level j. Then, U s the utlty that consumer derves from consumng the type of U can be expressed as follows: U ~ X j 1,,n ; j 1, J (1) where apple j and j s a choce-specfc constant that measures the change n utlty caused by X s the desgn matrx, whch s a row vector of the th consumer s characterstcs. These characterstcs nclude the consumer s experence of growng fruts and vegetables, experence of buyng organc fruts and vegetables, and the presence of chldren under a certan age. Vector ~ s a vector of coeffcents assocated wth s the random effect that captures the correlaton between the apples evaluated by the same ndvdual and s assumed to follow normal dstrbuton wth mean zero and varance,.e., ~ N(0, ) desgn matrx ; X ; s the resdual error term that s not captured by X, and ; and s assumed to follow the standard normal dstrbuton, j, 5

8 .e., ~ N(0,1). There are n consumers and J dfferent levels of damage among the apples. Ths specfcaton would lead to the varance and covarance of utlty U as follows: M J M 0 J 0 M J M J where M J The varance-covarance matrx s an nj nj square matrx wth J J square matrces M as the dagonal matrces ( J 1 are ts dagonal elements and are ts off-dagonal elements) and off-dagonal elements are zeros (J=5 n our survey data). The correlaton between utltes brought by dfferent apples evaluated by dfferent partcpants s zero; and the correlaton between utltes brought by dfferent apples evaluated by the same partcpant s. 1 The utlty U cannot be observed. What we observe s the th consumer s wllngness to buy apple j, whch s denoted as y. 1 U 0 y () 0 U 0 The structure of equaton () s a form of censorng for 1,, n ; j 1,, J. In a survey that asks questons about the respondent s opnon, the respondent s ntensty of feelngs s dependent on the measurable factors X and unobservable. In many stuatons, the respondents are not asked to respond to U drectly. Instead, the respondents gve only a set number of possble answers, say, fve, to the queston of y. 6

9 Consumers choose the response to a queston that most closely represents ther own feelngs. To smplfy the model, we group the answers nto two categores: wllng to buy ( y 1 ) and unwllng to buy ( y 0 ). For example, for apple j, consumer chooses among the fve choces: very unwllng to buy ( y 0 ), somewhat unwllng to buy ( y 0 ), neutral ( y 1 ), somewhat wllng to buy ( y 1 ), and very wllng to buy ( y 1 ). Because s assumed to be normally dstrbuted across observatons, for 1,,n ; j 1, J we have the followng probabltes: Pr ob( y Pr ob( y ~ 0) 1 ( j X ) ~ 1) ( X ) j j (3) where ( ) s the cumulatve densty functon for the standard normal dstrbuton. For ths model, the margnal effects of the regressors X on the probabltes are not equal to the coeffcents. They are calculated as follows for a contnuous regressor: E ( y X X ) ~ ( X ) j (4) where E(t) s the expectaton of t; and ( ) s the standard normal densty functon. The margnal effects are often measured at the mean level of X, X. For dscrete predctor varables (such as bnary varables and ndcator varables), the margnal effects can be obtaned by calculatng the probabltes assocated wth each choce at the dfferent levels of the predctor varables, holdng the rest of the varables at ther mean levels. Specfcally, the margnal effect assocated wth a bnary varable s the dfference n the probabltes of a partcular choce, whch s calculated when the bnary varable equals 7

10 one and zero, respectvely. The margnal effects for dscrete varables are summarzed by the followng formula: E( y X I, I r ) E ( y X I, I s ) r s (5) where X I denotes a vector of the mean levels of all predctor varables except the dscrete predctor varable I; and r and s are two levels of varable I. The maxmum lkelhood estmaton method s employed to estmate the coeffcents j, ~, and. The program s compled n R. Survey Data Ths study focuses on one type of damage to apples, cosmetc surface blotches caused by SBFS. Consumers evaluated color photographs of sx Golden Delcous apples presented on one sheet of paper. The apple sze n the photo was smlar to the actual sze of an apple. The frst apple, dentfed as apple U, had no blotches. Ths apple was consdered to be perfect and was used to make comparsons for other apples. The second apple, dentfed as V, had blotches that covered 1% of ts surface. The thrd one (W) had 3% coverage of blotches; and the remanng three apples, dentfed as X, Y, and Z, had blotch coverage of 5%, 7% and 9%, respectvely. To concentrate only on the problem of cosmetc damage, the ntervewer stated at the begnnng of the questonnare that the surface blotches are caused by SBFS fung, that the fung do not harm humans or the taste of apples, and that the damage s strctly cosmetc. The ntervewees were asked to look at the photo of the sx apples and then decde how wllng they would be to buy 8

11 apples V through Z. They had fve choces: very wllng, somewhat wllng, neutral, somewhat unwllng, and unwllng. After makng the choce of wllngness to buy for each of the apples pctured, the consumer was asked to answer several addtonal questons, whch are lsted n Table 1. To test whether ndvduals are more tolerant of cosmetc damages for organc than for conventonal apples, and to obtan an ndcaton of the dscount assocated wth the damage, addtonal questons presented on some of the questonnares asked consumers to ndcate ther wllngness to purchase the apples f there were a ffteen-cent dscount per pound and f the apple were organc. The ntervewees receved one of four types of questonnares: conventonal apple producton; conventonal apple producton wth ffteen-cent dscount per pound; organc apple producton; and organc apple producton wth ffteen-cent dscount per pound. Each ntervewee was asked only to fnsh one type of questonnare so as to ensure the survey results would be ndependent across the organc and dscount factors. The survey was conducted durng regonal apple festvals at two orchards n Iowa n October 004. The people enterng the festval ste were selected randomly. In order to collect a representatve sample, ths survey was conducted from 10 a.m. to 5 p.m. for more than one day durng the festvals n each of the two orchards. In total, 471 people were surveyed, of whch 454 responded to all the questons. Summary statstcs and descrptons of the questons are presented n Table 1. From Table 1 we see nearly one-thrd (31%) of the respondents buy apples once a week; two-thrds (67%) of them have grown fruts or vegetables n a garden or orchard; 40% of the respondents have bought organc fruts or vegetables; 69% of them thnk 9

12 locally grown s mportant or very mportant n ther purchasng decson; and 47% of them have young chldren at home. Varable Name Table 1. Summary Statstcs for Questons on Respondent Characterstcs Queston Descrpton Frequency (%) Mean Standard Devaton Dstance Dstance traveled to get to the orchard (mles) Often How often apples are purchased to eat fresh 5= once a week = two or three tmes a month = about once a month =only when n season = never or less than once a month 3.6 Appleaweek Number of apples bought from all sources n a week Grow Buyorganc Local Chldren Experence of growng fruts or vegetables n a garden or orchard 1 f yes f no Experence of buyng organc fruts or vegetables 1 f yes f no Importance to purchasng decson that apples are grown locally 4= very mportant = mportant = not very mportant 6.1 1= not at all mportant 4.41 Young chldren (1 years and younger) lvng at home 1 f yes f no One ssue to consder s whether or not the survey results are representatve of consumers n general (Mtchell and Carson, 1989). In our survey, the sample chosen those who partcpate n autumn apple festvals does not necessarly represent all those who would purchase apples, and n ths regard there may some bas n the sample selecton. It s qute possble that the segment of the populaton nterested n apple 10

13 festvals and n purchasng local products s more tolerant of cosmetc damage on apples than the general apple-purchasng populaton. At the same tme, the publc partcpatng n local apple markets s an mportant market segment for organc apple producers. However, there may also be populaton choce bas. The two orchards are located n the center of a mdwestern state. Based on the varable Dstance, the average drvng dstance was estmated to be 38 mles, wth 89 mles as the standard devaton. Ths result ndcates that the populaton was drawn from the local and regonal area. We thus vew our sample respondents as representng a populaton of the central Mdwest that would travel to local apple markets. Gven the potental bases, the extrapolaton of our fndngs to other populatons should be made wth cauton. We nterpret the fndngs relatve to the populaton attendng local and regonal festvals and markets. Some questonnares were categorzed as nvald, manly because of ncomplete answers. Snce only a small percentage of the surveys (4%) were not used n the analyss, sample non-response bas s not consdered to be serous. Emprcal Specfcaton and Results The emprcal specfcaton of the utlty functon underlyng the mxed probt model makes references to both prce (the ffteen-cent dscount) and producton technology (organcally produced or conventonally produced). The utlty functon s formulated as follows: U Dstance Often Appleaweek Local 6 j Chldren Organc Dscount 3 9 Grow Buyorganc 4 5 (6) 11

14 1,,454 ; j 1,, 5. The term U s the latent unobservable utlty level for consumer by consumng apple j. The observed apple ratng (degree of wllngness to buy) reflects ths latent utlty. The varable Organc ndcates the producton technology organcally produced or conventonaly produced. The varable Dscount ndcates the prce premum for an apple wth blotches compared wth a perfect appearng apple. Specfcally, Organc s coded as (1,0), where 1 represents organcally produced and 0 represents conventonally produced; and Dscount s coded as (0, 15), where 15 represents ffteen cents per pound dscount and 0 represents no dscount. A mxed probt model based on the emprcal representaton of the latent non-observable utlty functon n (6) s estmated usng maxmum lkelhood method. Estmaton results are presented n Table. Table. Mxed Probt Results (n=454) Varables Estmated Coeffcents Standard Error Dstance Often 0.87** 0.13 Appleaweek Grow 1.084*** 0.90 Buyorganc 0.317* Local 0.413** Chldren Organc Dscount 0.039** *** V 5.951*** W 3.874*** X 1.54*** 0.08 Y 3.03*** *** sgnfcant at the 1% level; ** sgnfcant at the 5% level; * sgnfcant at the 10% level. 1

15 From Table we can see that ˆ s qute large and s statstcally sgnfcant, so the correlaton among the evaluaton of dfferent apples by the same person cannot be gnored. Ignorng ths correlaton could lead to the wrong model specfcaton and estmaton results. The varable Often how often the respondent buys apples to eat fresh measures whether the person s a regular apple consumer or not and ndcates whether ths behavor sgnfcantly affects the probablty of the reported ratngs. The probablty of beng wllng to buy a partcular apple s expected to be larger f a person s a regular apple consumer as compared wth the wllngness of a person who s not a regular consumer. As expected, beng a more frequent apple consumer has a postve effect on wllngness to buy apples. The varable Grow experence of growng fruts or vegetables n a garden or orchard s also expected to affect the probablty of wllngness to buy n a postve way. The postve and statstcally sgnfcant coeffcent ndcates that those who have grown fruts and vegetables tend to lke apples more and would be more wllng to buy apples wth blemshes. The varable Local how mportant s t that apples are grown locally n determnng the purchase decson has a sgnfcant postve effect on the probablty of the wllngness to buy apples. People who place greater mportance on locally grown producton also tolerate apples wth a greater amount of blemshes, as expected. Table A.1 n the appendx gves the margnal effects of the varables to the probablty of wllngness to buy for the fve types of apples. The margnal effect measures the mpact of each predctor varable on the probablty of each consumer s degree of wllngness to buy a partcular apple. 13

16 Consstent wth the noton that most consumers lke organc apples more than conventonal apples, the producton technology organc producton affects the probablty of beng wllng to buy apples n a postve drecton. The results show that f an apple s produced organcally, the consumer has a hgher probablty of beng wllng to buy t, but the effect s not statstcally sgnfcant (Table ). However, when gven a ffteen-cent dscount for the purchase prce, the dscount has a postve and statstcally sgnfcant effect on the probablty of beng wllng to buy apples. The presence of a ffteen-cent dscount means the consumer s more wllng to buy the apples at varyng degrees of cosmetc damage Because the coeffcent on Dscount,, 9 provdes a measure of the margnal utlty of ncome, the value j 9 ndcates how much more consumers are wllng to pay for apple j compared wth apple Z (the apple wth blotch coverage of 9%, a level that s hghly vsble and conspcuously dscolored). For apples of type j=v,w,x,y, the unt s cents per pound. By calculaton, we obtan the result that the consumer s wllng to pay $.08 more for one pound of apples of type V, $1.5 more for one pound of apples of type W, $0.99 more for one pound of apples of type X, and $0.39 more for one pound of apples of type Y compared wth apples of type Z (the apple wth greatest amount of cosmetc damage). Smlarly, the rato 8 =$0.09 provdes an estmate of how much 9 more consumers are wllng to pay for organc apples versus conventonal apples wth the same spot coverage level. The premum of $0.09 per pound s n the range of the results from earler studes (e.g., Granatsten, 00). Perhaps more relevant are the relatve 14

17 premums pad for apples of varous degrees of cosmetc damage, and we summarze these dferences n the consumers wlngnes to pay n Table 3. Table 3. Dfferences n Consumers Wlngnes to Pay for Apples wth Dfferent Levels of Cosmetc Damage Comparson of apple types Dfference n wllngness to pay (per pound) V-W $0.56 W-X $0.53 X-Y $0.60 Y-Z $0.39 From Table 3 we can see that the dfferences of wllngness to pay for apples wth dfferent blotch coverage levels shown n the table are greater than the $0.09 premum for organc apples. That s, consumers surveyed are more wllng to buy conventonal apples wth less cosmetc damages (for example, apple V 1% blotch coverage) than for organc apples wth relatvely too many blotches (for example, apple W 3% blotch coverage). Ths s also llustrated n Fgure 1. Fgure 1 ndcates how much more consumers are wllng to pay for apples wth dfferent blotch levels compared wth conventonal apple Z (an apple produced wth conventonal methods and havng 9% blotch coverage), assumng the wllngness to pay for that apple s zero dolars. Fgure 1 shows that consumers tolerance for blotches s lmted even f the apple s organcally produced. For example, when consumers are wllng to pay $0.80 more than conventonal apple Z, they wll tolerate a blotch coverage level for conventonal apples of 4.8% compared wth a blotch coverage level for organc 15

18 apples of 5.3%. If the organc apples blotch coverage exceeds 5.3%, consumers would rather buy conventonal apples wth less cosmetc damage (4.8%). Fgure 1. Consumers Wlngnes to Pay More for Apples Compared wth a Conventonal Apple wth 9% Blotch Coverage V W X Y Z As mentoned earler, we would expect consumers to be more tolerant of cosmetcally damaged apples f the frut s produced organcally. However, our survey results show that organc producton methods do not sgnfcantly affect the consumers wllngness to buy apples; the resultng premum s relatvely small. In contrast, consumers are relatvely senstve to the occurrence of cosmetc damage. 16

19 Concluson Our recent survey of consumers n local market settngs shows that consumers make a trade-off between producton technology and cosmetc appearance of apples, although cosmetc damage weghs sgnfcantly n ther decson. Because of the survey questonnare format, we ntroduced a random effect nto the general probt model to evaluate consumers wlngnes to buy (organc) apples wth dferent levels of cosmetc damage. Varables that reflect consumer behavor do afect the consumers wlngnes to purchase the apples: experence of growng fruts or vegetables, and whether beng locally grown s mportant for the purchase decson. More mportantly, ths study estmates the premum that consumers are wllng to pay for organc apples and the premum they are wllng to pay for apples wth dfferent blotch coverage levels. The consumers tolerance of cosmetc damage on apples s lmted. When there are too many blemshes on the surface of organc apples, consumers would rather buy conventonal ones wth better appearance, even f the spots are merely a cosmetc problem. The presence of cosmetc damage reduces the grade and market value of organc apples. At the same tme, the costs of producng organc apples are lkely to be hgher than for producng apples by conventonal growng methods snce producers are lkely to apply organc pestcdes more frequently than conventonal pestcdes. In the case of SBFS, the use of fungcdes at the rght producton tme would mnmze sgnfcant loss due to cosmetc blemshes. The relatvely low consumer acceptance of cosmetc damage to apples narrows the margn of error for organc growers and makes decson makng for organc growers challengng. Because of the lmted consumer tolerance for cosmetc 17

20 damage, apple producers must account for the trade-off between producton technology and cosmetc damage n ther producton decsons n order to ensure ther profts. Although our results apply only to consumers n the market who atend farmers markets and festvals, we expect that these consumers would be more tolerant of cosmetc appearance n locally grown, organc apples. It would be useful to apply a smlar approach to determne whether these results can be extended to other market settngs. It s possble that the organc market has shfted from one n whch consumers are tolerant of consderable product varaton to one n whch consumers have less tolerance for poor cosmetc appeal. 18

21 References Acebron, L.B., and D.C. Dopco The Importance of Intrnsc and Extrnsc Cues to Expected and Experenced Qualty: An Emprcal Applcaton for Beef. Food Qualty and Preference 11:9 38. Alfnes, F., A. Gutormsen, G. Stene, and K. Kolstad Consumers Wlngnes to Pay for the Color of Salmon: A Choce Experment wth Real Economc Incentves. Forthcomng n Amercan Journal of Agrcultural Economcs. Baker, G.A Consumer Preferences for Food Safety Attrbutes n Fresh Apples: Market Segments, Consumer Characterstcs, and Marketng Opportuntes. Journal of Agrcultural and Resource Economcs. 4(1): Batzer, J.C., M.L. Gleason, P.M. Dxon and F.W. Nutter, Jr. 00. Evaluaton of Post- Harvest Removal of Sooty Blotch and Flyspeck on Apples usng Sodum Hypochlorte, Hydrogen Peroxde wth Peroxyacetc Acd, and Soap. Plant Dsease 86: Blend, J.R., and E.O. van Ravenswaay Measurng Consumers Demand for Ecolabeled Apples. Amercan Journal of Agrcultural Economcs 81: Bunn, D., L. Lynch, and R. Sommer Consumer Acceptance of Cosmetcally Imperfect Produce. The Journal of Consumer Affars 4: Earles, R., G. Ames, R. Balasubramanyam, and H. Born Organc and Low-Spray Apple Producton. Approprate Technology Transfers for Rural Areas (ATTRA), 38 pp. Granatsten, D., 00. Recent Trends n Organc Tree Frut Producton: 00. Center for Sustanng Agrculture and Natural Resources, Wenatchee, WA. 19

22 Grove, G.G., K.C. Eastwell, A.L. Jones, and T.B. Sutton Dsease of Apples. Chapter 18, pp In: Ferree, D. C. and Warrngton, I. J. eds., Apples: Botany, Producton, and Uses. CABI, Cambrdge, MA. Beers, E. H., Sucklng, D. M., eds. Kremen, A., C. Greene, and J. Hanson Organc Produce, Prce Premums, and Eco-Labelng n U.S. Farmers Markets. Outlook Report No. (VGS ) 1 pp, Aprl 004, ERS, USDA. Larue, B., G.E. West, C. Gendron, and R. Lambert Consumer Response to Functonal Foods Produced by Conventonal, Organc, or Genetc Manpulaton. Agrbusness 0(): Lourero, M.L., J.J. McCluskey, and R.C. Mttelhammer Assessng Consumer Preferences for Organc, Eco-Labeled, and Regular Apples. Journal of Agrcultural and Resource Economcs 6: Mtchell, R.C., and R.T. Carson Usng Surveys to Value Publc Goods: The Contngent Valuaton Method. Washngton, DC: Resources for the Future. Prokopy, R.J., and J. Avlla Ecology and Management of Apple Arthropod Pests. Chapter 19, pp In: Ferree, D. C. and I. J. Warrngton, eds., Apples: Botany, Producton, and Uses. CABI, Cambrdge, MA. Beers, E. H., D. M. Sucklng, eds. Reganold, J.P., J.D. Glover, P.K. Andrews, and H.R. Hnman Sustanablty of Three Apple Producton Systems. Nature 410(19, Aprl):

23 Roosen, J., J.A. Fox, D.A. Hennesy, and A. Schreber Consumers Valuaton of Insectcde Use Restrctons: An Applcaton to Apples. Journal of Agrcultural and Resource Economcs 3: Thompson, G. D., and J. Kdwell Explanng the Choce of Organc Produce: Cosmetc Defects, Prces, and Consumer Preferences. Amercan Journal of Agrcultural Economcs 80(May): We, S., S. Snggh, E. J. Woods, and D. Adar How Important Is Appearance? Consumer Preferences for Mandarns n Indonesa. Internatonal Journal of Consumer Studes 7: Wllamson, S. M., and T.B. Sutton Sooty Blotch and Flyspeck of Apple: Etology, Bology, and Control. Plant Dsease [Plant Ds.] 84(no. 7): (Jul). 1

24 Appendx Table A.1. Margnal Effects of Varables Varable Interval Ponts Margnal Effects Dstance Often P(5)-P(1) Appleaweek Grow P(1)-P(0) Buyorganc P(1)-P(0) Local P(4)-P(1) Chldren P(1)-P(0) Organc P(1)-P(0) Dscount V P(1)-P(0) P(1)-P(0) W X P(1)-P(0) P(1)-P(0) Y