The International Consortium on Agricultural Biotechnology Research (ICABR)
Contingent Valuation of
Payment Card Interval Data Approach
Dept. of Agribusiness Economics
Southern Illinois University,
Using a contingent valuation mail survey data, this research measures consumer willingness to pay (WTP) a premium for nonbiotech foods in an attempt to determine whether the market for nonbiotech foods emerges. The effects of individual characteristics including socio-demographics and perceptions about various attributes of agribiotechnology are evaluated in conjunction with computing WTP for nonbiotech foods.
Public concern is growing about biotech foods and more generally about the use of biotechnology in crop production. Several major U.S. and European food manufacturers and retailers announced that they would accept only nonbiotech crops (Jostling et al., 1999; ERS, 2000). This is coupled with the recent recall of Taco shells made of Starlink corns which is stirring up a wave of turmoil in the food supply chain. The uncertain prospect of agribiotechnology is in sharp contrast to the initial promise of agribiotechnology as a major technological breakthrough that would revolutionize the way crops are produced while enhancing the nutritional value of food products. Growing public concerns appear to be altering the dynamic path of the progress of agricultural biotechnology, raising such intriguing issues as adoption of identity preservation, market segregation, and labeling as ways of segregating GMOs from nonGMOs throughout the food supply chain.
Since identity preservation, market segregation, verification and labeling are not without additional costs to the production and marketing system, supply chain participants would want to ensure that market demand for nonbiotech foods is sizable enough to guarantee market prices cover these costs. Knowledge about whether and how much consumers would be willing to pay more for nonbiotech foods is critical for farmers to make planting decisions and for processors to make investment decisions for identity preservation, segregation, and certification. Nonetheless, we have little scientific information on the intensity of consumer backlash and the size of the premium consumers would willing to pay for nonbiotech foods. This lack of information could critically disrupt the basic supply-demand relationships for major crops. For example, a large demand for nonbiotech crops relative to the supply is likely to bring about substantial premiums for nonGMOs and deep discount for GMOs (Babcock and Beghin, 1999).
Nonbiotech foods have a characteristic of a nonmarket good in the sense that they are not segregated and labeled currently in the market and consumers have not been allowed to reveal their preferences between biotech and nonbiotech foods. Accordingly, we do not observe trading records for identity preserved and labeled nonbiotech foods in the grain and food markets, and we have to rely on a hypothetical method to uncover consumer preferences for nonbiotech foods. Contingent valuation (CV) provides the most appropriate technique to evaluate the demand for potentially emerging market for nonbiotech foods.
Using the stated preference method, this research evaluates the potential demand for nonbiotech foods by asking whether consumers would be willing to pay a premium to avoid biotech foods. The stated preference method could present crucial information in evaluating public acceptance of GMOs and in predicting whether or not the market for nonbiotech foods emerges. This research will use a database obtained from nationwide mail survey conducted in December, 2000. The questionnaires were distributed to 5,200 households selected across the United States by random sampling stratified by age and gender: about 3,000 households returned completed questionnaires, yielding a response rate of nearly 58 percent. A unique aspect of this database is that demographic information is disclosed for nonreturners as well as returners, which would permit us to assess potential nonresponse bias.
This research uses a contingent valuation question in the form of a payment card which contains an ordered set of threshold values (Cameron and Huppert, 1989). The payment card includes various sizes of premium ranging from $0.00 to $2.00 for a box of breakfast cereals (with a base price of $4.00) made of nonbiotech crops. The payment card approach avoids the high rate of item non-response on open-ended valuation questions. In this approach, consumers is asked simply to go over the range of values and to circle the highest amount they would be willing to pay. In conjunction with computing mean WTP for nonbiotech foods, the effects of individual characteristics including demographics and perceptions about various attributes of agribiotechnology will be evaluated.