Unfair milk prices? Lessons from a split-sample choice experiment

Abstract

Purpose In times of “milk price crises”, “fair” milk prices are repeatedly demanded. Various studies indicate an increased willingness to pay (WTP) for the additional attribute of price fairness. Nevertheless, market shares have been low so far. The purpose of this paper is to discuss three possible reasons for this: low reference prices, socially desirable responses in choice experiments and the lack of justification of the claim “fair” by further attributes. Design/methodology/approach In a split sample, one group facing alternatives with a higher price range and the other with a lower price range, the consumer’s choices are examined. This study uses a social desirability scale for controlling biases in the stated WTP. In addition, the claim “fair” is complemented with a guaranteed price, grazing, regional production and CO2-reduction. A random parameter logit model specified in WTP space is employed to estimate milk consumers’ (n=480) preferences for “fair” milk. Furthermore, a latent class approach reveals information about the source of preference heterogeneity for fair milk attributes among the two groups of the split sample. Findings This study finds statistically significant differences between the two price ranges. In the low price range, additional attributes can trigger an additional WTP. In the high price range, there is no statistically significant additional WTP. WTP’s dependence on price levels could explain why the market share for “fair” milk has so far been low. Originality/value This paper contributes to the study of the effect of split samples in choice experiments. In addition, it promotes the understanding of price fairness in milk and its determinants.

Price Fairness of Processed Tomato Agro-Food Chain: The Italian Consumers’ Perception Perspective

“…In addition, preferences and willingness-to-pay could be crucial for the industry in finding the proper market segment and different strategies to penetrate this market [ 20 , 36 ]. As supported by past studies, consumers’ willingness towards fairness premium price is influenced by who receives this premium and how much the consumer earns [ 36 , 72 ], and is dependent on the initial price levels [ 14 , 36 ]. When consumers believe there are unfair practices in the agro-food system and they may influence the change, consumers are motivated to make ethical purchasing choices [ 20 ].…”

“…It is important to increase the farmers’ negotiating roles when determining the distribution of the price along agro-food chain systems. As supported by past research, policies may help farmers develop food products with a set of consumer-oriented attributes, including fairness, credence, and process properties [ 14 ], and should aim at balancing non-monetary and monetary benefits for the farmers [ 80 ]. In liberalized agricultural markets, it is difficult for politics to find effective ways to boost farmers’ shares without adverse effects, such as higher prices paid by consumers [ 68 ].…”

“…The concept of fairness resembles the fair-trade conceptualisation and certification, which guarantees producers’ fair remuneration and working conditions. Fair trade applies to developing countries, excluding producers from European Union (EU) countries [ 13 , 14 ]. The academic research has extensively explored the Fair-trade certification from the consumer purchasing and consumption behaviour perspective, often in connection with premium price marketing practices and willingness-to-pay exploration [ 19 , 20 ].…”

“…The debate on fairness and fair price distribution is still heated. However, the academic literature is still struggling in the provision of a consistent understanding of the concept of fairness [14][15][16][17][18].…”