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Price promotion of organic foods and consumer demand

Published online by Cambridge University Press:  11 September 2021

Danhong Chen*
Affiliation:
School of Agricultural Sciences, Sam Houston State University, Huntsville, TX, USA
Edward C. Jaenicke
Affiliation:
Department of Agricultural Economics, Sociology, and Education, The Pennsylvania State University, State College, PA, USA
Ji Yan
Affiliation:
Durham University Business School, Durham University, Durham, UK
Kun Tian
Affiliation:
Norwich Business School, University of East Anglia, Norwich, UK
Rodolfo M. Nayga
Affiliation:
Department of Agricultural Economics, Texas A&M University, College Station, TX, USA
*
Author for correspondence: Danhong Chen, E-mail: dchen@shsu.edu

Abstract

Existing studies have examined the demand elasticities for organic products only in select categories, and their results for consumers' sensitivity to price changes are inconsistent. Evidence regarding the effects of price promotions on the demand for organic foods vs non-organic foods is scarce. This study aims to (1) examine the own-price elasticities of organic foods vs non-organic counterparts both with and without a promotion in a variety of product categories, and (2) investigate how the distinctive promotion effects between organic and non-organic counterparts depend on food category features. Using purchase data for 36 food categories from the 2015 Nielsen Consumer Panel, we find differential own-price elasticities for organic and non-organic foods, regardless of whether the product is purchased with a promotion. When the products are purchased with a promotion, we find stronger price promotion effects of organic virtues than non-organic virtues and weaker price promotion effects of organic vices than conventional vices. Price promotions of organic foods are more likely to induce health-conscious consumers to switch from conventional purchases to organic purchases in virtues.

Type
Research Article
Copyright
Copyright © The Author(s), 2021. Published by Cambridge University Press

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