This study by Adelina Gschwandtner, Lecturer at the School of Economics, and Michael Burton (University of Western Australia) uses a large, representative sample in order to analyse the demand for organic products in the UK and is a follow-up of a smaller pilot performed in Canterbury/UK in 2013*.
It employs a survey/questionnaire in order to elicit the willingness to pay (WTP) of consumers for specific attributes such as ‘organic’, ‘quality’, ‘chemical usage’, ‘animal welfare’ related to chicken meat and carrots in the UK.
Previous studies have revealed that often there is a gap between what people claim that they want to pay for such ‘credence attributes’ and what they actually pay in reality. This gap is often called ‘hypothetical bias’ because it derives from the hypothetical nature of surveys. Because of this reason the study employs two different methods, ‘Cheap Talk’ and ‘Honesty Priming’, aiming to correct for this.
‘Cheap Talk’ involves making consumers aware of the fact that people tend to overstate in general their true WTP when related to goods such as organic products. Studies have shown that, if consumers are informed about this overstatement, the effect will be reduced or completely eliminated.
‘Honesty Priming’ is a method borrowed from Psychology where consumers are primed into answering truthfully by asking them first to complete 10 statements using missing words. These missing words are usually chosen from 2 options, a correct (true) one (such as “The earth is round”) and an incorrect one (such as “The earth is square”). Through this, literature has shown that consumers can be induced to answer truthfully in the following questions about WTP.
The results reveal that there exists a core of organic consumers of about 20-30% of the sample that have a positive WTP for the organic label. However, when correcting for hypothetical bias, consumers seem to be willing to pay sometimes even more, for other attributes such as low chemical usage, and most importantly a higher quality.
The results of the study show that implementing mechanisms to correct for hypothetical bias has a significant impact and that in some cases willingness to pay values are down to 46% of what they would have been if no treatment would have been in place. This suggests, in accordance with a large and increasing body of literature, the usefulness and even necessity to correct for hypothetical bias when using surveys.
Forthcoming in the European Review of Agricultural Economics
*”The Organic Food Premium: A Local Assessment in the UK”, (2018), International Journal of the Economics of Business, 25(2), 313-338, https://doi.org/10.1080/13571516.2017.1389842.