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Willingness to Pay for Low Water Footprint Foods during Drought

Willingness to Pay for Low Water Footprint Foods during Drought

Chapter:
(p.251) 8 Willingness to Pay for Low Water Footprint Foods during Drought
Source:
Agricultural Productivity and Producer Behavior
Author(s):
Hannah KrovetzRebecca TaylorSofia B. Villas-Boas
Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226619941.003.0008

In the context of recent California drought years, we investigate whether consumers are willing to pay for more efficient water usage in the production of four crops. We implement an internet survey choice experiment for avocados, almonds, lettuce, and tomatoes to elicit consumer valuation for water efficiency via revealed choices. We estimate a model of consumer choices where a product is defined as a bundle of three attributes: price, production method, and water usage. Varying the attribute space presented to consumers in the experimental choice design provides the data variation to estimate a discrete choice model—both conditional Logit specifications and random coefficient mixed Logit specifications. We find consumers have a significant positive marginal utility towards water-efficiency and estimate an average implied willingness to pay (WTP) of about 12 cents per gallon of water saved. Moreover, informing consumers about the drought severity increases the WTP for low water footprint options, but not significantly. We find there is heterogeneity in the WTP along respondents’ education, race, and with respect to stated environmental concern. Simulations of removing low water footprint labels from the choice set attributes imply significant consumer surplus losses, especially for white, more educated, and more environmentally concerned respondents.

Keywords:   choice experiments, discrete choice model, tandom coefficient mixed logit, willingness to pay, labels, information, water footprint, food production, California agriculture, counterfactual policy simulations

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