An examination of consumer willingness to pay for a preserved farmland label

Abstract

With many farms facing development pressure, state governments have responded with farmland preservation programs that deliver permanent protection via conservation easements. These programs in effect provide support for farms that provide food locally in areas with development pressure. That consumers also appear interested in keeping local farms can be seen in the growth of farmers’ markets and other local food outlets. The purpose of this research was to determine if consumers would pay a premium for food labeled to have come from preserved farmland. Field experiments were run comparing willingness to pay (WTP) for watermelons with no label, a local association label, an original “Delaware Preserved Farm” label, and both labels together. Data were collected at parks and famers’ markets in three adjacent counties in Delaware, Maryland, and Pennsylvania and one additional county in Delaware. There were 327 participants each of whom provided their WTP using the incentive compatible Becker, DeGroot, Marschak (BDM) mechanism. ☐ The point estimates showed consumers were willing to pay $2.38 more for a preserved farm watermelon, on average, with a $3.00 premium when both labels were used. In all three states, WTP was similar when the experiment was conducted in a park; however, when the experiment was conducted in farmers’ markets, Delaware consumers were willing to pay more and Pennsylvania consumers less. The results are also presented using latent class analysis to determine groups of consumers based upon their reasons for supporting preserved farmland and their purchasing habits. Four distinct groups of shoppers were found: conscious shoppers, community supporters, cost focused, and dispassionate shoppers. The group names were chosen based upon how the participants responded to opinion questions. The cost focused group had the largest premium for a preserved farmland label, at $2.68, even though the point estimates suggested that the prices they were willing to pay were lower across all types of watermelons. Conscious shoppers and dispassionate shoppers would pay the most in total, but their premiums for a preserved farm watermelon were lower at $2.43 and $2.40 respectively. In sum, this research identifies a marketing opportunity for a new preserved farm label.