Consumer Willingness to Pay for Breads Marketed as "Low-Carbohydrate"

Bread producers are taking advantage of healthy feeding habits by developing new "low carbohydrate" products to entice customers. These low carbohydrate breads are generally more expensive than conventional types. This study tests the hypothesis that consumers are willing to pay higher premium for "low carbohydrate" breads at various locations and markets. We use retail data in a hedonic pricing framework to estimate the premium paid for the "low carbohydrate" attribute of bread. Results show that the implicit price of the "low carbohydrate" attribute of bread ranges from about 0.06¢ to 1.1¢ per gram, reflecting the amount consumers are willing to pay above the price of conventional bread.low carbohydrate bread, hedonic price, willingness to pay, Institutional and Behavioral Economics, D12,

Valuing water for Chinese industries : a marginal productivity assessment

Using plant-level data on more than 1000 Chinese industrial plants, the authors estimate a production function treating capital, labor, water, and raw material as inputs to industrial production. They then estimate the marginal productivity of water based on the estimated production function. Using the marginal productivity approach to valuing water for industrial use, they also derive a model and estimates for the price elasticity of water use by Chinese industries. Previous studies used water demand functions and total cost functions to estimate firms'willingness to pay for water use. They find that the marginal productivity of water varies among sectors in China, with an industry average of 2.5 yuan per cubic meter of water. The average price elasticity of industrial water demand is about -1.0, suggesting a great potential for the Chinese government to use pricing policies to encourage water conservation in the industrial sector. Increasing water prices would reduce water use substantially.WaterConservation,Environmental Economics&Policies,Decentralization,Water and Industry,Economic Theory&Research,Water and Industry,Water Supply and Sanitation Governance and Institutions,Town Water Supply and Sanitation,Environmental Economics&Policies,Water Conservation

Pricing Principles from Psychology for Agricultural Organizations with Market Power

A recent review of food retailer pricing found evidence that much of the behavior was inconsistent with traditional economic models (Li, Sexton & Xia, ARER 2006). These inconsistencies may stem from the theoretical foundation that firms use to guide their pricing. When firms can influence price, they often use pricing principles from psychology, based on buyer behavior instead of utility maximization. These principles have been incorporated into the marketing approach to pricing. A comparison of the economics and marketing approaches toward pricing found important differences and concluded that marketing principles provide: a richer and more empirically based treatment of the pricing issue from the buyer's perspective . . . ' (Skouras, Avlonitis & Indounas, JPBM 2005, p. 362). This paper reviews more than twenty different pricing principles, developed by psychologists and consumer behaviorists, that may appear inconsistent with some traditional economic theories and that could help increase the profits of agricultural organizations that have enough marketing power to affect price. These pricing principles can be grouped into four main categories. The first category is called 'framing.' Framing refers to the way something is depicted or what is emphasized (e.g., telling buyers that hamburger is 25 percent fat or 75 percent lean). Price framing deals with how the price is described to customers. Incorporating 'free' into an offer, describing a price in terms of multiple units (e.g., three for a dollar), specifying purchase limits, adding an anchor (e.g., suggesting a number to buy or a reason to buy more), highlighting the price in terms of spare change, encouraging purchases on credit, and reframing ( e.g., specifying the cost per day, comparing the purchase with other small regular expenses, or using two different currencies) have been shown to increase willingness to pay. The next second category is called 'congruency.' Marketers strive to make all their messages to prospective buyers consistent. Congruency means that the signals sent by the price should match the messages from other sources. Within this category, there are principles dealing with packaging (e.g., size and shape) and with the terminology, font, and typeface size that are used to describe the product and its price. The next group is called 'context.' Researchers have found that the information people see around an item and the sequence they see this information can influence prospect willingness to pay. Adding an external reference price to advertisements or store signage, striving to make key information first or last in the viewing sequence (e.g., primary and recency), separating shipping and handling charges from product costs, and striving to be perceived as the premium product because asymmetric competition may exist are the pricing principles in this group. 'Signaling' is the last category. The principles in this group involve the messages that buyers receive from the price. One pricing principle involves the effect of certain price endings, often called the effect of nines. A common belief in economics is that if all other things are held constant, lowering the price should generate a downward-sloping demand curve. However, at certain price points, the quantity demanded is likely to be sharply higher, and if price is lowered below a price point, the quantity demanded may fall. Instead of being downward sloping, the demand curve may have segments with a positive slope. Other principles within this group involve the sensitivity of buyers to the frequency distribution of past prices, the ability of buyers to recall past prices, the awareness of buyers to the cost of a product, the number of syllables in the price, the ability of higher prices to suggest higher quality, and the ability of higher prices to improve a product's perceived performance (e.g., the price placebo effect). By including these marketing-based principles in their tool kit, applied economists can better understand the pricing behavior they observe in the marketplace and can provide more practical advice to agricultural organizations on what they should consider when developing their pricing strategies.Industrial Organization, Marketing,

Water market institutions: lessons from Colorado

Important water issues in South Africa relate to equity, efficiency of use, quality (return flow pollution) and instream uses such as the environment. Farmers in South Africa pay water rates whether or not water is used and water is not volumetric priced. Water markets can attach an opportunity cost price and scarcity value to water. Opportunity cost pricing by the state has received no support in the international economic literature largely because of estimation problems. Water markets have started to emerge in the Lower Orange River and in the Fish and Sunday's rivers in the Eastern Cape in South Africa but there are two reasons why agricultural water markets do not release water in South Africa. The first reason is that the only water trades that have taken place in these rivers are between non-users of water and intensive users. It may take time before all sleeper rights (water not used) are activated which is also the case in Australia. Secondly, irrigation farmers in South Africa along the Orange and Sunday’s rivers are permitted to irrigate a larger area if they adopt water saving technology such as drip irrigation. Although this water saving technologies will reduce water application per ha, the consumptive use of water per ha may not decrease and will increase if a larger area can be irrigated. Agricultural water markets are thus increasing the use of water and not promoting its conservation. It is thus recommended that transfers should be based on consumptive use if return flow is significant.Resource /Energy Economics and Policy,

Too Much of a Good Thing? An Experimental Investigation of the Impact of Digital Technology-enabled Business Models on Individual Stress and Future Adoption of Sustainable Services

The pervasive diffusion of digital technologies affords the development of innovative and sustainable business models. With increased connectivity, options arise for enabling sharing-based services with pay-per-use pricing. Besides the merits that these services gather, e.g., concerning sustainability, flexibility and economics, less is known about the potential adverse impacts on individuals. Thus, we employed an experimental research design to examine how digital technology-enabled business models affect individual stress and perception concerning the future usage of these services. Specifically, we investigated the context of car sharing, a service that has recently been advanced by the use of digital technologies and received increasing adoption rates. The empirical results indicate that digital technology-enabled business model designs significantly influence psychological stress in an unfavorable manner, and hence, negatively affect the willingness to use car sharing. Thus, our investigation points to the importance of accounting for potential dysfunctional societal effects of information systems in sustainability transformation

Access pricing, bypass and universal service in post

A postal regulator typically faces two issues which make the design of efficient access pricing especially difficult and which complicate the process of liberalizing the industry. First, universal service obligations, together with the presence of fixed costs, require retail prices to depart from the underlying marginal costs of the incumbent provider. Second, competing firms may be able to bypass the incumbent’s delivery network. Within a simple and stylized framework, this note analyzes how access charges should best be set in the light of these twin constraints

Economics of payment cards: a status report

This article surveys the recent theoretical literature on payment cards (focusing on debit and credit cards) and studies this research's possible implications for the current public policy debate over payment card networks and the pricing of their services for both consumers and merchants.Payment systems ; Credit cards

The Economics of Water Resource Allocation: Valuation Methods and Policy Implications

In this chapter a ‘watershed economics approach’ that could be applied in Cyprus is proposed which is composed of two important stages. In Stage I economic valuation techniques are used to establish the economic value of the competing demands for surface and groundwater, incorporating where necessary an analysis of water quality. The valuation exercise allows the objective balancing of demands based upon the equi-marginal principle to achieve economic efficiency. In Stage II a policy impact analysis is proposed which addresses issues of social equity and the value of water for environmental/ecological purposes. The analysis is undertaken within the confines of the watershed; the most natural unit for the analysis of water allocation and scarcity since it determines the hydrological links between competing users and thus the impacts of one user upon another. The methodology is encapsulated by a case study of the Kouris watershed in Cyprus