The USDA's National Organic Program (NOP), with its unified definition and labeling requirements, holds great promise for increasing commerce in and decreasing transaction costs associated with purchasing organic food. However, the label and its meaning must both be well understood and reflect the traits consumers want if this promise is to be realized. This paper reports the results of a survey and experimental auction on consumers' preferences for organic standards. On one hand, the USDA NOP's Final Rule broadly conforms to consumer preferences regarding what practices should or should not be permitted in organic production and processing. Consumers support a strict definition of organic in general, opposing the use of a variety of practices historically banned by organic certifiers. For example, both the survey and auction methods found that consumers support the banning of Genetically Modified Organisms in organic food and are willing to pay a premium to avoid them. Consumers are also in accord with the Final Rule's exclusion of irradiation, biosolids, growth regulators, etc. On the other hand, the survey and auction results reveal a lack of understanding of the label's meaning as well as a disconnect between the label's function (detailing acceptable production practices) and consumers' stated motivations for buying organic (e.g., support for a local sustainable food system). Implications of these findings for decision makers in policy and industry are discussed. Of particular focus will be the role of these agents in promoting products that allow consumers to purchase items that reflect and support these values.Consumer/Household Economics,

Christy, Ralph D.

Conner, David S.

English

Research Papers in Economics

The Organic Label: How to Reconcile its Meaning with 
Consumer Preferences
David Conner and Ralph Christy
The USDA’s National Organic Program (NOP), with its unified definition and labeling requirements, holds great promise 
for increasing commerce in and decreasing transaction costs associated with purchasing organic food. However, the label 
and its meaning must both be well understood and reflect the traits consumers want if this promise is to be realized.
This paper reports the results of a survey and experimental auction on consumers’ preferences for organic standards. 
On one hand, the USDA NOP’s Final Rule broadly conforms to consumer preferences regarding what practices should 
or should not be permitted in organic production and processing. Consumers support a strict definition of organic in 
general, opposing the use of a variety of practices historically banned by organic certifiers. For example, both the 
survey and auction methods found that consumers support the banning of Genetically Modified Organisms in organic 
food and are willing to pay a premium to avoid them. Consumers are also in accord with the Final Rule’s exclusion of 
irradiation, biosolids, growth regulators, etc.
On the other hand, the survey and auction results reveal a lack of understanding of the label’s meaning as well as a 
disconnect between the label’s function (detailing acceptable production practices) and consumers’ stated motivations 
for buying organic (e.g., support for a local sustainable food system).
Implications of these findings for decision makers in policy and industry are discussed. Of particular focus will be 
the role of these agents in promoting products that allow consumers to purchase items that reflect and support these 
values.
the findings of a survey and experimental auction 
targeted at current consumers of organic food in 
Ithaca, NY. The major question to be addressed is 
whether consumers get what they want from organic 
food. Specifically, does the Final Rule, with its list 
of acceptable and banned practices, conform to con-
sumers’ preferences for what should be allowed? 
Does the label address consumers’ stated reasons 
for buying organic? Do consumers really understand 
the label’s meaning? Implications for public policy 
and private-firm strategy will be discussed. 
Methods1
A survey of current consumers of organic food was 
conducted in Ithaca NY in the autumn of 2000. 
Questions focused on reasons for buying organic, 
preferences for what should and should not be in-
cluded in the definition of organic, and willingness 
to pay (WTP) to have or avoid the Big 3 in organic 
food. An experimental English auction in February 
2002 attempted to validate the WTP figures by mea-
suring them by another method. The two methods 
complement each other: surveys collect data from 
a larger sample and allow for a broader array of 
Organic food, being a credence good (Darby and 
Karni 1973), requires third-party verification. Prior 
to 2001 this function was performed by a series of 
independent agencies, each with a potentially dif-
ferent definition of organic. Lohr (1999) argues that 
a universal set of standards decreases transaction 
costs and facilitates commerce in organic food.
 The USDA’s National Organic Program’s Final 
Rule has created this unified standard, detailing a 
list of inputs and practices permitted under organic 
production and processing. By the end of 2002 all 
food labeled organic must conform to the Rule. The 
initial proposal for the Rule, released in 1997, was 
widely criticized by consumer and producer groups 
as being too lenient. These groups were particularly 
vocal in their opposition to the inclusion of what 
became known as the Big 3: genetically modified 
organisms (GMOs), biosolids, and irradiation. The 
Big 3 are not allowed in the Final Rule.
 The goal of the organic label—providing 
information to decrease transaction costs and fa-
cilitate commerce—is best accomplished when the 
label’s meaning is well understood by consumers 
and reflects their preferences. This paper reports 
David Conner and Ralph Christy are research associate and 
professor, respectively, in the Department of Applied Economics 
and Management at Cornell University, Ithaca, NY.
1 Copies of the survey instrument and experimental design are 
available upon request from the author.Conner and Christy The Organic Label: How to Reconcile its Meaning with Consumer Preferences   41
questions (attitudes, etc.), while auctions impose a 
budget constraint and real tradeoffs not present in 
hypothetical survey questions.
A survey was administered to a group of current 
consumers of organic food in Ithaca, NY. Ithaca is 
a town known for its knowledge of and activism in 
food issues. The surveys were completed at the two 
locations where organic food is most prominently 
sold: the local farmers’ market and cooperative 
“health food” market. The major supermarket in 
the area with a significant organic produce section 
declined to participate. Historically, the vast major-
ity of organic food has been bought in health food 
stores, not in supermarkets (Reicks, Splett, and 
Fishman 1997). A large number of organic growers 
sell at the farmers’ market, so patrons at these two 
locations are likely to consist of typical consumers 
of organic food in Ithaca.
The target population of this research is current 
consumers of organic food. The problem is that the 
demographic and socio-economic traits of this popu-
lation are unknown. No claims can be made that the 
sample group represents the general populations of 
Ithaca, New York State, or the nation as a whole. 
However, the fact that Ithaca has a thriving organic 
market (located primarily at these two locations) sug-
gests that the survey respondents provide an interest-
ing study group for this issue. These people actively 
seek out organic food by shopping at these markets, 
suggesting they belong to the market segment The 
Hartman Group (1996) calls “True Naturals,” the 
“core purchasers” of organic food.
The surveys were compiled over several sessions 
in the fall of 2000. The farmers’ market operates on 
Saturdays and Sundays; due to space constraints, the 
board of directors only granted permission to collect 
data on Sundays. Data were collected on September 
30 and October 7, 2000. The surveying sessions at 
the cooperative market were conducted on a number 
of days and times in order to reach people with a 
variety of shopping habits. Only people who cur-
rently buy organic food were included. The surveys 
had three main components: a section on attitudes 
and shopping habits, including why shoppers buy 
organic and what they believe ought to be included 
in the definition of organic; a Contingent-Valuation 
(CV) component measuring their WTP to have or 
avoid each of the Big 3 included in the definition; 
and demographic traits such as age, gender, educa-
tion and income. A total of 123 usable surveys were 
compiled.
The CV portion elicited open-ended responses to 
the three WTP questions. The baseline was a food 
item that shoppers normally buy organic and that 
costs $1. It is certified organic, but by an agency that 
allows the use of GMOs, biosolids, and irradiation, 
respectively. Respondents were asked how much 
they would pay for a bag of the same item, identical 
in appearance, nutrition, freshness, etc., but that is 
certified by an agency that does not allow the use of 
each of the Big 3, singly. The three WTP questions 
were in an open-ended format that tends to produce 
less-biased estimates than those from dichotomous 
choice questions (Balistreri et al. 2001). 
The experimental English auction was conducted 
on a different group of organic consumers (recruited 
via posters and email announcements) in the Eco-
nomics Experiment Lab at Cornell University. The 
English auction was chosen because of its simplicity 
and demand-revealing properties (Davis and Holt 
1993). Participants were given an endowment of 
$20, from which they paid for any item they won in 
the auction. The WTP was determined by auctioning 
two items: a baseline item, a bag of organic blue 
corn chips that makes no claims about its GMO 
content, and a bag of organic blue corn chips that 
has a seal stating it is GMO-free. The original 
packages of the chips were just as described to the 
participants; participants were shown a blown-up 
image of the actual GM-free label. The chips were 
removed from the original packaging and placed in 
identical plastic bags so that the participants were 
not influenced by brand recognition, logos, or other 
packaging features. Items were auctioned in random 
order and in a number of rounds to control for order 
and wealth effects. 
Participants were also given an exit survey ask-
ing for demographic information closely matching 
the 2000 survey, and a question gauging their 
understanding of organic labels. They were asked 
whether a number of practices are allowed under the 
definition of organic. The intention of this question 
was to see if they were aware that GMOs are not 
allowed in organic production. Other components 
in the question (including, e.g., manure from non-
organic farms, botanical pesticides, and mined rock 
powders) were included because asking only about 
GMOs would have put too much attention on that 
component and possibly biased the responses.42   March 2004 Journal of Food Distribution Research 35(1)
Results
Survey respondents broadly agree with the Final 
Rule on what should or should not be allowed in 
organic production and processing. When asked if 
each of the Big 3 ought to be allowed, 85, 80 and 76 
percent said that GMOs, biosolids, and irradiation, 
respectively, should not be allowed; the remaining 
percentages replied either it should be allowed, no 
opinion, or don’t know. Similarly, 63, 80, 95, and 
76 percent say that manure from non-organic farms, 
antibiotics, growth regulators and confinement of 
animals, respectively, should not be allowed. All 
these practices are banned by the Final Rule.
Consumers are willing to pay more to avoid 
the Big 3 in organic foods. The mean and median 
premia they will pay for GMO-free organic food 
are $0.75 and $0.50. For biosolid-free, the mean is 
$0.78 and the median $0.50; for irradiation-free, the 
mean is $0.75 and the median is $0.50. 
The auction also demonstrates a WTP to avoid 
GMOs in organic food. The bids (for both the third 
and final round, and the average bids over all three 
rounds) for the labeled and non-labeled chips were 
significantly different at the 95% confidence level; 
consumers bid more for the labeled chips. The mean 
difference for both the third round and the average 
round was $0.40. Expressed as a percent premium 
(and excluding one extreme outlier observation), 
consumers would pay on average 95% more in the 
third round and 15% more in the average round. 
Data from the surveys and experiment point to 
a lack of understanding of what exactly consumers 
are getting from organic food. Only 53% of auc-
tion participants knew that organic already implies 
GMO-free. Furthermore, a number of organic corn 
chip manufacturers have placed GMO-free labels 
on their packages along with the organic label, in 
spite of the fact that the GMO-free information is 
redundant. They clearly believe that the cost of this 
redundant label is justified by the increased sales 
it brings in. Perhaps the GMO-free label provides 
psychological incentive to buy the product among 
consumers who already understand the organic 
label’s meaning, as one auction participant men-
tioned after the experiment. 
The survey shows another area in which consum-
ers may not fully understand the label’s meaning. 
The Final Rule fails to provide a means of express-
ing in the marketplace certain values associated with 
organic agriculture. When asked why they buy or-
ganic, respondents commonly stated reasons such as 
concern about pesticide residues, the environment, 
and farm worker safety. Buying organic certainly 
contributes positively to these issues; however, 
many respondents also mentioned reasons such as 
support for sustainable agriculture and local food 
systems, and opposition to the “corporate” food 
system. The label, as a list of permitted practices, 
does not necessarily facilitate purchases reflecting 
these values.
Organic does not necessarily mean sustainable. 
Sustainable agriculture aims to address both the eco-
logical and social problems associated with mod-
ern industrialized agriculture. But the organic label 
provides, at best, information on the environmental 
impacts at the production site. It does nothing to 
address pollution from transporting food over great 
distances, for example, let alone social-justice and 
community issues. Furthermore, with the entry into 
the organic market (and acquisition of once-small, 
independent organic firms) by large agri-business 
corporations, it is clear that buying organic does not 
necessarily imply supporting small family farms or 
a local sustainable food system, as many surveyed 
consumers stated.
Conclusions and Implications
If the purpose of the organic label is strictly to 
list practices which are or are not permissible, 
the Final Rule is broadly in accord with consumer 
preferences, according to a 2000 survey of organic 
consumers in Ithaca, NY. Results suggest that none 
of the practices banned in the Final Rule (especially 
the Big 3) ought to be reinstated.
However, consumer misunderstanding of the 
label’s meaning points to a need for better com-
munication if the label is to function optimally. The 
label could state the information itself, or refer to 
consumer-friendly web pages, toll-free numbers, 
etc. Fees from grower certification could be used to 
fund advertisements that promote organic, explain 
its benefits, and clarify the label’s meaning.
Firms can use consumer aversion to the Big 3 as 
a promotional tool. Both the survey and auction in-
dicate consumers will pay more to avoid GMOs. In 
a sense, consumers are getting this GMO-free trait 
“for free” when buying organic food, even though 
they are willing to pay extra for it. Promotions 
should highlight the GMO-, biosolid-, and irradia-
tion-free traits and emphasize that buying organic Conner and Christy The Organic Label: How to Reconcile its Meaning with Consumer Preferences   43
is the best way to avoid the Big 3. Growers can also 
tout their independence from the corporate food 
system and contributions to community develop-
ment, social justice, etc.
The ability of the organic label to facilitate the 
expression of progressive values in the marketplace 
is more troublesome. One option is to incorporate 
social and broader environmental values into or-
ganic-certification requirements, although they 
would be difficult to quantify and implement. The 
USDA organic program is probably not the best 
way to accomplish this.
Many activists argue that another word is needed, 
one that incorporates the list of allowed practices 
along with the values associated with the origins 
of the organic movement. Such a new word could 
address the broader issues not covered by USDA 
organic, but would have to start from scratch to gain 
the public recognition, prestige, and understanding 
currently enjoyed by the word organic.
Qualifying firms could take greater advantage 
of existing labels and programs such as local, Fair 
Trade, “green,” etc. Labeling systems that account 
for values not captured by existing programs need 
to be defined, developed and implemented. Activist, 
consumer, and producer groups should cooperate to 
promote products with these labels. 
In general, steps are needed to allow consumers 
to access information that allows them to make pur-
chasing decisions that reflect their values and to use 
the marketplace to shape the world as consumers as 
well as citizens. Both the public and private sectors 
have key roles to play in this endeavor.
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Can Hypothetical Questions Reveal True values? A Laboratory

Free Competition and the Optimal Amount of Fraud.”

Shelf Labeling of Organic Foods: Effects of Customer Perceptions and Sales.” Working paper 97-03, The Retail Food Insustry

The Hartman Report. Food and the Environment: A Consumers’ Perspective, Phase I. Prepared for The Food Alliance by The Hartman Group,

Welfare Effects of Eco-label Proliferation: Too Much of a Good Thing?” Paper presented at the FAMC Conference on New Approaches to Consumer Welfare,

THE ORGANIC LABEL: HOW TO RECONCILE ITS MEANING WITH CONSUMER PREFERENCES

THE ORGANIC LABEL: HOW TO RECONCILE ITS MEANING WITH CONSUMER PREFERENCES

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