Pricing differentials for organic, ordinary and genetically modified food

Abstract

Abstract: Purpose – Aims to conduct research on consumer willingness to buy genetically modified (GM) foods with a price advantage and other benefits, compared with organic and ordinary types of foods, employing a robust experimental method. The importance of this increases as the volume and range of GM foods grown and distributed globally increase, as consumer fears surrounding perceived risk decrease and consumer benefits are communicated.

Design/methodology/approach – In contrast with survey-based experiments, which lack credibility with some practitioners and academics, customers chose amongst three categories of fruit (organic, GM, and ordinary) with experimentally designed levels of price in a roadside stall in a fruit-growing region of New Zealand. Buyers were advised, after choosing, that all the fruit was standard produce, and the experiment was revealed. Data were analysed with multi-nomial logit models.

Findings – Increasing produce type and price sensitivity coefficient estimates were found in order from organic through ordinary to spray-free GM produce, requiring market-pricing scenario simulations to further investigate the pricing implications.

Practical implications – The real market experimental methodology produced robust, useful findings.

Originality/value – It is concluded that, when the GM label is combined with a typical functional food benefit, GM fruit can indeed achieve significant market share amongst organic and ordinary fruit, even in a country where the GM issue has been highly controversial; GM fruit can gain a sustainable competitive advantage from any price reduction associated with production cost savings; and market shares of organic fruit are least sensitive to pricing and the introduction of GM fruit.