Consumer preferences for differentiated food products

Vugar Ahmadov

doi:10.7273/000005836

A significant characteristic of most markets is that the commodity being exchanged is differentiated. A differentiated commodity is one where consumers distinguish among its components or attributes. In general, products are differentiated in two dimensions, one being the dimension of varietal (or horizontal) differentiation and the other being a dimension of quality (or vertical) differentiation. The dissertation consists of three manuscripts, studying consumers' preferences for differentiated products. First manuscript provides theoretical evidence on heterogeneity of consumers' preferences for vertically differentiated products. Second manuscript investigates consumers' perception of quality and safety on product evaluation. Third manuscript studies consumers' preferences for cold smoked salmon attributes using a conjoint choice experiment. In first manuscript, the effects of differences in quality perception arising from exogenous technology preferences on firm's profits in domestic and foreign markets were analyzed using one-shot three stage game theoretic approach. Two-country game theoretic model allows only one domestic and foreign firm to exist in both markets. Due to exogenous preferences for technologies used by domestic firms in respective markets, consumers perceive foreign firm's products relatively lower than domestic firm's products. To gain a market share, foreign firm sets its price lower than price of domestic firm's products upon export. Differences in quality perception of physically same product across two markets encourage domestic firms to produce relatively low quality for foreign markets or offer the product with technology preferred in foreign market. In second manuscript, the effects of country of origin, home and foreign region of origins on consumers' perceptions of food safety, quality and willingness to buy were examined. The findings suggest that consumers' perception of food quality and likelihood of purchasing food product is affected by product origin cues through perception of food safety. Estimated results demonstrate that consumers evaluate and perceive food attributes more favorably if they have opportunity to taste its sample. Product sampling significantly improved consumers' perception, especially if food is low priced. In third manuscript, a conjoint based choice experiment was conducted to elicit consumer preferences for cold smoked salmon attributes. Product attributes include 1) production method (two levels - wild versus farmed), 2) origin of salmon (four levels - two country of origin - USA and Canada) and two region of origin - Alaska and British Columbia), and 3) price (three levels - premium, high and low). Consumers' preferences for product attributes were estimated using random parameters logit model to overcome the problem of irrelevant independence of alternatives. The results suggest that consumer preferences are positively affected if the origin of product is identified with Alaska and British Columbia. The estimations show consumer preferences for wild smoked salmon over farmed smoked salmon. The study computes the trade-offs between attribute levels showing that consumers are willing to pay premium for wild smoked salmon, and smoked salmon from Alaska but want discount for British Columbia compared to Canada.

Consumer preferences for differentiated food products

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