Three Essays on Experimental Auctions and Organic Products

Nathan Shea Skuza

This dissertation consists of three studies that investigate the performance of economic field experiments and evaluate the determination of price premiums associated with organically produced food and apparel. The first study investigates the impact that compensation has on individuals' responses in a point-of-purchase setting, when the opportunity costs of participation are small and product(s) are familiar to participants. We conducted a field experiment using the incentive compatible BDM mechanism to elicit consumers' willingness to pay (WTP) values for organically produced apples. Our results suggest that compensated individuals tended to offer WTP values that were significantly larger on average than values offered by non- compensated individuals. The second paper, addresses consumers' WTP for organic versus conventionally produced cotton t-shirts. This research uses a random 2nd price auction technique to determine WTP, with a follow-up survey of consumers' purchase behaviors, importance of apparel product attributes, and beliefs about organic products, A Tobit model was used to identify demographic, attitude and knowledge variables impacting WTP. Significant variables included race/ethnicity, belief about organics and past organic purchase behavior, importance of product attributes, and knowledge of market prices. This study demonstrates successful use of the random 2nd price auction technique in the apparel field and identifies groups of common factors that differentiate groups of consumers in terms of their WTP for organic t-shirts. The third study utilizes an experimental economics mechanism at the point-of-purchase to elicit consumer values for organic attributes in apples and milk. For apples we investigate the interactions in terms of WTP between the organic label attribute and apple size, while for milk we consider the interactions between the organic attribute and milk fat content. Willingness to pay was modeled using a Cragg model which allowed for a two-stage WTP decision process. We found that organic increased the probability of zero bids for apples, and higher fat content decreased the probability of zero bids in milk. Apples received premiums for organic production and for larger size, and the premiums were additive. Organic was found to receive a substantial premium in milk, but higher fat content did not add extra value.

Three Essays on Experimental Auctions and Organic Products

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