US Household Demand for Organic Fruit

84 Pages Posted: 20 Mar 2019

See all articles by Erik Nelson

Erik Nelson

Bowdoin College

John M. Fitzgerald

Bowdoin College

Nathan Tefft

Bates College

John Anderson

Bowdoin College - Department of Economics

Date Written: September 1, 2017

Abstract

We estimate US household monthly elasticities of demand for some of the more popular organic fruits. To our knowledge, this is the first US-wide, multi-year analysis of price and income elasticities for various organic fruits. We calculate elasticities of demand for low-income, middle class, and rich income bracket households using three estimation techniques: two econometric methods and one machine learning method (least absolute shrinkage and selection operator (LASSO)). Demand estimates are based on Nielsen scanner data from approximately 60,000 households collected from 2011 to 2013. Generally, we find that own-price conditional and unconditional elasticities of demand for organic fruits are negative. Unconditional elasticity magnitudes tend to be largest in the representative middle-class household. Income elasticities of demand measurements are inconsistent and often statistically insignificant. This finding is consistent with the survey literature finding that many consumers buy organic food for mostly moral or ethical reasons. We run two policy experiments: a 10% subsidy of organic fruits, and a 10% tax on conventional fruits. Our hypothetical policies engender a stronger reaction among the general public than habitual buyers of organic fruit; unconditional purchase and expenditure elasticities are generally larger than conditional purchase and expenditure elasticities. Finally, we find that elasticities measured with the LASSO technique are not radically different than those measured with econometric methods. The most noticeable difference between the two analytical techniques is that LASSO is more likely to find price and income elasticities of demand that indistinguishable from zero, both substantively and statistically.

Keywords: organic fruit, elasticities of demand, econometrics, machine learning, Nielsen Consumer Panel data

JEL Classification: Q18, C01, C24, C34, C55, D10, D12

Suggested Citation

Nelson, Erik and Fitzgerald, John M. and Tefft, Nathan and Anderson, John, US Household Demand for Organic Fruit (September 1, 2017). Available at SSRN: https://ssrn.com/abstract=3081997 or http://dx.doi.org/10.2139/ssrn.3081997

Erik Nelson (Contact Author)

Bowdoin College ( email )

Brunswick, ME 04011
United States

John M. Fitzgerald

Bowdoin College ( email )

9700 College Station
Brunswick, ME 04011
United States
207-725-3593 (Phone)

Nathan Tefft

Bates College

204 Lane Hall
2 Andrews Road
Lewiston, ME 04240
United States

John Anderson

Bowdoin College - Department of Economics ( email )

Brunswick, ME 04011
United States

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