Measuring willingness to pay for freshness in perishable goods: an empirical analysis

Abstract

Understanding consumer behavior toward perishable products is crucial for optimizing food supply chains, minimizing waste, and reducing lost sales. Such knowledge allows to effectively incentivize consumers to purchase items nearing the end of their shelf life. While some retailers already apply discounts on products with low remaining shelf life, there is limited insight into how consumers respond to these price changes. To address this gap, we investigate the effects of product attributes and discount labels on purchasing decisions, applying discrete choice models to sales and inventory data from a European retailer. Our analysis quantifies consumers' willingness to pay for an extra day of shelf life across various perishable goods, particularly in the dairy category. The results reveal a non-linear relationship between remaining shelf life and consumers' willingness to pay, alongside a significant reduction in perceived value for products with discount labels. Based on our case study, we recommend implementing differentiated discount policies adapted for different product categories, with transparent communication about the reasoning behind these discounts. By improving consumer perceptions of labeled foods and strategically adjusting the timing and magnitude of discounts, retailers can better align with customer preferences, reduce waste, and increase profitability.

Keywords: Discrete choice model, Willingness to pay, Food waste