The Consumption Choice of Organics: Store Formats, Prices, and Quality Perception –A Case of Dairy Products in the United States - Organic Food and Agriculture: New Trends and Developments in the Social Sciences - page 9

Eggs, 2005-06

Conventional
98.58%

Supermarkets

82.54% High-end High-end

0.12% 38.81%

Organic Value-oriented

1.42% Supermarkets 1.49%

Value-oriented 59.70%

15.93%

Eggs, 2007-08

Conventional
97.69%

Supermarkets Supermarkets

76.48% High-end 75.10% High-end

0.04% 11.67%

Organic

2.31% Value-oriented

Value-oriented 13.23%

21.18%

Fig. 2b. Consumption Choice by Store Format and Product Type for Eggs, 2005-2008

3.2 Econometric model specification
The choice between an organic versus a conventional food product is a typical binary
discrete choice problem. Let U o denote the utility of organic consumption and U c that of
conventional consumption. A common formulation of this kind of binary choice is the linear
random utility model,

o c

Ux  '    and Ux  '    . (1)

o o c c

 

o c

 

 

Prob Yx  1|  Prob UU   Prob x '    0| x , (2)

 

where we denote by Y =1 the consumer's choice of organic product ( o ), x is a vector of the
exogenous variables, β ≡ β o - β c is a vector of parameters (organic against conventional), and ε
is a random error. In this chapter, we adopt the logit model setup, i.e. assuming that the
probability follows the logistic distribution,