Does willingness to pay increase with the number and strictness of sustainability labels?

• Published in: Agricultural economics Vol. 49; no. 1; pp. 41 - 53
• Main Authors: Tebbe, Eva, Blanckenburg, Korbinian
• Format: Journal Article
• Language: English
• Published: Malden Wiley Subscription Services, Inc 01.01.2018
• Subjects: Animal products; Becker‐DeGroot‐Marschak mechanism; Behavioral economics; D11; D12; D44; Embedding; Embedding effect; Experimental economics; Food production; Green products; L15; Labels; Organic; Signaling; Sustainability; Willingness to pay
• ISSN: 0169-5150; 1574-0862
• DOI: 10.1111/agec.12394

Labels signaling sustainable product attributes are gaining importance, although uncertainty concerning the environmental, micro‐ and macroeconomic benefits of such labels persist. One of the questions still incompletely answered is whether Willingness To Pay (WTP) varies with a gradually increasing number of labels on a food product. In order to answer this question, we conducted a laboratory experiment with 191 student respondents, testing consumer valuations of different labeling strategies. Using the Becker‐DeGroot‐Marschak mechanism, WTP for 15 food products was measured. The products were endowed with up to six different sustainability labels, such that each grocery item was available in eight product versions. For perishable, nonperishable, and plant‐based products, the results indicate that participants are prone to allocating WTP‐premiums to labeled products, more than to unlabeled products. For animal products, however, labels do not influence WTP significantly. Furthermore, the premiums do not vary with an increasing number of labels, irrespective of whether the labels signal substitute or complementary sustainability information. The results are not entirely in line with normative notions of magnitude variation, but rather with the behavioral economic concept of embedding effects.