Demand for value-added products is highly segmented among different types of consumers. In this article, we assess consumer preferences for local, organic, and GMO-free potatoes in order to discover their potential niche markets. We identify sociodemographic characteristics that affect consumer preferences and compare the effects of different attributes on consumers' willingness to pay. Results suggest that the attribute "Colorado grown" carries a higher willingness to pay than organic and GMO-free attributes.JEL Classifications: D12, Q13The recent farming crisis nationwide associated with declining commodity prices and w e a t h e r -r e l a t e d yield p r o b l e m s h a s forced farmers to find new markets for their commodities through value-added marketing. To discover the right niche market is a complicated task because demand is highly segmented among consumers who may be concerned with different attributes (such as local, organic, eco-labeling, and other specialty types). Baker deals with the case of market segmentation for apples, showing that there are different types of apple consumers, from those who are strongly concerned about food safety to those who are extremely price sensitive. The current study uses contingent valuation
In experimental auctions, participants are usually given an initial endowment or cash compensation that will cover the costs associated with their bids in the experiment as well as their participation time. This study analyses participants' bids in a randomly binding second-price auction to test the effect of the initial endowment on participants' willingness-to-pay estimates. Three different endowments: $2, $4, and $6 are used to compensate participants in an experimental auction. It is found that participants receiving $4 or $6 as an initial endowment, bid statistically higher than those receiving only $2. Thus, willingness-to-pay estimates are sensitive to the initial endowment. Based on the results obtained in this experiment, it is concluded that endowments that are closer to the value of the auctioned good may be a more appropriate way to compensate auction participants in order to reveal their true willingness to pay for a private good, and to reduce overbidding. Additionally, the findings illustrate that an initial compensation closer to the participants' value of time may inflate their bids, and consequently may not be a correct compensation mechanism to elicit true willingness-to-pay for private goods. New ways of compensating participants in experimental auctions should be investigated.
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