Organic produce demand estimation utilizing retail scanner data

Abstract

Retail demand relationships for organic and non-organic bananas, garlic, onions, and potatoes are examined using scanner data from a retail co-operative food store located in Bozeman, Montana. A level version Rotterdam demand specification is used in a six-equation system to estimate Hicksian demand elasticities. The own-price elasticity for organic onions is negative and significant. All other own-price elasticities are not significantly different from zero. This indicates consumers may not be very price sensitive for the goods in question. With few exceptions, the cross-price elasticities which are significant are also positive. Income elasticities are mostly significant and positive. Elasticity measurement may be somewhat imprecise due to a lack of variability in prices and an ambiguous error structure. Key factors influencing the quantities of the produce items purchased include the number of children in a household, the average age of adults in a household, and employment status of the primary grocery shopper. Educational status did not have any significant impact on quantities purchased.