Hedonic Price Analysis in Food Markets

This article presents the basic theory of hedonic modeling, its empirical application and relevance, and the principal limitations and challenges. Agricultural economists have long utilized the hedonic price relationship, and the hedonic price technique has been utilized to estimate the implicit prices of attributes for numerous food products. It provides a framework of the hedonic models that can be used to quantify the long-term effects of exogenous shocks on quality, or implementation of regulatory policies. This article discusses the whole armamentarium of econometric models and methods familiar to applied economists, including parametric, semi-parametric, and non-parametric approaches. The objective is to describe briefly each econometric model within the hedonic context and provide an understanding of the implications and trade-offs inherent to the choice of each alternative. This is a fruitful area of research with increased customization of products and the increasing availability of large data sets.

Introduction

This introductory article starts by discussing the importance of food for human life, culture, and civilization. Although research on food demand and consumption has been active for a few decades, the article states, there are presently few resources to which someone can turn as a basic reference on the economics of food consumption and policy that covers specificities of theories and methods related to the study of food consumers and covers issues in food demand and policy. This book is meant to fill that gap. This article finally outlines the main parts in the book which are divided into theory and methods, food policy, and topics and applications.

Demographics and Food Consumption: Empirical Evidence

This article reviews only those empirical works that report results on the influence of sociodemographic factors on food consumption. It highlights those recent papers that can be helpful to the interested reader as a base from which to explore further aspects of demographics and food consumption. Reviewed empirical studies analyze the influence of demographics on food consumption following the two different approaches. This article presents the main demographic trends in developed countries. It gathers empirical evidence about the effect of demographic factors on food consumers' preferences for different food attributes, classified for pedagogical purposes in the following categories: ethics (organics, fair trade, and animal welfare), food safety and health (food safety, healthy diets, genetic modification, and irradiation), local and typical produce, ethnicity, and convenience. Finally, it concludes with some remarks and comments about emerging trends for future research.

Consumer Demand and Welfare in Equilibrium Displacement Models

The scope and value of the equilibrium displacement models (EDM) methodology in consumer demand and welfare analysis is extensive. This article reviews the basic elements of the model. It discusses different applications of the models in the literature that show the utility of the approach. The major forms of the EDM and implications for consumer demand and welfare are highlighted. An important question when using the EDM to generate results for changes in prices, quantities, and surplus values is how sensitive are the results to alternative plausible values of the partial elasticities of the demand/supply equations. It then turns at last to issues related to statistical precision and approximation errors. It concludes with the discussion of modifications and extensions that are likely to be made.

Demand for Meat Quality Attributes

Consumer demand for meat is constantly changing and agricultural economists have been prolifically researching this change. The purpose of this article is to give an overview of demand for meat quality attributes and it discusses implications for industry stakeholders and policymakers. Discussion focuses especially on demand for red meat quality attributes by consumers in the United States and Europe. It mentions that properly specified meat demand models require variables capturing changing consumer lifestyles and preferences for specific meat quality attributes if models are to be of value in understanding consumer behavior. It also shows the overall patterns in meat demand. It assesses how consumer demand for meat quality attributes is influencing consumer meat purchasing decisions. Numerous economic experiments and surveys reveal that consumers are willing to pay more for products they perceive possess intrinsic quality attributes they want.

Constrained Utility Maximization and Demand System Estimation

This article provides an overview of the literature on consumer and demand system analysis with emphasis on complete food demand systems. It presents theoretical foundations, constrained utility maximization, properties, and general demand restrictions. It discusses dual functions, including the expenditure function, the indirect utility function, and the distance function. The first three dual approaches are standard tools of the applied demand system analyst. Then it introduces the issue of welfare effects and integrability along with separability and aggregation. The article also provides a review of functional forms and covers econometric issues that include estimation, inference and hypothesis testing, specification tests, and other empirical issues. Models of the almost ideal demand and inverse systems as well as some additional hypothesis tests and inferences regarding model performance are estimated and reported.

Globalization and Trends in World Food Consumption

A close examination of global food consumption trends from studies on food consumption over a long period of time and over a wide range of spatial coverage uncovers clear emerging patterns. This article details the trading-up phenomenon and the convergence phenomenon. It shows the landscape of food consumption in the world by reviewing the per capita consumption pattern of major agricultural commodities by country using use consumption data published by the Food and Agricultural Policy Research Institute. It provides statistical evidence of the convergence hypothesis suggesting a narrowing of differences in consumption pattern between countries. It identifies the fundamental forces that drive the development of these patterns and gives the specific country examples of these phenomena. Some of the implications of this emerging consumption trend are explored, namely, food security and the emerging consumption affects on health outcomes.

Policy Evaluation and Benefit-Cost Analysis

Benefit-cost analysis (BCA) is an attempt to evaluate the wisdom of a proposal through quantified reasoning. This article explains the measurement tools available to the analyst for estimation of welfare effects of food policies. It gives a detailed description of the conceptual framework behind these measurements. The methods and practice of economic analysis of food safety policies are nicely described in and many of the legal, policy, and economic aspects of ensuring a safe food supply are discussed. The article summarizes briefly the underlying conceptual framework of BCA, and then discusses the regulatory practice of policy evaluation of food consumption policies. It briefly highlights two recent examples of BCAs conducted for US food policies and illustrates the potential for other food education interventions.

Effects of Generic Advertising on Food Demand

The purpose of this article is to examine the effects that generic advertising have on the demand for food and on nutrition in the United States. It begins with an overview of generic advertising programs in the United States. This is followed by a conceptual discussion of the economic impacts of these programs on consumers and producers. The empirical methods economists use to examine the effects of generic advertising on food demand are reviewed. This is followed by a discussion of the results of selected studies with a particular focus on demand impacts. It examines the impact of generic advertising on obesity and poor nutrition. The chapter ends with a conclusion of findings of some nutritionists and economists that have been highly critical of generic advertising, and have linked the rise in these programs to the increasing trend in obesity in the United States.

Food Security Policy in Developing Countries

This article reviews the concept of food security and the various approaches developing countries have used to promote food security in their countries. The discussion therefore involves both direct and indirect policy interventions that are used to ensure food security in developing countries. It presents a simple microeconomic model of food security that explains individuals' demand for food ingredients as well as the different channels through which they become food-insecure. It examines the food security policies of developing countries as they relate to the theoretical model. It discusses food market intervention policies and focuses on the indirect food security measures normally employed to attain a sustainable social and economic environment over the long term. This article shows the efforts several policy analysts have put into research to examine policy options and their impacts on food security.