A Hedonic, Hedonic Metric and Logistic Approach to Estimating Demand for Fluid Milk Products Using Micro Level Data

Abstract

This study analyzes the market for functionally enhanced milk products. The first paper investigates the factors that derive the demand for soymilk products based on a two-stage hedonic model. In the first stage, the relationship between the prices of dairy products and the attributes of these products are exploited to derive the marginal implicit attribute prices. In the second stage, we used these prices along with the information on households’ demographic background to explain the demand for product attributes. Our results indicate that although the soymilk taste is undesirable, since soymilk is lactose/cholesterol free (LFCF) and mostly organic, it has a higher price premium than other milk types. In the second paper, we introduced the concept of Hedonic Metric (HM) approach as an approximation method to estimate the price elasticities in classical traditional models. In these models, the number of estimated parameters increases exponentially with the number of variables included in the model. HM method applied in this paper is practical and significantly reduces the number of parameters. The HM approach is compared with the Distance Metric (DM) approach of Rojas and Peterson (2008) to see which method gives better approximations to original LA/AIDS and RM models. In the last paper, we applied a two-stage logistic estimation to analyze consumer attitudes towards specialty milk types. In the first stage of our estimation we estimated the hedonic attribute prices. In the second stage we used these implicit prices along with the demographic information on households to estimate the factors that affect households’ decision to purchase specialty milk types. Our results indicate that while CFLF attribute and soy attribute are complementary with each other, whereas the organic attribute is a substitute to them. Minority households have a much higher probability of purchasing specialty milk types than white households.