The Long-Term Effects of Marketing Organic Products

Abstract

Demand for organic foods has been increasing in many product categories. Prior studies report that consumers are willing to pay premium prices for organic products, but little is known about their role in supermarket competition. In this study, we investigate long-term cross-chain impacts of marketing organic and conventional products. Our findings reveal that prices of conventional products generate more store traffic than do prices of organic products. On the other hand, in response to a price increase for organic products, consumers tend to switch to conventional products within a retail chain rather than to other retail chains.

Keywords: organic products, food marketing, marketing mix, vector autoregressive models

JEL Classification: L13, M31