Consumers' Perception of Quality in Organic Food: a random utility model under preference heterogeneity and choice correlation from rank-orderings

With this study we investigate the preferences of an important category of consumers of organic products (Regular Consumers of Organic Food or RCOFs) allowing for preference heterogeneity. A survey instrument was developed to elicit preferences for important qualitative and quantitative attributes of extra virgin olive oil. The survey was administered via questionnaire to a random sample of 198 RCOFs in organic food stores of Naples, Italy. The choice task was organised around a fractional factorial main effects orthogonal design. Each respondent made 8 choices to rank-order 9 product profiles in terms of their individual preference. Product attributes included price, origin of production, type of certification and visual appearance. Interestingly, the set of observed responses appears to display significant preference heterogeneity for origin of production and price. Once heterogeneity and correlation amongst repeated choice by the same respondent are accounted for by means of random- parameter panel logit models, the fit increases dramatically with respect to the more restrictive fixed-parameter logit models. Results also suggest that price plays an important role as quality proxy, while visual appearance is not significant in preference modelling and the type of certification programme has a fixed effect.