| Summary: | 碩士 === 國立中正大學 === 國際經濟所 === 98 === The main purpose of this study is to evaluate the economic benefits of country of the origin labeling (COOL) using both experimental auction and contingent valuation method (CVM) to elicit the consumer’s willingness to pay (WTP) and premium for Taiwan products vs. imported products. Furthermore, we also analyze the differences in consumption behavior among consumers with different risk perceptions.
For experimental auction, we used and compared a random nth-price and the Vickrey second-price sealed bid auctions. We recruited 120 consumers to participate in the experiments conducted in Taipei, Taichung, and Kaohsiung in March 2010. We chose oolong teas from Taiwan, Vietnam, and China as auctioned products due to the consumer’s safety concerns about these imported teas and the wide spread deceptive sales of these imported oolong teas as Taiwan products in the market place. One important aspect of our experimental design is to investigate the auction participants’ bidding behavior before and after knowing the countries of the origin for products. Participants tasted three oolong teas in the beginning of the experiment followed by five trials of auction. Then they were told the countries of origin for three teas and continued with five trials of auction. The experiment attempted to reflect the changes from current market situation with tasting but no COOL to the ideal market with both tasting and COOL.
Tobit and OLS models were used to estimate the WTP and price premiums for oolong teas. The econometric results show that Taiwanese consumers revealed very high premiums for Taiwan oolong tea after knowing the country of origin from both auction methods. The study also finds that consumers who are more risk averse have higher WTP for Taiwan oolong tea. For a random nth-price auction, before knowing the country of origin, the estimated price premiums from Tobit model for Taiwan tea relative to Vietnam and China teas are 7.43% and -1.89%, respectively. For the Vickrey auction, the estimated price premiums are 12.56% and -5.65%, respectively. However, after knowing the country of origin, the estimated premiums from random nth-price auction are 60.98% and 49.46% for Taiwan tea relative to Vietnam and China teas, respectively. The estimated premiums from the Vickrey auction are 35.70% and 18.85%, respectively. These estimates appear to be more credible than those from pervious experiments informing participants about the COO in the beginning of the auction.
Using data from CVM, we estimated a multinomial logit model. The estimated price premiums for Taiwan tea over teas from Vietnam and China are 928.97% and 1607.73%, respectively. One reason for such high estimated premiums from CVM is likely due to the pattern of responses to the hypothetical CV questions. Specifically, many participants did not switch their choices even with heavy discounts on imported teas. There is also a problem of small sample size. This study shows that auction experiment yields more credible results than CVM.
The results from both experimental auction and CVM clearly show that Taiwanese consumers have strong preferences for oolong tea produced domestically over those imported from Vietnam or China. It is important to have COOL for this product as well as many other food and agricultural products in Taiwan. The economic benefit is not limited to Taiwanese consumers. The rigorously enforced COOL would undoubtedly increase the competitiveness of Taiwan’s agriculture and capture the value of “Taiwan” as a brand in the market. These would greatly benefit Taiwanese farmers. The COOL appears to be one of the best approaches to reduce the negative impacts from trade liberalizations under WTO and ECFA.
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