Consumers’ Recognition of Multifunctionality in Agriculture and Price Premiums for Environmentally Friendly Agricultural Products: Evidence from a Survey Experiment

Abstract

We conduct an online survey experiment to determine the influence of multifunctionality recognition in agriculture on the price premiums of environmental-friendly agricultural products. We use the case of fish-friendly rice produced in Shiga prefecture, Japan, which contributes to the conservation of the water and ecosystem in rural areas around Lake Biwa by setting up fish ways and reducing the use of herbicides. We assume two conditions for consumers to pay premiums on environmental-friendly agricultural products. The first is that consumers recognize multifunctionality in agriculture. The second condition is that consumers have a correct understanding of environment-friendly agricultural products. We thus examine the effects of respondents’ attributes on their responses to two types of visual stimuli: one associated with the multifunctionality of agriculture and information about environment-friendly agricultural products. In the analysis of the respondents; willingness to pay, the price premium of the group with both the stimulus and information is significantly higher than the price premium of the control group with no interventions. However, the price premium of the group with only the stimulus is not statistically different for the control group. The policy implication of this research is that consumers are more likely to support agri-environmental policies if they recognize both the multifunctionality of agriculture and the properties of environmental-friendly agricultural products. The two types of stimuli have complimentary effects on increasing price premiums. Promoting the recognition of multifunctionality is especially important for those who do not usually access information on agriculture.