Recent agricultural economics literature has largely analyzed consumers'willingness to pay (WTP) for many credence attributes, including place of origin, organic, locally grown, environmentfriendly, fair trade, and animal welfare. In this study, we instead attempt to analyze why consumers value "locally grown," which is a credence attribute receiving increasing attention in the market. Specifically, we propose a distinction between the direct effect and the indirect effect of "locally grown" on consumers' attitudes towards agri-food products to explain consumers' preferences for locally grown products. We collect data from an experiment with university students and analyze the data with a structural equation modeling methodology.
Key Words: credence attributes, locally grown, inferences, attitudes.
Growing segments of world consumers seek improved quality, healthiness, and variety in their food (Verbeke 2005, IDDBA 2008). Accordingly, demand for agri-food products with credence attributes (e.g., place of origin, organic, locally grown, environment-friendly, and fair trade) is increasing rapidly (Nimon and Beghin 1999, Loureiro and Umberger 2007, Basu and Hicks 2008, Darby et al. 2008, Kanter, Messer, and Kaiser 2008, Froelich, Carlberg, and Ward 2009). This growing consumer demand has resulted in an extensive literature, studying a range of issues with credence attributes. Many studies suggest that credence attributes have an impact on some consumer groups' buying intentions, specifically on the amount they are willing to pay to acquire products. However, examining why consumers are willing to pay a premium price for credence attributes is notably less prevalent in the literature. For example, Lusk et al. (2006) recognized this in the context of country-of-origin labeling. In this study, we aim to begin filling this gap by analyzing consumers' motivations for buying agri-food products that are "locally grown."We clarify whether consumers are willing to pay a premium for "locally grown" products because they value the "locally grown" attribute itself, or because they mainly value "locally grown" as a signal of other desirable product attributes, such as freshness or its environmental friendliness.
To disentangle consumers' motivations for buying "locally grown" products, we propose and test a model that separates the direct effect from the indirect effect of "locally grown" on consumers' attitudes towards a product. Similar to the distinction suggested by Van der Lans et al. (2001), we define direct effect as the impact of "locally grown" on consumers' attitudes towards a product, without any mediation. We instead define indirect effect as the impact of "locally grown" on consumers' attitudes towards a product mediated by their belief that other desirable product attributes (e.g., freshness or environmental friendliness) are present in the product. These product attributes that are inferred from "locally grown" may be either experience attributes, which are features that can be verified by the consumer after disposal, or other credence attributes. For example, some consumers may value "locally grown" as a cue of product freshness, which is an experience attribute, or as a cue of environmental friendliness, which is another credence attribute.
We suggest that, along with "locally grown," any other credence attribute may have a direct and indirect effect on consumers attitudes towards a product. For example, some consumers may value the attribute "animal welfare" as a positive cue of desirable "food safety" (which is, according to our definition, an example of an indirect effect), while others may value the attribute "animal welfare" itself, because they really care about the welfare of animals (which is an example of a direct effect). Similarly, some consumers may be willing to pay a premium for food "from France," either because they believe that "from France" is a cue for "good flavor" or because they have a positive reaction associated with the idea of France. …