Masked Heterogeneity in Aggregation: Incorporating Beliefs and Geographic Information into Consumer Willingness to Pay for State Brands

Abstract

AbstractState marketing programs for food and agricultural products are largely driven by consumers’ desires to purchase in-state products. Evaluations of state marketing programs have largely ignored consumer location and proximity to surrounding states, measures of ethnocentrism, and the presence of other geographic marketing labels. This study examines willingness to pay for own and out-of-state labels for a generic commodity, milk, within an eight-state region. The results show that an aggregate model conceals consumer heterogeneity in marginal willingness to pay values for state brands as compared to a disaggregate model, even when using random parameter logit models.