Demand Structure and Willingness to Pay for Organic Dairy Products

This paper analyses if the introduction of a new and “low fat” organic variety of fluid milk has any effect on consumers’ valuation of organic milk in general and can rewind the stagnating trend in the demand for organic milk. In order to analyse this, the consumers’ purchasing structure was analysed and it was found that consumers first chose between different types of milk and secondly, decided of whether this milk was organic or conventional. Elasticities indicated a greater temporary flexibility in the demand structure and a permanent change of substitution patterns through the introduction of the new type of milk. The calculation of marginal Willingness to Pay show a temporary raise in consumers’ valuation of the organic quality attribute, but this was followed by a decline.