Merging Brands and Consumer's Willingness to Pay for Environmentally-Friendly Agricultural Products

It is often said that there are too many brands of environmentally-friendly agricultural products, and that is one of the reasons why the premiums for those goods are low in Korea. The Paldang Clean Agricultural Belt Project is a Gyounggi Province's project that aims at extending the share of environmentally friendly farming in the 7 cities surrounding the Paldang Lake which is almost the only drinking-water source of Seoul Metropolitan Area. Although the primary goal of the project is contributing to the improvement of water quality in the lake, the project contains various steps to promote marketing of environmentally-friendly goods produced in the region. One of the strategies suggested is merging the existing small scale brands into one which is named “Paldang Seon (the gift from Paldang)” The paper investigates whether and how much consumers will pay more for the new large scale brands whose quality will be guaranteed by the Province. The differences in WTPs for the regular goods, the existing brands, and the Paldang Seon are estimated with a bivariate probit model as well as a contingent ranking model applied to a survey data set. It is found that the size of the additional WTP for the new brand differs by product-type substantially. For the cases of rice and fruits there are already well-known national level brands, and the WTPs for the larger scale brands are small. However, the WTPs for fresh vegetables and eggs where most brands are small-sized will increase substantially when the existing brands are merged into a larger one.