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Retail Intermediation and Local Foods

Author

Listed:
  • Timothy J. Richards
  • Stephen F. Hamilton
  • Miguel Gomez
  • Elliot Rabinovich

Abstract

Direct sales of local foods, for instance through farmer’s markets, have reached a plateau, while intermediated sales (through more traditional retailers) are still rising rapidly. We provide an explanation for the growth of intermediated local foods based on the observation that consumers prefer to buy local foods as part of a shopping basket that includes both local and non-local items. We test our hypothesis using data from a natural experiment conducted by Relay Foods, an online retailer based in the U.S. state of Virginia, and a multi-variate logit model of shopping-basket demand. We find significant complementarities among items in a sample shopping basket that are not reflected in estimates from a discrete-choice model of category demand. Estimates of a structural pricing-and-local-content model reveal important incentives for retailers to offer local foods as part of a broader selection of grocery items.

Suggested Citation

  • Timothy J. Richards & Stephen F. Hamilton & Miguel Gomez & Elliot Rabinovich, 2017. "Retail Intermediation and Local Foods," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 99(3), pages 637-659.
    • Handle: RePEc:oup:ajagec:v:99:y:2017:i:3:p:637-659.
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    File URL: http://hdl.handle.net/10.1093/ajae/aaw115
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    Citations

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    Cited by:

    1. Xiao Dong & H. Allen Klaiber & Zoë Plakias, 2023. "I scream, you scream, we all scream for local ice cream: Consumer preferences for locally processed foods," Agribusiness, John Wiley & Sons, Ltd., vol. 39(1), pages 51-64, January.
    2. Printezis, Iryna & Grebitus, Carola, 2018. "Marketing Channels for Local Food," Ecological Economics, Elsevier, vol. 152(C), pages 161-171.
    3. Chiaverina, Pierre & Drogué, Sophie & Jacquet, Florence, 2024. "Do Farmers Participating in Short Food Supply Chains Use Less Pesticides? Evidence from France," Ecological Economics, Elsevier, vol. 216(C).
    4. Azucena Gracia & Miguel I. Gómez, 2020. "Food Sustainability and Waste Reduction in Spain: Consumer Preferences for Local, Suboptimal, And/Or Unwashed Fresh Food Products," Sustainability, MDPI, vol. 12(10), pages 1-15, May.
    5. Stewart, Hayden & Dong, Diansheng, 2018. "How strong is the demand for food through direct-to-consumer outlets?," Food Policy, Elsevier, vol. 79(C), pages 35-43.
    6. Dawn Thilmany & Elizabeth Canales & Sarah A. Low & Kathryn Boys, 2021. "Local Food Supply Chain Dynamics and Resilience during COVID‐19," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(1), pages 86-104, March.
    7. Hung‐Hao Chang & Chad D. Meyerhoefer, 2021. "COVID‐19 and the Demand for Online Food Shopping Services: Empirical Evidence from Taiwan," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(2), pages 448-465, March.
    8. Lauren Chenarides & Carola Grebitus & Jayson L Lusk & Iryna Printezis, 2022. "A calibrated choice experiment method," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 49(5), pages 971-1004.
    9. Maureen Stickel & Steven Deller, 2020. "Local Foods and Local Economic Performance," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 42(2), pages 335-357, June.
    10. Azucena Gracia & Ana María Sánchez & Francesc Jurado & Cristina Mallor, 2020. "Making Use of Sustainable Local Plant Genetic Resources: Would Consumers Support the Recovery of a Traditional Purple Carrot?," Sustainability, MDPI, vol. 12(16), pages 1-17, August.
    11. Ge, Houtian & Gomez, Miguel I. & Richards, Timothy J., 2018. "Retailer Marketing Strategy and Consumer Purchase Decision for Local Food – An Agent-Based Model," 2018 Annual Meeting, August 5-7, Washington, D.C. 273819, Agricultural and Applied Economics Association.
    12. Nicole Didero & Marco Costanigro & Becca B. R. Jablonski, 2021. "Promoting farmers market via information nudges and coupons: A randomized control trial," Agribusiness, John Wiley & Sons, Ltd., vol. 37(3), pages 531-549, July.
    13. Jeffrey K. O'Hara & Marcelo Castillo & Dawn Thilmany McFadden, 2021. "Do Cottage Food Laws Reduce Barriers to Entry for Food Manufacturers?," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(3), pages 935-951, September.
    14. Yizao Liu & Xuan Chen & Adam N. Rabinowitz & Benjamin Campbell, 2020. "Demand, challenges, and marketing strategies in the retail promotion of local brand milk," Agricultural Economics, International Association of Agricultural Economists, vol. 51(5), pages 655-668, September.
    15. Maximilian Koppenberg & Stefan Hirsch, 2022. "Output market power and firm characteristics in dairy processing: Evidence from three EU countries," Journal of Agricultural Economics, Wiley Blackwell, vol. 73(2), pages 490-517, June.
    16. Demko, Iryna & Plakias, Zoe & Katchova, Ani, "undated". "How do farmers compose their portfolio of local food marketing channels?," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 259931, Agricultural and Applied Economics Association.
    17. Mydland, Ørjan & Størdal, Ståle & Kumbhakar, Subal C. & Lien, Gudbrand, 2022. "Modeling markups and its determinants: The case of Norwegian industries and regions," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 252-262.
    18. Lina Wang & Elliot Rabinovich & Timothy J. Richards, 2022. "Scalability in Platforms for Local Groceries: An Examination of Indirect Network Economies," Production and Operations Management, Production and Operations Management Society, vol. 31(1), pages 318-340, January.
    19. Kaiyuan Lin & Hiroe Ishihara & Chialin Tsai & Shihhan Hung & Masaru Mizoguchi, 2022. "Shared Logistic Service for Resilient Agri-Food System: Study of E-Commerce for Local and B2B Markets in Japan," Sustainability, MDPI, vol. 14(3), pages 1-13, February.
    20. repec:ags:aaea22:335857 is not listed on IDEAS
    21. Sarah A. Low & Martha Bass & Dawn Thilmany & Marcelo Castillo, 2021. "Local Foods Go Downstream: Exploring the Spatial Factors Driving U.S. Food Manufacturing," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(3), pages 896-915, September.

    More about this item

    Keywords

    Local food; retail prices; food retailing; shopping-basket model;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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