F O O D A N D N U T R I T I O N A G R I C U L T U R E

E N V I R O N M E N T

How preferences drive consumers’ How preferences drive consumers’ behaviourbehaviour

S. Issanchou1, E. Ginon1, C. Chabanet1, P. Combris2

1 INRA, UMR 1129 FLAVIC, F-21000 Dijon, France2 INRA, UR 1303 ALISS, F-94205 Ivry-sur-seine, France

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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Context Various data can be collected from consumers:

Hedonic scores Liking scales Stated preferencesMaximum prices Auctions Observed choices Choice experiment

with posted prices

Auctions: widely used Choice experiment: familiar task; close to a real shopping situation

Objectives Are the ‘maximum prices’ obtained with auctions consistent with

‘choices’ made in a choice experiment with posted prices?

Which strategies drive ‘choices’? Economic strategies or liking?

Incentive methods

F O O D A N D N U T R I T I O N A G R I C U L T U R E

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Sense of Innovation, 7-10 September 2008 - 3

Experimental procedure

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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General Design

Same four industrial baguettes presented in each session:- simultaneously

-in a balanced order- in full information condition (visual + label + tasting)

Hedonic measurements

Economic experiment (within-subject design)

Group 1 Group 2

Participants split into two groups

Choices

Auctions

Auctions

Choices

Session 1

15 days

Session 2

Session 3

15 days

Real commitment: actual selling of one the four

baguettes

Participants 177 consumers / buyers of industrial bread

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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The ‘auction’ method: BDM procedure

Becker-De-Groot-Marschak (1964)Becker-De-Groot-Marschak (1964)Incentive mechanism

0 €Participant Experimenter

Maximum buying price = Reservation price 0.80 €

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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The ‘auction’ method: BDM procedure

Becker-De-Groot-Marschak (1964)Becker-De-Groot-Marschak (1964)Incentive mechanism

0 €Participant Experimenter

1.15 €

Maximum buying price = Reservation price 0.80 €

Selling prices: random selection

0

1

2

3

0.4 0.5 0.6 0.7 0.8 0.9 1 1.1 1.2 1.3

Prices (€)

Num

ber o

f Tok

ens

→ No selling

Selling price

I don't buyI don't buy

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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The ‘auction’ method: BDM procedure

Becker-De-Groot-Marschak (1964)Becker-De-Groot-Marschak (1964)

0 €Participant Experimenter

I must buyI must buy

0.55 €

Incentive mechanism

→ Selling

Maximum buying price = Reservation price 0.80 €

Selling prices: random selection

0

1

2

3

0.4 0.5 0.6 0.7 0.8 0.9 1 1.1 1.2 1.3

Prices (€)

Num

ber o

f Tok

ens

Selling price

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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Price for one baguette

I am ready to pay at most:

I don’t wish to buy:

€ € €€

Standard

Healthy

Meunière

Cereal

’’

Design of the economic experimentsBDM procedure designBDM procedure design

0.55 0.85 1.05

X

Reservation Prices (RP)Reservation Prices (RP)

Stage 1: Reservation prices recording

Equal 0 €

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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Design of the economic experimentsBDM procedure designBDM procedure design

4 variants of baguetteX

1 information condition

4 prices given by each participant

Stage 2: Random selection process

To obtain a truthful price for each baguette

1 baguette amongst 4 was randomly drawn1 selling price was randomly drawn

Stage 1: Reservation prices recording

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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Design of the economic experimentsChoice experiment with Posted pricesChoice experiment with Posted prices

Stage 1: Choice recording

ChoiceChoice

Prices (P)Prices (P)

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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17 choice sets (random order)

17 choices given by each participant

Design of the economic experimentsChoice experiment with Posted pricesChoice experiment with Posted prices

Stage 1: Choice recording

Stage 2: Random selection process

To maintain the same commitment for the whole session

1 choice set among 17 was randomly drawnThe chosen alternative was sold

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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Design of the economic experimentsPosted pricesPosted prices

Posted prices were chosen according to the market prices

Standard Meunière Cereal HealthyLowest prices on the market

0.55 € 0.80 € 0.85 € /

Price A 0.50 € 0.70 € 0.80 / 0.75 € 0.75 / 0.80 €Price B 0.60 € 0.85 € 0.95 / 0.90 € 0.90 / 0.95 €Price C 0.65 € 0.95 € 1.10 / 1.00 € 1.00 / 1.10 €Price D 0.75 € 1.10 € 1.25 / 1.15 € 1.15 / 1.25 €Highest prices on the market

0.70 € 1.00 € 1.20 € /

Half of the consumers received the left series of prices for the Cereal and Healthy baguettes and half received the right series

F O O D A N D N U T R I T I O N A G R I C U L T U R E

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Sense of Innovation, 7-10 September 2008 - 13

Results

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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Hedonic scores: distributionB. New

liking

freq

uenc

y

0 2 4 6 8 10

020

4060

B. Std

liking

freq

uenc

y

0 2 4 6 8 10

020

4060

B. Meun

liking

freq

uenc

y

0 2 4 6 8 10

020

4060

B. Cere

liking

freq

uenc

y

0 2 4 6 8 10

020

4060

5.2 (± 0.3) cStandard

B. New

liking

freq

uenc

y

0 2 4 6 8 10

020

4060

B. Std

liking

freq

uenc

y

0 2 4 6 8 10

020

4060

B. Meun

liking

freq

uenc

y

0 2 4 6 8 10

020

4060

B. Cere

liking

freq

uenc

y

0 2 4 6 8 10

020

4060

7.9 (± 0.3) aCereal

B. New

liking

freq

uenc

y

0 2 4 6 8 10

020

4060

B. Std

liking

freq

uenc

y

0 2 4 6 8 10

020

4060

B. Meun

liking

freq

uenc

y

0 2 4 6 8 10

020

4060

B. Cere

liking

freq

uenc

y

0 2 4 6 8 10

020

4060

6.6 (± 0.3) bMeunière

B. New

liking

freq

uenc

y

0 2 4 6 8 100

2040

60

B. Std

liking

freq

uenc

y

0 2 4 6 8 10

020

4060

B. Meun

liking

freq

uenc

y

0 2 4 6 8 10

020

4060

B. Cere

liking

freq

uenc

y

0 2 4 6 8 100

2040

60

4.8 (± 0.3) c

Healthy

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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Reservation prices (RP): distribution

Cereal

Reservation price

Freq

uenc

y

0.0 0.5 1.0 1.5 2.0 2.5

020

4060

80

Healthy

Reservation price

Freq

uenc

y

0.0 0.5 1.0 1.5 2.0 2.5

020

4060

80

Standard

Reservation price

Freq

uenc

y

0.0 0.5 1.0 1.5 2.0 2.5

020

4060

80

Meunière

Reservation price

Freq

uenc

y

0.0 0.5 1.0 1.5 2.0 2.5

020

4060

80

Standard Meunière

Cereal Healthy

Market price 0.64 €

Market price 0.87 €

Market price 1.06 € Launch price

0.95 €

Mean ± CI 0.96 ± 0.02

Mean ± CI 0.82 ± 0.03

Mean ± CI 0.82 ± 0.02

Mean ± CI 0.68 ± 0.02

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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Reservation prices versus liking scores

Individual Kendall’s rank correlationsIndividual Kendall’s rank correlations

Histogram of Kendall.rank$CorrKendall_Rank

Kendall tau coefficient

Freq

uenc

y

-1.0 -0.5 0.0 0.5 1.0

010

2030

4050

6070 Mean ± CI

0.61 ± 0.03

N=173

Results:Results: 60% of participants had a

Kendall tau coefficient ≥ 0.70

Both methods gave a similar hierarchy of products for liking scores and reservation prices

Reservation Prices (auctions)

Hed

onic

sco

res

Individual Tau

coefficient

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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Reservation prices versus choicesGlobal comparison: demand curves

Data AnalysisData AnalysisEstimation of “the probability of buying each baguette

according to price” to build demand curves

BDM procedure: estimation with binomial cumulative distribution functions

Choice experiment: estimation with a conditional logit model (estimation associated with 5 Euro for all other baguettes)

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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Global comparison: demand curves

MeunièreStandard

Cereal Healthy

Meunière

The lowest slope

Similar slopes

very low purchase probability,even for null prices

Highest agreement

Lowest agreement

Both methods gave similar results in terms of price elasticity

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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Consistency between BDM and

Choice

Reservation prices (RP) – Prices (P) = Surplus

Prices: 0.50 0.70 1.10 0.75

Standard HealthyMeunière Cereal

Hedonic scores:

Reservation prices: 0.55 0.85 1.05 06.5 5 8 3.8

Correlated

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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Surplus (bar range = 0.20 euros)possible choices

Num

ber o

f cas

es

050

010

0015

0020

0025

0030

00

-2 20

irrationalrational

Consistency between BDM and Choice

Surplus (RP-P) distributionSurplus (RP-P) distribution

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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Surplus (bar range = 0.20 euros)actual choices

Num

ber o

f cas

es

020

040

060

080

0

-2 20

irrationalrational

Consistency between BDM and Choice

Surplus (RP-P) distributionSurplus (RP-P) distribution

77% rational77% rational

10%10%

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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Consistency between BDM and Choice

Surplus (RP-P) distributionSurplus (RP-P) distribution

Surplus (bar range = 0.20 euros)

Num

ber o

f cas

es

050

010

0015

0020

0025

0030

00

-2 20

possible choices

irrationalrational

actual choices

irrationalrational

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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Choice strategy in relation with RP

Prices: 0.50 0.70 1.10 0.75

Surplus + 0.05 + 0.15 - 0.05 - 0.75

Expected choiceExpected choice

Surplus maximizationSurplus maximization

FullFull Rationality Rationality

Standard HealthyMeunière Cereal

Hedonic scores:

Reservation prices: 0.55 0.85 1.05 06.5 5 8 3.8

Correlated

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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Which strategy?Which strategy?

Prices: 0.50 0.70 1.10 0.75

Choice strategy in relation with RP

Surplus + 0.05 + 0.15 - 0.05 - 0.75

BoundedBounded rationality rationality Irrational choicesIrrational choices

Which strategy?Which strategy?

Preference maximization? (hedonic)

or

Price minimization? (economic)

Standard HealthyMeunière Cereal

Hedonic scores:

Reservation prices: 0.55 0.85 1.05 06.5 5 8 3.8

Correlated

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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Prices: 0.50 0.70 1.10 0.75

Choice strategy in relation with RP

Correlated

Surplus + 0.05 + 0.15 - 0.05 - 0.75

Preference maximization

Surplus maximizationSurplus maximization

Standard HealthyMeunière Cereal

Hedonic scores:

Reservation prices: 0.55 0.85 1.05 05 6.5 8 3.8

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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Choice strategy in relation with RP

Prices: 0.50 0.70 1.10 0.75

Standard HealthyMeunière Cereal

Hedonic scores:

Reservation prices: 0.55 0.85 1.05 05 6.5 8 3.8

Correlated

Surplus + 0.05 + 0.15 - 0.05 - 0.75

Price minimization

Surplus maximizationSurplus maximization

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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Preference maximization

AndAnd

Price minimization

Choice strategy in relation with RP

Prices: 0.75 0.85 1 0.75

Standard HealthyMeunière Cereal

Hedonic scores:

Reservation prices: 0.50 0 1.25 0.955 3.5 7 8

Correlated

Surplus -0.25 -0.85 0.25 0.20

Surplus maximizationSurplus maximization

FullFull Rationality Rationality

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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Prices: 0.50 0.70 1.10 0.75

Choice strategy in relation with RP

Standard HealthyMeunière Cereal

Hedonic scores:

Reservation prices: 0.55 0.85 1.05 05 6.5 8 3.8

Correlated

Surplus + 0.05 + 0.15 - 0.05 - 0.75

No Preference maximization

No Price minization

No Surplus maximization

Puzzling casesPuzzling cases

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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Choice strategy in relation with RP Main results Main results

17 choice sets*177 participants = 3009 choices17 choice sets*177 participants = 3009 choices

0 surplusP2 P4 P3 P1

Irrational choices: Irrational choices: 393 cases

Price. Min.:Price. Min.: 110 cases

Pref. Max.:Pref. Max.: 162 cases

FullFull rationality: rationality:

395 casesNo purchase Expected choice

Puzzling:Puzzling: 60 cases

Pref. Max Pref. Max andand Price. Min.:Price. Min.:61 cases

FullFull Rationality Rationality

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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Choice strategy in relation with RP Main results Main results

0 surplusP2P4 P3P1

Irrational choices: Irrational choices: 302 cases

Price. Min.:Price. Min.: 28 cases

Pref. Max.:Pref. Max.: 145 cases

FullFull Rationality: Rationality: 1057 cases

No purchaseExpected choice

Surplus maximization

Bounded Bounded Rationality: Rationality:

427 cases

Price. Min.:Price. Min.: 84 cases

Pref. Max.:Pref. Max.: 188 cases

Puzzling: Puzzling: 435 cases

Pref. Max Pref. Max andand Price. Min.:Price. Min.:10 cases

FullFull Rationality Rationality

Pref. Max Pref. Max andand Price. Min.:Price. Min.:22 cases

FullFull Rationality Rationality

Puzzling:Puzzling: 119 cases

Puzzling:Puzzling: 133 cases

17 choice sets*177 participants = 3009 choices17 choice sets*177 participants = 3009 choices

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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Choice strategy in relation with RP Synthesis Synthesis

3009 CHOICES3009 CHOICESFullFull Rationality Rationality 1545

cases 51%51%

BoundedBounded rationality or rationality or IrrationalityIrrationality HedonicHedonic Rationality (Pref. Max.) Rationality (Pref. Max.) 495

cases 17%17%

EconomicEconomic Rationality (Price. Min.) Rationality (Price. Min.) 222 cases 7%7%

PuzzlingPuzzling 747 cases 25%25%

Journée du Pôle Alimentaire Parisien, 3 Décembre 2008F O O D A N D N U T R I T I O N

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Conclusions

Good consistency between reservation prices and choices:

• Only 23% of choices with a price higher than the maximum price given by the participant

• Only 10% of choices at a price which exceeds by 0.20€ the maximum price

Liking is a decisive determinant of consumers’ choice:

• Full rationality:

Surplus explains the majority of choices, the higher the reservation price, the higher the surplus. As reservation prices are correlated to hedonic scores, liking partly determines rational choices.

• Bounded rationality and Irrationality:

Some consumers preferred to reduce their surplus and even to accept a small negative surplus for a more liked product

F O O D A N D N U T R I T I O N A G R I C U L T U R E

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Acknowledgements

PRA (Programme Recherche Alimentation) Cafet’n’lab

Regional Council of Burgundy Bourgogne Terre de Culture (BTC)

Eurogerm

Consistency between BDM and Choice

Surplus (RP-P) distributionSurplus (RP-P) distribution

Surplus (bar range = 0.20 euros)actual choices

Num

ber o

f cas

es

020

040

060

080

0

-2 20

irrationalrational

Histogram of deltaneg.rank4$delta

Surplus

Num

ber

of c

ases

-1.5 -1.0 -0.5 0.0

050

100

150

200

250

300

350

Histogram of deltaneg.rank3$delta

Surplus

Num

ber

of c

ases

-1.5 -1.0 -0.5 0.0

050

100

150

200

250

300

350

Histogram of deltaneg.rank2$delta

Surplus

Num

ber

of c

ases

-1.5 -1.0 -0.5 0.0

050

100

150

200

250

300

350

Histogram of deltaneg.rank1$delta

Surplus

Num

ber

of c

ases

-1.5 -1.0 -0.5 0.0

050

100

150

200

250

300

350

++

+

-

--

Most preferred

Least preferred

Histogram of deltapos.rank4$delta

Surplus

Num

ber

of c

ases

0.0 0.5 1.0 1.5

050

100

150

200

250

300

350

Histogram of deltapos.rank3$delta

Surplus

Num

ber

of c

ases

0.0 0.5 1.0 1.5

050

100

150

200

250

300

350

Histogram of deltapos.rank2$delta

Surplus

Num

ber

of c

ases

0.0 0.5 1.0 1.5

050

100

150

200

250

300

350

Histogram of deltapos.rank1$delta

Surplus

Num

ber o

f cas

es

0.0 0.5 1.0 1.5

050

100

150

200

250

300

350

++

+

-

--

Most preferred

Least preferred