Welfare impacts of new demand‐enhancing agricultural products: The case of Honeycrisp apples. (28th March 2020)

• Record Type: Journal Article
• Authors: Wang, Yanghao; Çakır, Metin
• Is Part Of: Agricultural economics. Volume 51:Number 3(2020)
• Page Start: 445
• Page End: 457
• Publication Date: 2020-03-28
• Subjects: agricultural R&D -- apple market -- consumer welfare -- demand‐enhancing innovation -- new product -- random coefficient logit; Agriculture -- Economic aspects -- Periodicals; 338.105
• DOI: 10.1111/agec.12564
• Languages: English
• ISSNs: 0169-5150

Abstract

Abstract: Agricultural research and development programs on new demand‐enhancing products have become increasingly important over the past decade. Large numbers of new agricultural products have been developed and commercialized in the United States to meet consumers' increasingly diverse expectations for food quality. However, little is known about their economic benefits. Focusing on the apple market, we investigate the welfare impacts of the introduction of Honeycrisp apples in a market equilibrium framework. We use market data on apple sales from 61 cities across the United States between 2009 and 2015. We find the introduction of Honeycrisp increased consumer welfare, which is mainly explained by the increased number of total apple varieties. We also find that the introduction of Honeycrisp apples has increased overall market size and total apple sales. To extrapolate our results to the entire U.S. apple market, we perform a back‐of‐the‐envelope analysis and find that the introduction of Honeycrisp apples has increased total consumer welfare by about 859 million dollars during the study period. This corresponds to approximately 19% of the annual average domestic expenditures on public food and agricultural R&D.