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.
Bibliographical noteFunding Information:
We would like to thank Michael Boland, Hikaru Hanawa Peterson, Jim Luby, and attendees of Food Group Workshop and Agricultural and Applied Economics Seminars in the Department of Applied Economics at the University of Minnesota. We are also thankful to three anonymous referees and the editor, Awudu Abdulai, for their valuable comments. This research was conducted in collaboration with USDA Economic Research Service under a Third-Party Agreement with Information Resources, Inc (IRI). The findings and conclusions in this presentation are those of the authors and should not be construed to represent any official USDA or U.S. Government determination or policy. The analysis, findings, and conclusions expressed in this paper should not be attributed to IRI. Any errors remain our own.
© 2020 International Association of Agricultural Economists
- agricultural R&D
- apple market
- consumer welfare
- demand-enhancing innovation
- new product
- random coefficient logit