Pricing ecolabeled seafood products with heterogeneous preferences: An auction experiment in Japan

Abstract

In an already large, complex Japanese seafood market, demand for ecolabeled seafood can vary across consumer segments in a way that may have important implications for marketing strategies for sustainable seafood. In contrast to previous studies of consumers' willingness to pay for ecolabeled seafood, this article analyzes retailers' best pricing strategy when consumer preferences for ecolabeled seafood are heterogeneous. An auction experiment involving consumers in Tokyo is analyzed with a latent class model to estimate variation in willingness to pay, differentiated by consumer characteristics. Results show that there is heterogeneity in price premiums, implying that representative consumer estimates are misleading. Further, higher premiums are not easily associated with observable demographic factors or high willingness to pay for the unlabeled product, leading to a complex pricing problem for retailers who wish to capture maximum revenue through price pairs for unlabeled seafood and seafood bearing an ecolabel for sustainability.