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HOUSEHOLDrsquoS PREFRENCES AND WILLINGNESS TO PAY
FOR PESTICIDES FREE FRUIT IN KHYBER
PAKHTUNKHAWA (KP) PAKISTAN
BY
JAHANGIR KHAN
A dissertation submitted to The University of Agriculture Peshawar in Partial
fulfillment of the requirement for the Degree of
DOCTOR OF PHILOSOPHY IN AGRICULTURE
(AGRICULTURAL amp APPLIED ECONOMICS)
DEPARTMENT OF AGRICULTURAL amp APPLIED ECONOMICS
FACULTY OF RURAL SOCIAL SCIENCES
THE UNIVERSITY OF AGRICULTURE
PESHAWAR-PAKISTAN
MAY 2018
HOUSEHOLDrsquoS PREFRENCES AND WILLINGNESS TO PAY
FOR PESTICIDES FREE FRUIT IN KHYBER
PAKHTUNKHAWA (KP) PAKISTAN
BY
JAHANGIR KHAN
A dissertation submitted to The University of Agriculture Peshawar in Partial
fulfillment of the requirement for the Degree of
DOCTOR OF PHILOSOPHY IN AGRICULTURE
(AGRICULTURAL amp APPLIED ECONOMICS)
Approved by
___________________________ Chairman Supervisory Committee
Prof Dr Abbas Ullah Jan
___________________________ Member (Major Field of study)
Dr Ghaffar Ali
___________________________ Member (Minor Field of study)
Prof Dr Mussawar Shah
___________________________ Chairmanamp Convener Board of Studies
Dr Ghaffar Ali
___________________________ Dean Faculty of Rural Social Sciences
Prof Dr Noor P Khan
___________________________ Director Advanced Studies and Research
Dr Shahid Sattar
DEPARTMENT OF AGRICULTURAL amp APPLIED ECONOMICS
FACULTY OF RURAL SOCIAL SCIENCES
THE UNIVERSITY OF AGRICULTURE
PESHAWAR-PAKISTAN
MAY 2018
TABLE OF CONTENTS
S No Title Page No
List of Table i
Acknowledgements ii
Abstract iii
I INTRODUCTION 1
11 Background on Pakistan 2
12 Pesticides-free Food and Products 4
13 Justification of the study 6
14 Purpose and objectives of the study 7
15 Research Questions 8
16 Hypothesis Development 9
161 Hypothesis to be tested 9
17 Contribution of the study 9
18 Organization of thesis 10
II LITERATURE REVIEW 11
21 Illustration of Contingent Valuation Method (CVM) 11
22 Crux of the Double bounded dichotomous choice model premium 13
23 Overview of the Ordered Logit Model 15
24 Factors influencing Householdslsquo Willingness to Pay 19
25 Essence of the Literature Reviewed 27
III MATERIALS AND METHODS 29
31 Khyber Pakhtunkhwa 29
32 Sampling Technique 31
321 Stage 1 _Selection of district Peshawar and Mardan 31
322 Stage 2 _ Selection of Union Councils (UCs) 31
323 Stage 3 _Selection of households from each Union Council 31
33 Allocation of Sample Size for Different Models 32
34 Contingent Valuation Survey Designing 33
35 Householdslsquo Survey 33
36 Conceptual Framework 34
361 Householdlsquos Utility and Willingness to Pay 34
362 WTP and CVM 35
37 Elicitation Techniques 36
371 Bidding Game Approach 37
372 Open-ended Elicitation Method 37
373 Payment Card Approach 37
374 Dichotomous Choice Model 37
38 Empirical Estimation of WTP by Payment Card using Ordered Logit
Model 39
39 Empirical Estimation of WTP using Double Bounded Dichotomous
Choice Model 42
391 Factors which could Influence WTP 43
392 Bids Design 44
310 Empirical Estimation of WTP using Linear Regression Model 44
311 Description of Variables 45
1V RESULTS AND DISCUSSION 46
41 Descriptive Analysis 46
411 Demographic and Socio-economic Characteristics 46
412 Householdlsquos Awareness and Perceptions about Pesticides Application
on Fruit 51
42 Empirical Results of this Research Endeavour 52
421 Distribution of responses on householdslsquo willingness to pay
(WTP) 52
422 Householdlsquos willingness to pay using ordered logit model 53
423 Predicted probabilities and Marginal effects of ordered logit model 56
424 Matrix of Correlation Coefficient 60
43 Householdlsquos willingness to pay using double bounded dichotomous
choice model 63
431 Householdslsquo estimated Mean WTP 65
432 Households Response to First Bid (Amount) 66
44 Post Estimation Diagnostic Test 67
441 Householdslsquo willingness to pay by using linear regression model 68
45 Comparison of elicitation questions formats 70
451 Response rate for zero WTP 71
46 Discussion about Major Findings 72
V SUMMARY CONCLUSION AND RECOMMENDATION 78
51 Summary 78
52 Conclusions 79
53 Recommendations 81
54 Limitation and Suggestion for Future Envisage 82
56 Suggestions 83
LITERATURE CITED 84
Appendix- 1 Questionnaire 96
i
LIST OF TABLE
Table No Title Page No
31 Total population and sampled households from selected UClsquos 32
32 Payment card format 41
33 Bid system for Pesticides free fruits 44
34 Description of explanatory variables 45
41 Age of the householdlsquos head (Years) 47
42 Educational Level of the Householdlsquos Head (Years) 48
43 Householdslsquo size of the Respondents (Member in Number) 48
44 Householdslsquo Income in Pakistanlsquos Rupee (PKR) 49
45 Households expenditure on food (PKR) 50
46 Householdlsquos monthly expenditure share on fresh fruits (PKR) 50
47 Householdlsquos Awareness and Perceptions of Pesticides use on Fruit
Grown 51
48 Factors influencing respondent householdlsquos WTP (Ordered logit model) 55
49 Predicted probabilities and marginal effects from the estimated ordered
logit model 61
410 Matrix of correlation coefficient between explanatory variables 62
411 Factors influencing consumerslsquo WTP (double-bounded dichotomous
choice model) 65
412 Households mean estimated WTP 66
413 Householdslsquo Response to First Bid (Amount) 67
414 Diagnostic test results 68
415 Estimated parameters using liner regression model 70
416 Mean willingness to pay comparison from CV question format 71
417 Comparison of response rates by CV question format 71
ii
ACKNOWLEDGEMENTS
I am grateful to Almighty Allah for blessing me with the potential of seeking
the light of knowledge the taste of gaining knowledge courage and for all the blessings
which enabled me to complete a stage of education
Doing a research is not an individual work Itlsquos indeed the result of efforts by
many people I would like to thanks all people who helped and supported me to
complete this research successfully
My whole hearted and profound thanks to my advisor Dr Abbas Ullah Jan
Department of agricultural amp Applied Economics for his support critical review
valuable suggestions and inspiration to make this research success
My most special thanks to Assistant Prof Dr Syed Attaullah Shah Department
of agricultural amp Applied Economics for his cooperation and valuable suggestions
providing me all facilities during the course of this research
My sincere thanks to Dr Ghaffar Dr Dawood Jan and all faculty members
Department of agricultural amp Applied Economics for their cooperation advices and
back-up to achieve my goals and their encouragement and instrumental support during
the research practical work
I would like to submit my admirations to my friends and foreign research expert
Dr Kar Ho Lim and Dr Aditya Khanal Department of Agricultural amp Environmental
Sciences College of Agriculture Tennessee State University USA for their help
especially in thesis write-up and paper publication
At last but the not least I wish to put across my deep admiration to my parents
friends relatives and family members who support me during my study
Jahangir Khan
iii
HOUSEHOLDrsquoS PREFRENCES AND WILLINGNESS TO PAY
FOR PESTICIDES FREE FRUIT IN KHYBER
PAKHTUNKHAWA PAKISTAN
Jahangir Khan and Abbas Ullah Jan
Department of Agricultural amp Applied Economics
Faculty of Rural Social Sciences
The University of Agriculture
Peshawar-Pakistan
May 2018
ABSTRACT
The over use of fertilizers and pesticides in agriculture are degrading natural ecosystem
and human health The substantial association of health risk with pesticide residues and
its adverse impact on environment has fetched attention of researchers across the globe
In this alarming scenario pesticide free farming is deemed as panacea to
environmental human and animal health friendly production system Pesticide free
fruit are considered to be superior in quality as compared to fruit produced
conventionally and helps in preventing several health and environmental hazards
Therefore the demand for pesticide free fruit is increasing throughout the world Given
this increasing demand for pesticide free fruit this study is designed to measure what
price premium household would be willing to pay (WTP) for fruit free from pesticides
such as apple peach and mango This study also aims to identify factors influencing
householdslsquo WTP decision of pesticide free fruit in Khyber Pakhtunkhwa (KP)
Pakistan The primary data was gleaned from 1000 sampled respondents through face
to face interview from two selected districts namely Peshawar and Mardan KP
Pakistan To elicit householdlsquos WTP information Contingent Valuation Method
(CVM) was employed Contingent valuation is a survey based method used for eliciting
willingness to pay of the householdslsquo for environmental and natural resources
Different elicitation techniques are used to design CV question scenario such as
payment card question double dichotomous choice question and open ended question
Consequently this study used the entire three payment format to elicit householdlsquos
WTP for pesticide free fruit The ordered logit model was employed to appraise the
payment card method However linear regression model was adopted to identify
factors influencing householdlsquos willingness to pay for pesticides free fruit
Nevertheless the double bounded dichotomous choice model was performed to
measure dichotomous choice questions The major results demonstrate that 935 percent
households were willing to pay higher prices for fruit pesticides free in the study area
Estimates remarkably reveal that around 35 percent households were willing to pay 16
to 20 percent higher prices and 24 percent households were willing to pay 6 to 10
percent higher prices for pesticides free fruit than the prevailing prices of conventional
produce It is reported by 61 percent of the households that local farmers use irrational
pesticides on fruit Major findings have also corroborated that 881 percent sampled
household have perceived health concerns over pesticides residues in food Similarly
911 percent of the households have supported the idea that farmer should be engaged
in environmental benign agricultural production practices which have a minimum
adverse impact on health and the environment Socio economic and demographic traits
have confirmed positive significant effects on householdlsquos willingness to pay The
iv
results of householdlsquos head awareness on WTP are according to the prior expectations
that awareness of householdlsquos head has significant contribution in willingness to pay
for pesticides free fruit While householdlsquos size has a significant but inverse effect on
willingness to pay for pesticides free fruit Furthermore householdlsquos perception
regarding health and environment concern has a propensity to positively influence the
willingness to pay for pesticides free fruit It is also depicted by the results that mean
WTP by using double dichotomous payment card and open ended elicitation format
validates consumer demand for pesticide free fruit in the study area Three separate
mean WTP were computed for each double dichotomous choice payment card and
open ended format which were figured as Rs2576 1632 and 1437 respectively
These results reveal market potential for pesticides free fruit in the study area This
research study is expected to contribute in the three different aspects Firstly this study
has figured out the potential for pesticides free markets in Pakistan This study has also
abridged the research gap regarding consumerlsquos preferences and willingness to pay for
pesticides free fruit which can be generalized and replicated to other areas In addition
results have provided insight to fruit producers helping them to strategize production
system decisions Based on the findings from this research government non-
government organization and other stakeholders should formulate policies and would
promote and encourage the production of pesticides free fruit in Pakistan
1
I INTRODUCTION
Pesticides are agrochemical formulated to cope with the severe problems diseases
caused by insects fungi virus and self-grown weeds The term pesticide can be defined
as any chemical or natural substance applied with the objective to repel destroy or
control pests and regulate plant growth (FAO 2002) In modern agriculture arena
pesticides are intensively used on crops before and after harvest The application of
pesticides surged with the passage of time due to an increase in the demand for
agricultural commodities by the burgeoning population of the world The overall
pesticidelsquos consumption across the globe is observed as about 2 million tons per year
While this massive pesticides consumption demonstrates that about 69 percent is used
by European countries and the remaining 31 percent is utilized by the rest of the world
as mentioned by Abhilash and Singh (2009) The more alarming situation is that the
aforementioned magnitude of pesticides consumption is increasing with the every
passing year as reported by FAO (2002)
The green revolution as well as a huge increase in the application of pesticides in the
agriculture realm had enhanced food and non-food crop production Resultantly the
significant surge in the economic growth of several agricultural based economies was
reported over the last few decades as demonstrated by Carvalho (2006) Despite the
substantial contribution of pesticides to diminish the food insecurity societies around
the world are cognizant and concerned about the food sanitation safety and
environmental externalities owing to irrational use of pesticides and other croplsquos input
(Wilson 2000) More categorically the food safety realization in developed countries
has been led to organic agriculture Whereas in many developing countries which
include but not limited to Pakistan the pesticides-free and organic food markets
remained underdeveloped due to several reasons One of the obvious reasons is the
uncertainty among consumerlsquos preference that led to their concern if an organic market
can be self-sustained Similarly a dearth of proper market structures and institutional
support failed to provide environment-friendly agriculture practices in developing
countries (Rehber and Turhan 2002) The current scenario of agriculture sector in
developing countries has raised several considerable questions to acquire the
anticipated implications for this sector However the most relevant query drifted that
2
―Is there sufficient consumerlsquos willingness to pay (WTP) available in a developing
country for grass-roots development of pesticide-free agriculture
11 Background of the Research Endeavor
Agriculture sector is the mainstay of Pakistanlsquos economy which significantly
contributes as 192 percent to overall Gross Domestic Product (GDP) of its economy
(GOP 2016-17) Despite many efforts and policy reforms still this sector is entangled
with insignificant growth momentum
Since the inception of this country in 1947 there wasnlsquot any notable crop and plant
protection policy adopted by concerned policy makers over a long span of time It is
evident from past timeline that ―Grow More slogan was initiated by the government of
Pakistan back in 1970s to address the escalating foodlsquos demand of rapidly increasing
population of Pakistan Subsequently Grow More policy resulted in ever increasing
pest problem which couldnlsquot be controlled with conventional crop management
practices Therefore the government started to provide the direct subsidy to Pesticides
Industry to provide panacea to croplsquos pest problem But unfortunately the colossal
surge in pesticides utilization had not only destroyed the pests but was also found lethal
for the environment benign organisms that include predators birds etc This irrational
use of pesticides and other crop inputs has caused huge economic loses and health
issues among the farming community
Pakistanlsquos agriculture is endowed with 11 (Eleven) different agro-ecological zones
providing the country an incredible exciting arena for experimentation and state of the
art for agriculture as reported by Altaf (2010) This diversified nature of ecological
zones can be utilized in a lucrative way to attain an optimal output The driving forces
of this sector are striving hard to curtail the gaps by ensuring the adequate production
and supplying the food to meet the demand of rapid growing population of the country
However the emerging challenges such as irrational use of croplsquos input and complying
with world trade organization (WTO) obligations are insisting the concerned policy
makers to focus on paradigm shift for significant contribution of agriculture towards
livelihood welfare and prosperity
3
These different agro ecological conditions provide the encouraging and conducive
environment for the production of cereal crops fruits vegetables and even for non-food
crops Fruits and vegetables grown in Pakistan have a wide domestic demand and have
also attracted the international consumer by exporting these edibles in the international
market Pakistan exports mango apple dates oranges guava and dry fruits like pine
nuts to different countries which include but not limited to Afghanistan UAE Saudi
Arabia and Europe (GOP 2014-15)
The relative importance of agricultural sector can be gauged with high growth rate of
exports of fruits and vegetables from Pakistan to different countries mainly South East
and the Middle East (Khalid Mustafa 2003) where low Sanitary and Phytosanitary
(SPS) standards are comply with Yet several more fruit grown in Pakistan have
enormous potential to be exported in the international market Specifically insect pest
infestation during pre- and post- harvest of fruit and vegetables is a significant problem
To protect from those many kinds of pesticides and agro-chemicals are widely used in
Pakistan These include different types of agro-chemicals which consist more than 100
types of insecticides almost 30 types of fungicides and approximately 39 different
types of herbicides (Zia et al 2009Anwar et al 2011) In 1960 the consumption of
chemical pesticides in Pakistan was 7000 tons per year which has risen to 78 232 tons
per year in 2003 (Syed and Malik 2011)With the development of pest resistance to
those chemicals over years each year new chemical compounds in large amount are
used to protect crops Overuse of these agro-chemicals has caused many adverse health
and environmental effects
However significant variation in consumer behavior in the developed countries has
excelled the demand of high quality food which had encouraged the organic
agriculture Thatlsquos why developing countries who have still adopted obsolete strategies
for pest control are out of race for agriculture export and are at venture to be considered
as ―dirty producer in an international market Similarly in Pakistan massive increase
in the pesticidelsquos use has escorted to two major harms to Pakistanlsquos economy Firstly
Pakistan imports a large quantity of pesticides incurring billions of costs on it and
second overuse of pesticides on agricultural commodities has created many health and
environmental hazards in the farming community of Pakistan Several research
endeavors such as Ahmad et al (2004) Rizwan et al (2005) Parveen and Masud
4
(2001) had divulged that individuals working in field under pesticides exposed
environment specifically women who worked long time in the cotton croplsquos field
sustained more health hazards These health hazard underscored skin irritation
headache nausea and gastroenteritis It is also evident that the hazardous chemical
residues of organo-chlorines organophosphate and synthetic pyrethroids pesticides
were found in 85 percent of the blood samples drawn from 75 sampled individuals
(male and female) in Pakistan
12 Pesticides free Food and Products
Pesticides free fruit and vegetable are those edibles that are grown without the use of
pesticides and can be deemed as major component of an organic farming Due to
awareness among people about advantages of Pesticides free fruit and vegetable which
upshot in food safety and benefit environment as well the production and consumption
of such food products is being highly valued With the consumption of food produced
without the use of pesticides can be helpful in the prevention of some of the health
hazards related with the consumption of conventional food (Nouhoheflin et al 2004)
The term ―Pesticides free was introduced for the first time in a book ―Look to the
Land in 1939 by Lord Northbourne The author narrates pesticides free farm as an
organization that making use of environment balance technique by adopting zero
pesticides In early 20th
century pesticides free food ideology was brought forward
while correspondingly there was an immense use of chemical in food products as well
Householdslsquo were having great concern about their health as well as soil condition and
they began to grow such food which was free from chemical residuals In the era of
70s a noteworthy change was reported in escalating the demand of pesticides free food
and pesticides free farming Therefore in year 1972 ―International Federation of
Pesticide free Agriculture Movement was formed In the same era the producers who
were producing pesticides free food individually commenced the certification process
The obvious aim of the process was to develop rules and to underpin the standards of
pesticides free production
In this modern era where food consumers are highly concerned about their health safety
and environment benign practices they prefer to buy pesticides free food products
This is because of their knowledge about the relationships between the production
practices and quality of food produced Consumers are becoming more conscious as
5
they are aware of the harmful effects of food produced with irrational pesticides use on
their health Many research endeavors have corroborated that fresh fruit and vegetables
confers health related benefits and provide protection against the risk associated with
different types of diseases like diabetes stroke and cancer(Van and Pivonka 2000 Stan
Kar Stoner Singh 2008) Likewise the world health organization (WHO) has
revealed in their research carried out in 2002 that the fruits and vegetables
contaminated with pesticides can cause about 31 percent of diseases related to heart and
11 percent stroke in all over the world However if best quality of fruit and vegetable
consumption is adequately increased it is projected that about 27 million of lives can
be protected each year Pesticides free food contains higher level of antioxidants which
fight against various diseases and provide different essential vitamins More
importantly pesticides free food products also aimed to prevent from some allergies
and diseases common in human being It is corroborated by other research studies that
chemical fertilizer free food are beneficial for human health as well as for the animals
wildlife and for the ecosystem To encourage such agricultural management techniques
in developing countries in general and Pakistan in particular still there is long way to
go but such research studies can provide the paved way to open new avenues for the
concerned policy makers and stakeholder in the realm of Agriculture
In addition locally grown pesticide free produce tends to fetch higher prices due to
sanitation concerns of the consumer and improved quality of the product Subsequently
such produce are preferred by the household and they are agree to pay a price premium
for such food produced free from pesticides compared to prevailing regular market
price of conventional food products Thus it is important to measure householdlsquos
willingness to pay for locally produced pesticide free fruit To acquire a good or
service consumerslsquo wants to sacrifice an extra amount of money which show their
willingness to pay Willingness to pay can also be defined more categorically as the
extra amount of money that an individual wants to pay for best quality of food (Lusk
and Hudson 2004) The commonly used model for eliciting householdlsquos willingness to
pay information is Contingent Valuation Method (CVM) Contingent valuation (CV) is
a survey-based method which is used to elicit householdlsquos willingness to pay for
environmental and natural resources
6
12 Justification of the Study
With the every passing year the demand for agriculture products is hiking due to rapid
increase in the worldlsquos population Pakistan being an agrarian country is striving hard
to fulfill the domestic and international demand for agricultural food To overcome the
escalating demand for agricultural product farmers mainly depend on chemical
technologies to manage pests and to provide enough food Besides their benefits now it
is clear that pesticides are negatively influencing human health and also the natural
environment The food that we are eating has gained more discussion in all over the
world including developing countries like Pakistan that whether this food is safer for
human health and for natural environment Consumers are facing with problemslsquo which
food is safe to eat and which is not safe Which food processing is beneficial for human
and environment and which is worse (Bold et al 2015 Chiew Shi Wee et al 2014
Sirieix 2011 and Butt et al 2015) Most of people are turning towards the production
and consumption of pesticides free food to resolve these issues
In developed countries consumers are highly concerned about the excessive use of
chemicals on food and its negative impact on health and natural environment thatlsquos
why the production of food produced without the use of pesticides Large numbers of
studies are conducted on consumerslsquo perception regarding pesticides- free food in
developed countries like Europe Australia United State and New Zealand but in
developing countries very little is known about consumerslsquo perception regarding
pesticides-free food
Despite the fact that food production without pesticides and other chemicals are safe for
health and environment its production and consumption is very low In Pakistan only
few farmers are using chemicals free technology for food production It has only 28
farms producing pesticides-free food which they just growing for their own
consumption not for commercial purpose In Pakistan there is high gape of information
about consumerlsquos perception and awareness regarding pesticides-free food and
consumerslsquo willingness to pay for pesticides-free food (Panhwar 2004)
Keeping in view the human health hazards and environmental vulnerability owing to
irrational use of pesticides alternative farming systems such as pesticides free farming
integrated pest management (IPM) and organic farming is becoming progressively
7
more popular in the global context However in the country like Pakistan where costly
input and lower output agriculture was a historic focus Following the Green
Revolution in 1960s adoption of certified organic production is expected to be fairly
low Nevertheless aforementioned agriculture practices could be an alternative system
in convincing farmers towards safe and sustainable agriculture and to comply with the
strict regulations and mandates of certified organic system and WTO Moreover due to
conducive and diversified weather and climatic condition of the country and relatively
cheaper labor force availability production of such safer food seems feasible
Pesticides free food is supposed to be having high prices however it is important to
examine whether households are willing to pay a higher price for these pesticides free
fruit According to the research study conducted in different countries of the world on
pesticides free food this study also focus to investigate a price premium that
households are willing to pay for pesticides-free fruit and factors influencing their
decision For this purpose Khyber Pakhtunkhwa (KP) is selected as a research area
Khyber Pakhtunkhwa (KP) is blessed with fertile soil and plenty of water for irrigation
and is famous for production of delicious fruit such as peach apple guava plum
mango Pear apricot date and citrus Fruit farming has been an important business of
Khyber Pakhtunkhwa and the total fruit production during 2015-16 was 411448 tons
from 44737 hectare (GOKP 2015-16) Given that the region is one of the important
fruit growing regions with relatively readily available agricultural labor growers has
the potential to produce pesticides free fruit in this region In this direction more
research work is required to estimate a price premium householdslsquo willing to pay for
fruit free of chemicals and pesticides Thatlsquos why this study is designed to measure
what price premium households would be willing to pay for pesticides free fruit and
improvement in apple peach and mango quality produced by farmers
14 Purpose and objectives of the Study
The irrational and overuse of pesticides in agricultural food production causes severe
damages to human as well as animal health and to the environment too Thus a new
production and new system is needed to overcome these problems and to limiting the
use of these hazardous chemicals during production process The risk of harmful effects
on health and environment are generally reduced with pesticides free farming compared
8
to conventional farming methods Hence pesticides-free farming has the potential to
provide a healthy and safer environment The purpose of conducting this study is to
understand the factors that influence householdlsquos behavior in purchasing pesticide free
food and their willingness to pay for such food The main theme to carry out this study
is to discuss on the variables which determines householdlsquos behavior in the buying
pattern of pesticide free food Besides this research also aims to increase the
understanding on householdlsquos awareness attitude and perceptions towards pesticide
free products
The general objective of this study was to investigate what price premium householdslsquo
are willing to pay for pesticides free fruit produced locally
The specific objectives of this research study are mentioned as below
To study socio-economic characteristics of household and their expenditure on
fruit
To investigate householdlsquos perception towards the use of pesticides on fruit
production
To identify factors influencing householdlsquos willingness to pay (WTP) for
pesticides free fruit
To compare householdlsquos willingness to pay across urban and rural regions of
the study area
To examine the effect of different contingent valuation elicitation format on
householdlsquos WTP
15 Research Questions
1 Do householdlsquos willingness to pay a price premium for pesticide free fruit
produced locally is affected by their socio-economic characteristics
2 Do householdslsquo willingness to pay price premium for pesticide free fruit
produced locally are different in rural and urban regions
3 Do householdslsquo willingness to pay price premium for pesticide free fruit
produced locally are affected by WTP question format
9
16 Hypotheses
Hypothesis is a proper statement that shows the expected association between an
exogenous and endogenous variable (Creswell 1994) Hypothesis is mainly of two
types the null (Ho) and the alternative (H1) hypothesis The null hypothesis is a
statement about the relationship between the dependent and independent variables
while the alternative hypothesis is tested for the acceptance or for the rejection of null
hypothesis through using different test-statistics and usually opposite to the null
hypothesis
161 Hypotheses to be tested
Hypothesis 1
H1 Socioeconomic characteristics have significant effect on householdlsquos WTP
for pesticides free fruit produced locally
Hypothesis 2
H1 Rural and urban locations have significant effect on householdlsquos WTP for
pesticides free fruit produced locally
Hypothesis 3
H1 WTP question format have significant effect on householdlsquos WTP for
pesticides free fruit produced locally
17 Contribution of the Study
The major findings of this research endeavor could be lucrative to pesticides-free food
industry players in designing and implementing programs relating to the production
marketing and consumer behavior regarding fruit and vegetable The study is providing
information regarding householdlsquos willingness to pay an extra amount for pesticides
free fruit at market place The identification of factors influencing purchase of
pesticides free food provides valuable information in formulating short and long term
marketing programs Also the outcomes of the study provide benefits to Government
in their policy making towards pesticides-free farming and pesticides free products
Pesticides free fruit could contribute significantly to wealth formation poverty
lessening and can assess to export market Pesticides free fruit provide healthy food and
natural environment to the society
10
18 Organization of thesis
This study is organized into five chapters In the first chapter background of the study
research questions study hypothesis research justification and contribution of this
study is discussed Chapter two is consist of review of literature related to consumerslsquo
perception market potential and market prospects empirical research studies on
consumerlsquos willingness to pay and consumer knowledge about pesticides free food
socio-demographic variables and their effects on willingness to pay price premium are
discussed Chapter three discuss in detail the study area conceptual and empirical
framework on consumerslsquo willingness to pay and contingent valuation methods are
discussed Chapter four presents descriptive analysis and results obtained from
empirical findings and Chapter five provide summary conclusion and recommendation
and future suggestions on the basis of research findings
11
II LITERATURE REVIEW
Literature review is a synthesis of previous study in the content of a thesis In this
chapter different past investigation are reviewed Mostly this chapter concern on the
methods adopted by different researchers while measuring willingness to pay It also
figure-out various explanatory variables which have been found influencing
householdslsquo willingness to pay an extra amount of money for pesticides-free food
Previous researches on perception questions are also discussed
21 Illustration of Contingent Valuation Method (CVM)
A number of research studies are undertaken across globe to investigate about
consumerslsquo WTP for safer foods such as organically produced pesticides free or
naturally grown Most of the WTP studies use contingent valuation methods where
hypothetical market scenario is developed and subjects are asked to name their WTP
price as compared to existing market price Different techniquesquestionnaires are
used in contingent valuation method where respondents are directly asked to state their
maximum amount of money they are willing to pay for specified improvements in
environmental or health quality The methods used in CVM includes personnel
interview mail and survey that elicit consumerlsquos WTP for those goods yet not available
in the market Survey questions include single bounded double bounded dichotomous
choice and open ended or closed ended (Lusk and Hudson 2004)
Misra et al (1991) studied consumer preferences and their willingness to pay for
pesticides free fresh produce by applying contingent valuation method An ordered
probit model was adopted to know householdlsquos stated willingness to pay for products
free from pesticides residual The study also aimed to know the factors affecting the
probability of householdslsquo WTP for a number of alternative price premiums The
results indicated that householdlsquos willingness to pay was different across different
factors The study concluded that testing and certification was the recommendation of
the households Results also showed that consumers in the study area opposed higher
prices for certified-FPR fresh produce
In another study Gil et al (2000) adopted contingent valuation method and studied
consumerslsquo willingness to pay for pesticides free fruit in Spanish regions Results
showed that consumerslsquo concern over health and environment was increased Results
12
also suggested that due to the adverse impact of conventional food on health and
environment demand for pesticides-free food has raised Results of the study also
showed that consumerslsquo were willing to pay more prices for fruits vegetables and
meats which were free of pesticides
Boccaletti and Nardella (2000) used contingent valuation method to assess householdlsquos
willingness to pay for pesticides free fresh fruit and vegetables To know the impacts of
explanatory variables on the probability of householdslsquo willingness to pay different
price premium an ordered logit model was used and results were reported A
significant and positive effect of income on householdlsquos willingness to pay was
observed Results of the study also suggest that householdlsquos education and associated
risk concern has an inverse relation with households WTP
In another study Millock et al (2002) conducted a research study by using contingent
valuation technique to estimate willingness to pay for pesticides free products through
panel data The information collected was based on weekly report of householdslsquo
purchases of 2000 Danish families Questionnaires were sent to households and asked
them to differentiate different food attributes The food product attributes were included
environmental issues animal welfare and food safety The result showed that
household had given high value to food free from pesticideslsquo residues
Similarly in a relevant study Cranfield and Magnussan (2003) studied willingness to
pay of the Canadian householdlsquos for those products which were free from pesticides
residuals by applying an Ordered Probit Analysis model A contingent valuation (CV)
study was attempted to know that if Canadian households would pay a price premium
for pesticides free food products About sixty five (65) percent of the householdlsquos were
willing to pay a 1 to 10 percent extra amount of compared to those products
contaminated with pesticides residuals About five percent of the total respondents were
willing to pay more than 20 percent price premium The main determinants that switch
over the households to pay higher premiums for pesticides free products were
householdslsquo health concern and environmental concern
In a relevant study John and Eric (2004) developed a survey based research to find out
householdlsquos choice of paying an extra amount for fresh and pesticides free products by
using a contingent valuation technique According to their research 65 percent of
13
households were willing to pay one to ten percent extra prices for pesticides-free
products as compare to conventionally produce one five percent respondents willing
to pay more than twenty percent Health and natural environmental issues youth and
grocery stores were the important factors influencing consumers to pay higher prices
Masias et al (2012) carried out a research study in Spain to analyze the level of
knowledge consumption and consumerlsquos willingness to pay for organic vegetables
such as organic tomatoes By using contingent valuation method three distinct
consumerslsquo groups were identified The results showed consumerlsquos lack of knowledge
regarding organic vegetable Result of the study revealed a clear relationship between
level of knowledge and organic food consumption and consumerslsquo potential willingness
to pay
Boys et al (2014) conduct a research study in Dominica to assess willingness of the
consumerslsquo and their opinion for organic or locally grown produce By adopting
contingent valuation method (CVM) maximum likelihood estimation (MLE) procedure
was applied Findings from the study reported that respondents in Dominica were
willing to pay 175 percent for organic and 12 percent price premium for locally
produced food Results of the study showed that consumer response towards
willingness to pay was different across socio-demographic characteristics family health
status and experience regarding adoption of organic food products
22 Crux of the Double bounded dichotomous choice model
Many recent research studies deployed double bounded dichotomous choice model to
study consumerslsquo willingness to pay for pesticides free organic and related food
Owusu (2010) studied and analyzed market possibility for new pesticides free lettuce
and water melon by using a double bounded dichotomous choice contingent valuation
technique in the city of Kumasi in Ghana The information of the respondents was
collected By applying a Tobit model householdslsquo willingness to pay was assessed
More than 50 percent price premium were paid by 71 percent of the respondents for
natural vegetables and 82 were willing to pay 1 to 50 percent higher premiums for
natural fruits Results showed that human capital food qualities and householdlsquos
recognition impact householdlsquos willingness to pay for pesticide free commodities The
14
evaluated market possibility for pesticide free fruits were (GHcent32117113 US$
26453433) for every annum and for naturally produced vegetable was GHcent1991224
(US$1640083) per year suggested an immense market possibility for naturally
produced fruits in Ghana
sum
(
)
(
)
Where
are binary valued (0 or 1) indicators and the formulas
for the corresponding response probabilities are given above The model was estimated
through maximum likelihood estimation method and the results were used to find out
the mean and individual WTP (s) for pesticides free fruits
Where ƒ(WTP) is a function X is a set of socio-economic characteristics are
coefficients and is error term
In another study Cerda et al (2012) investigated different markets regarding
respondentlsquos preferences and willingness pay a price premium for products free from
pesticide in Chile Conjoint analysis was also used to estimate the marginal willingness
to pay of the consumer for pesticide-free apple A total of 400 individuals were
interviewed to know householdlsquos willingness to pay and to determine different
attributes that consumer search when purchasing apple by using a logistic probability
function and single-bound dichotomous elicitation format The output showed sweet
apple lowest price and pesticides free production attributes were preferred by
households Results of the study revealed that consumers in the study area were willing
to pay about 130 Chilean pesos kilogram for pesticide free apple
By using double bounded dichotomous choice approach Minh et al (2013) conducted
a research study on consumption and willingness to pay a price premium for pesticides
free vegetables in Vietnam Under contingent valuation method 185 respondents were
surveyed and analyzed Results showed that about 15 percent of the consumers had
already used pesticides free vegetables and 88 percent sought to try and purchase such
products if available in the market Result revealed that consumerslsquo were willing to pay
15
on average 70 percent more amount for pesticides free vegetable than the convention
price Findings also showed that respondents with more concerned about pesticides free
food and high purchasing power were more likely to pay extra amount of money
Findings of the study showed most of the consumers were still worrying about safe
food because of chemical residues in vegetables Results suggest that control of
pesticides level was difficult for state agencies because of insufficient capabilities
Some recommendations were suggested based on findings of the study such as the
consumers should be informed regarding organic vegetables and information should be
publicized to consumers and to expand organic market share in the future new shops
should be open
Hai et al (2013) conducted a research study on consumption of organic vegetables and
consumer WTP for vegetables produced without the use of pesticides in Vietnam They
reported in their study that most of the consumers were still worrying about safe food
because of chemical residues in vegetables Control of pesticides level was difficult for
state agencies because of insufficient capabilities By using double bounded
dichotomous choice approach under contingent valuation method 185 respondents
were surveyed and analyzed The results showed that about 15 percent of the
consumers had already used pesticides-free vegetables and 88 percent of the total
respondents desired to try and purchase if such pesticides free products were available
in the market On average consumers were willing to pay 70 percent more price than
the convention price Findings of the study also showed that respondents with high
income and more concerned about pesticides-free food were more likely to pay price
premium
23 Overview of the Ordered Logit Model
Regarding discrete nature and ordinal ranking of the WTP variables in payment card
method an ordered logistic regression was applied in many research studies Ordered
logistic regression is the most appropriate choice in studying these issues (Green
2007) Under latent variable framework the willingness to pay model can be written as
follows
16
Where is an unobserved latent variable reflecting the WTP for pesticides-free fruits
for household i expressed in terms of utility to switch from the traditionally grown
fruits consumption to pesticide free fruits is a parameterlsquos vector reflecting the
relationship between WTP captures a set of socioeconomic and demographic
variables influencing WTP and is the unobserved disturbance term reflecting
stochastic differences between households not controlled for The relationship between
the unobserved and the observed outcome for household ( =0 1 2hellipj) can
be summarized as follows
It is presumed that ɛ is normally distributed across observation
With regards to ordered logistic model Valchovska S (2004) investigated Dutch
householdlsquos attitudes and behavioral intentions to purchase pesticides-free olive oil By
applying CVM to assess consumer willingness to pay a price premium for pesticides
free olive oil on the Dutch consumer an ordered logit regression model was used
Results suggested that willingness to pay did not depend on socio-demographic factors
but rather on consumers awareness and experience with the product Results also
showed that experience regarding the product was significantly related to purchase
intention and willingness to pay Most of the consumers considered pesticide-free olive
oil to be too expensive Results suggested high prices appeared the biggest constraint
on consumption Results clearly verified that consumerslsquo familiarity with pesticide-free
olive oil in the Netherlands was low at present This situation may however be
changed by a possible increased availability of the product in the supermarkets
17
Rodriguez et al (2008) carried out a research study to measure consumers WTP for the
available pesticides free products in Argentina domestic market The data was collected
through a survey from the consumers of Buenos Aires city For the analysis of data a
binomial multiple logistic regression model was applied Five different organic
products such as regular milk leafy vegetables whole wheat flour and fresh chicken
and aromatic herbs were selected for the research The method of contingent valuation
(CVM) was adopted to estimate consumerslsquo stated willingness to pay The result
revealed that pesticide free agriculture has undergone momentous expansion and
consumers in the study area were willing to pay a higher amount of money for such
organic products Research results suggest that along with price that play a significant
rule while consuming organic products non availability of stores for organic products
and a reliable regulatory system limits the consumption of pesticides free organic
products in the study area
According to Kalogeras et al (2009) carried out a research study that concentrates on
the identification of Dutch householdslsquo willingness to pay (WTP) for natural olive oil
The study was carried out in 5 biggest Dutch cities in Netherland To evaluate the
impact of explanatory variables on householdslsquo willingness to pay a price premium for
natural produced olive oil an ordered logit regression model was constructed Results
suggest that experience awareness and consumerslsquo personnel satisfaction were the
variables influencing consumerslsquo WTP for natural olive oil
Travis et al (2009) conduct a research on consumer purchasing behavior for pesticides
free fruits and vegetables To identify the impact of socio-economic and socio-
demographic characteristics on the probability of consumers belonging to certain
groups like devoted casual or nonuser an ordered logistic model was used Results
showed that factors like price and income were influencing householdlsquos willingness to
purchase pesticides-free fruits and vegetables to some extent The results also showed
that respondents with a college degree children aged more than six years and aged
above than fifty years were willing to purchase pesticides-free fruits and vegetables
Zeki and Zia (2009) carried out a research study to investigate consumerslsquo stated WTP
for tomatoes produced free from pesticides residues The study also aimed to measure
the impacts of socio-demographic and hazard variables on WTP Ordered Probit model
18
was used to figure out the likelihood of WTP for pesticide free tomatoes The
information was acquired from 666 respondents by survey method in Ankara and Tokat
regions at same occasion The study results revealed that 3423 percent of Turkish
households were not willing to pay 7702 percent willing to pay a 30 percent higher
amount of money and 22 97 percent would be willing to pay more than 30 percent
premium According to the results Turkish households were paying a little price
premium for tomatoes produced free from pesticides Furthermore the important
factors significantly influencing willingness to pay for pesticides free tomatoes were
gender education statue of mother recognizes for ecologic agriculture solid
sustenance and risk
Oyawole et al (2016) conducted a study in Nigeria to asseslsquo consumer awareness
benefits and willingness to pay for organic vegetables Descriptive statistics and logit
model was used for the analysis of data According to the research findings about 70
percent of consumers were aware of the benefits of organic agriculture and hence they
were willing to pay price premium Results showed that factors influencing willingness
to pay positively were higher education and consumer awareness regarding organic
food while age income and gender had no significant influence on consumer
willingness to pay
Hayati et al (2017) conducted a research study in Marand city to identify factors
effecting consumerslsquo WTP for pesticides-free fruits and vegetables To assess
respondentlsquos willingness to pay an ordered logistic regression model was applied By
using Contingent valuation method data was collected from 394 respondents The
results revealed that 33 of the respondents were willing to pay 20 more price
premium 64 showed 5 to 20 more price premium while only a small portion 3
of the total sample of the consumers were not willing to pay more price for pesticides
free fruits and vegetables Findings of the study also revealed that factors such as
income of the respondent environmental and health concern and consumerlsquos
knowledge regarding pesticides free fruits and vegetables were significantly affecting
respondentslsquo willingness to pay for vegetables and fruits free from pesticides residues
19
24 Factors influencing Householdsrsquo Willingness to Pay
Based on the literature review factors influencing households WTP a price premium
are discussed below
WTPj = β0 +β1Agej + β2Genj + β3Eduj+ β4Hsizej + β5Incj + β6Locj + β7Healthconj+
β8Envirconcernj +
Where
WTP = Willingness to pay for pesticides free fruit = Householdslsquo head age in years
= Gender status of the householdslsquo head = Education level of householdslsquo head in
years = Householdslsquo size = Income of the household = Householdslsquo
location = Health concerned = Environment concerned micro=Error term
Govindasamy and Italia (1991) investigated households in different grocery retail
markets in New Jersy to know their different opinion regarding pesticides free
products The main theme of the research study was to know demographic
characteristics that caused the household to pay a price premium for products free from
pesticides residues than the price prevailing in the market The result showed the
influencing factors that caused the individual to pay more price premium for pesticides
free products were demographics characteristics such as females those having higher
income and young individuals The result also showed that number of member in
households had an inverse relation with willingness to pay More individual in a house
were not willing to pay higher prices for pesticides free products
Piyasiri and Ariyawardana (2002) conduct a research study to identify market potential
and consumerslsquo expectations for pesticides free food in Kandy Sri Lanka The study
also aimed to identify factors influencing consumerslsquo willingness to pay price premium
for pesticides-free food Results revealed that most of consumers in the study area were
aware of the use of pesticides free food and this awareness influenced their
consumption of organic food and willingness to pay more for organic food Results
showed that socio-demographic characteristics like income education of the
respondents beside environment knowledge were the important factors influencing
consumerslsquo WTP for pesticides-free food Study suggested that market for organic food
could be enhanced by availability of organic food in easily accessible shops and market
20
should also direct awareness in consumer regarding demand and consumption of
organic food
Qingbin and Junjie (2003) conduct a study to identify market potential for pesticides
free apple and milk by adopting a conjoint analysis technique in Vermont State of
USA Results found that there was a significant niche market for pesticides free apple
and milk The results also suggested that especially those consumers who were
regularly purchased pesticides free products were willing to pay price premium for
apple and milk produced without the use of chemicals and certified by NOFA
Heo and Kim (2004) investigated green marketing strategies and willingness to pay for
environment-friendly agricultural products in the Metropolitan area The results
revealed consumerlsquos WTP for grain vegetables fruit and processed foodstuffs were
206 percent 202 percent 193 percent and 172 percent respectively higher than
agricultural products produced by conventional farming method
Gracia and Magistris (2007) conduct a research study to know consumerslsquo purchasing
behavior regarding pesticide-free food and also factors influencing food purchasing in
Iran A multivariate limited dependent variable model was used Results showed that
households purchasing pattern was more for pesticides free products and they
purchased such safer products in large quantity Findings of the study showed that
purchase of pesticide free products depends on householdlsquos behavior and information
regarding the product Moreover householdlsquos behavior regarding health concern and
environment concerns given by pesticides-free products were the factors that explained
both intension and final decision to purchase pesticide free products Income and
information about pesticide free products had a significant positive influence on the
decision of the consumer to purchase pesticides free products
Kamal et al (2009) studied householdlsquos willingness to pay a higher price for
pesticides-free products in Kathmandu valley About 180 respondents were interviewed
by using well designed questionnaires to find out their perception for pesticide-free
food commodities and asses their willingness to pay The study revealed that almost all
the respondents were willing to pay a higher price for such food but the level of
acceptability varied Up to 58 of the respondents were willing to pay 6- 20 more
price while 13 were willing to pay half premium The average price premium was
21
noted about 30 Over 39 of the respondents suggest the extra price is reasonable for
pesticide-free food while 27 suggest it a really higher price However results showed
that the consumption of pesticide free food had increased
Morteza et al (2009) conducted a study to examine consumerslsquo willingness to pay for
pesticides free fruits and vegetables The results showed that variables such as socio-
demographic characteristics and perception of the respondents regarding environment
and health concern were influencing consumerslsquo WTP for pesticides free food
Environment concern was the important factor of consumer willingness to pay but
results from this study showed that respondents in New Brunswick gave more priority
to health as compare to environment Results also indicated a positive influence of
income and health concern on consumer willingness to pay for organic food
Ghorbani and Harnraz (2009) carried out a research study on factors influencing
consumer WTP for pesticides free products in Iran By applying Tobit model the
results showed that physical look and information of consumerslsquo were the influencing
factors affecting willingness to pay higher price Consumerlsquos concern of chemicals
residues in diets were also positively affecting willingness to pay In demographic
characteristics such as education of the respondents had negative effect on WTP The
study suggested that farmers and consumers should be encouraged to produce and
consume pesticides-free food Study also suggests that marketing strategies should be
encouraged for the marketing of such organic food products
Akgungor et al (2010) carried out a research study to estimate consumerslsquo perception
regarding safe food and the trade-off that urban Turkish consumer made between good
quality and chemicallsquos free fresh fruits and vegetables The date was gathered from a
representative sample of urban consumers The results suggested higher income and
more educated respondents were highly interested and they had more knowledge
regarding organic products Results showed suggested reason for choosing organic
products was consumerslsquo perception regarding organic products of low health risk and
higher nutritional value Results showed 36 percent higher price premium consumers
were willing to pay for organic food that suggests urban Turkish consumerslsquo demand
for organic products
22
Oraman and Unakitan (2010) analyzed factors influencing Turkish consumerslsquo
purchasing decisions for fruits and vegetables The survey conducted in Istanbul by
applying logistic model Results of the survey showed that health and safety concern
were the important factors influencing consumerslsquo preferences regarding organic food
Findings of the study would help organic food producer in targeting factors that were
influencing consumerslsquo decisions to purchase organic food products
Bektas et al (2011) conducted a research study to determine level of consumerslsquo
awareness regarding food safety in Izmir Turkey by applying Probit model Results
revealed that consumerslsquo with high income and more education were more aware
regarding safer food Outcome of the study also identified aged respondents had more
probability for healthy and safe food products Results suggested that awareness for
safer food should be passed through informative campaign targeting especially low and
middle income groups as well as low education level population
Coulibaly et al (2011) studied the health risk caused by using large quantity of
chemicals and pesticides on vegetables By using a hedonic pricing model they
identified the determinants of the householdlsquos WTP for pesticide free products
Information was collected through a well designed questionnaire on householdlsquos
perception awareness and consumerslsquo willingness to pay for pesticide free vegetables
The perception of householdlsquos for good quality vegetables included color freshness no
external damage and firmness The most important factor effecting householdlsquos choice
to pay more for pesticide-free vegetables were awareness about the health hazards
caused by those chemical Households were willing to pay more than fifty percent for
those products free of such pesticides and chemicals
Joyce et al (2011) conduct a survey to examine consumerslsquo perceptions and to assess
their willingness to pay for pesticides-free product They surveyed 100 households in
Morogoro municipal The results presented showed that 78 of the respondents were
willing to pay a higher price for pesticides-free food The results revealed that
environment and health concern were the most important factors effecting householdlsquos
willingness to pay for organic food Results from the survey suggested that
consumption of pesticides free food were increasing but need certification labeling
processing and packaging to boost up the demand
23
Sangkumchaliang and Huang (2012) conducted a survey on consumerslsquo perception and
attitude towards organic food products Results showed that consumers were
purchasing organic food products because of the expectations that organic food is
healthier and safer to the environment Results also revealed that respondents with old
aged and more educated were more willing to purchase organic food products The
study suggested that consumerlsquos information needed to purchases organic food
Owusua and Anifori (2013) analyzed the willingness of householdlsquos to pay an extra
amount of money to watermelon and lettuce produced naturally or free from pesticides
by applying a (CV) contingent valuation information starting with urban Kumasi in
Ghana The impacts of the determinants of the householdlsquos willingness to pay a higher
price were examined with a Bivariate Tobit model Results showed socioeconomic
characteristics as well as freshness and cleanness of products had a great influence on
householdlsquos choice to pay a higher price than they pay for conventional products
While householdslsquo size has a negative impact on consumerslsquo willingness on paying
premium to natural lettuce The estimated mean householdlsquos willingness to pay for
pesticide free watermelon was Ghcent05554 (US$ 0 4575) and for natural lettuce was
GHcent12579 (US$1 0361)
Haghjou (2013) investigated that the demand for those products that was grown without
the use of pesticides has increased amazingly in the recent years The study was carried
out to assess the factors effecting householdlsquos willingness to pay a higher price for
organic products accessible in the Argentinean provincial market The output of the
study reveals that 95 of the respondents were willing to pay a higher price while 10
of the householdlsquos were like to pay about 35 percent higher price than the market
existed price for naturally grown products The results suggested that householdslsquo
income family size ecological problems including respondentslsquo knowledge has
enhanced their desire to pay higher price for pesticide-free products than the
conventional one The result also showed that female as well as house wives were
agreed to pay more price premium
HUI et al (2013) conduct a survey on householdslsquo WTP a price premium for
pesticides-free products in Klang valley The study was based on householdlsquos
purchases by 2012 on their demographic and social-economic characteristics To study
the householdlsquos perception and WTP for pesticide free products 500 households were
24
interviewed by using well designed questionnaires The data collected were analyzed to
find what determined the presence of pesticide-free products The main theme of the
research study was to know the determinants that playing rule in willingness to pay for
products free from pesticides residues The result revealed that majority of the
households were agreed to pay a higher price premium for pesticide free products
Different factors like environment psychology food free from pesticide residuals and
health conscious were related to explain household willingness to pay for organic
products However the result also showed that social demographic and level of
knowledge did not explain the WTP for products free from pesticide
Syed et al (2014) studied different level of pesticides in different vegetables and fruits
in Pakistan The results obtained showed that more than half of the collected samples
were contaminated with organophosphate pyrethroids and more organochlorines
pesticides Numerous research studies found that tomato apple melon mango grapes
and plum among fruits and vegetables has crossed the maximum residual levels of
FAO and World Health Organization (WHO) The comparison with other areas showed
that in 50 of the sample the residual level was above than the stated level but was in
agreement with neighboring countries like china and Bangladesh Higher hazard risk
index (HRI) values were calculated for dieldrin methamidophos op-DDT diazinon
and pp-DDT in apple mango banana melon potato and onion
Vidogbena et al (2015) carried out a research study in major cities in Benin to asseslsquo
consumer perceptions about cabbage produced by a physical barriers method to protect
cabbage from pesticides Results showed that consumers were aware of the impacts of
pesticides on health and environment but they were not able to differentiate between
cabbage produced conventionally and through this net method Results of the study
revealed that consumer were willing to pay higher price for cabbage produced with
minimum application of pesticides as compared to one produced with pesticides
application Consumers were willing to pay 38 more price than the existed market
price Results indicated that females more educated and aged respondents were willing
to pay more prices for better quality cabbage
Safdar et al (2015) studied pesticide free food consumption and consumerslsquo WTP in
the United Arab Emirates To recognize major determinants of respondentlsquos willing to
pay more price for products free from pesticides residues a regression model was used
25
Around 300 hundred respondents were interviewed and information was collected The
results showed that the consumption of such food was increased in the study area This
increment was due to high per person price premium more knowledge about nourished
food products and different household population Consumers were paid price premium
for the food free from pesticides residuals Results showed that majority of the
respondents respond when inquired as to whether they were willing to pay more for
pesticide-free products Age nationality instruction family size and salary were main
factors influencing consumerslsquo to pay higher price for the pesticides-free food products
Hiren et al (2016) carried out a survey in Tennessee State USA The data were
collected on a random sample from grocery shoppers to assess consumer general
knowledge about pesticides-free food and to know their willingness to pay For this
study binary logistic regression model was used The survey showed that most of the
consumer had a fair knowledge about pesticides free food Results indicated that
number of those respondents who had never been used organic food was higher than
those who usually used The results showed that income and environmental concern
were the factors that effectively determine to pay more for pesticides-free food
Aguiar et al (2016) studied factors influencing consumerslsquo purchasing behavior
regarding organic food in Brazil by using structural equation modeling (SEM)
approach Results revealed that most of the consumerslsquo were willing to buy organic
food Respondents were willing to pay 25 percent price premium for organic food as
compared to food produced conventionally Results suggest the main determinants of
consumerslsquo willingness to pay were their beliefs of positive effects of organic food on
health and environment
Mangan et al (2016) studied level of awareness and willingness to pay for organic
vegetables in Sindh province of Pakistan Result of the study reported that majority of
the respondents had knowledge about the beneficial effect of organic vegetables while
less than half of the respondents had never heard about organic vegetables Results also
showed that most of the respondents (82) were not aware of the benefits of organic
vegetables to the environment Majority of the respondents were willing to pay price
for organic vegetables
26
Nandi et al (2016) studied consumer willingness to pay for organic fruits and
vegetables and also factors influencing consumerslsquo WTP in India For the estimation of
respondentlsquos willingness to pay contingent valuation method (CVM) was used For the
data analysis 250 respondents were selected A binomial regression model was used to
know respondents willingness to pay and the factors influencing on WTP Results
revealed that most of the respondents were confronted with environment problem
health related issues and safe environment and food The respondents were increasingly
desired to have more healthier and environmental friendly food To acquire better
quality of fruits and vegetables about 90 percent of consumers were willing to pay a
price premium ranging from 5 percent to 100 percent Factors like income of
respondents householdlsquos size gender and other opinion variables such as pesticides
residues in food taste and environmental concern were significantly influencing
consumer willingness to pay a price premium
Slamet et al (2016) conducted a research study to identify factors influencing
consumerslsquo willingness to purchase pesticides free vegetables in Jabodetabek region
(Jakarta) Data was obtained through a householdlsquos survey Three methods binary logit
model descriptive analysis and factor analysis were used for analysis of data The
results showed that respondents with more income minimum householdlsquos size and
price tolerant were more likely to purchase pesticides-free vegetables The study also
indicated other factors determining consumerlsquos willingness to purchase for pesticides-
free vegetables were positive attitude health concern environment concern as well as
positive belief in pesticides-free vegetables
Gumber and Joyti (2017) conduct a research study in national capital region of India to
find out price premium and factors effecting consumerslsquo WTP for pesticides free food
Results of the study showed that consumerlsquo demographic characteristics like education
income of the respondents environmental concern and health related issues were the
important factors influencing consumers to pay higher price for organic food Besides
other variables like taste physical look certification packaging and promotion were
found to have no influence on consumer willingness to pay for pesticides-free food
Results suggested organic food producer to design communication strategies and
suitable pricing strategies in the study area
27
25 Essence of the Literature Reviewed
The above literature reported that several studies have been conducted on
consumerhouseholds willingness to pay for pesticides-free fruits with contingent
valuation method (Govindasamy and Italia 1999 Krystallis and Chryssohoidis 2005
Quagrainie 2006 Kimenju and De Groote 2008) In this type of models a
hypothetical market scenario is developed in which consumer are asked about their
stated WTP a price premium Misra et al (1991) and Boccaletti and Nardella (2000)
used contingent valuation method and analyzed household willingness to pay for
organic products in Italy and USA Gil et al (2000) also used the contingent valuation
model in Spain and reported that respondents in that study area were willing to pay a
price premium for pesticide-free fruits
Regarding the socio-demographic profile of pesticides-free products the above
underline research study showed that mostly female respondents were willing to pay
price premium more frequently than male respondents Age factors also played an
important role with older consumers observed more WTP due to their health concern
On the other hand income played a vital role while buying safer food Literature also
supported that more educated respondents are willing to pay more price premium for
healthier and environmental friendly food products
The preceding review presents valuable information on contingent valuation method
and consumer willingness to pay price premium for organic foods and environment
resources Since most of the work had done on consumer willingness to pay for
pesticide-free fruits in developed countries but not a few studied paid much attention to
conduct research on householdslsquo willingness to pay for pesticides-free fruits in
developing countries like Pakistan
A few facts emerge the literature review One the coverage of consumerslsquo WTP for
organic and pesticide-free food is rather thin in the literature The lack of this
information could inhibit governmental and developmental agencieslsquo decision Second
the consumer WTP is a factor demographics and consumerslsquo perception This study
uses CVM to explore Pakistani consumer WTP for pesticide-free fruit We found socio-
demographic factors such as age education income householdlsquos size householdlsquos
head education and perception significantly influencing householdslsquo WTP Findings of
28
WTP
Environmental
concern
Socio-demoghr
aphic characte
risitcs
consumer knowledge of PFF
Health
concern
this study almost showed 26 percent price premium that suggest a strong indication of
consumerslsquo demand for pesticide-free fruit This is a convincing message for
agriculture policymakers to encourage and educate farmers for production of pesticide-
free fruits Thus this study is timely relevant and provided additional information on
understanding consumerlsquos attitudinal behavior choice and factors effecting willingness
to pay for pesticide free fruits in Khyber Pakhtunkhwa (Pakistan)
Review of literature highlighted different influencing factors that affect the consumers
willingness to pay for pesticides-free food are shown in figure 1 It shows that
perception of consumers regarding human health and environment and socio-economic
and socio-demographic characteristics have an influential affect on consumer
willingness to pay
Figure 1 Factors effecting consumerrsquos WTP for pesticides free fruits
29
III MATERIALS AND METHODS
This chapter consists of two sections The first section describes the study area while
the second section presents the conceptual frame of the study The second section
provides a detailed discussion about the methodology being employed for the research
In the beginning of this section a brief debates provided on Contingent Valuation
Method (CVM) used to analyze householdslsquo willingness to pay (WTP) and later on
elaborate specification of the empirical models used for capturing the factors
influencing householdlsquos willingness to pay for pesticides-free fruit and vegetables is
given followed by a discussion on how the data was collected in the study area
31 Khyber Pakhtunkhwa
Khyber Pakhtunkhwa (KP) occupies a north-west position in Pakistan with a total area
of about 74521 square km Gilgit-Baltistan is situated on its northeast Punjab on the
southeast and Azad Kashmir on the east A long and narrow piece of land belongs to
the Federally Administered Tribal Areas (FATA) borders situated to its south and
Baluchistan directly below it On its west Federally Administered Tribal Areas are
situated and Afghanistan is situated on its northwest According to census report 1998
the total population of KP was 177 million According to the 2011 Census Bureau of
Pakistan house listing operation the population of KP was estimated to be more
than 268 million There are a total of 26 districts in KP Naturally KP has been
endowed with abundant cultural and tourism friendly environment It has the capability
to become a charming area for the tourist in the world Due to its beautiful and
attractive scenery geographical location climate and God gifted natural resources KP
is exceptionally abundant in terms of multitudes of tourist attraction The core of this
charm is clear from the striking natural picturesque consisting of beautiful rivers
attractive and splendid waterfalls spiral lakes mostly in the hilly areas and ever green
valleylsquos in most parts of the province TCKP (Tourism Corporation Khyber
Pakhtunkhwa(2015)Districts of KP is shown in figure31
30
Figure 31 District Peshawar and Mardan of Khyber Pakhtunkhwa
31
32 Sampling Technique
Three stage stratified sampling technique was used for the collection of data
from study area
321 Stage 1 _Selection of district Peshawar and Mardan
In the first stage as KP is comprised of 26 districts Peshawar and Mardan was
purposively selected The purpose behind this selection was huge population in these
two districts
322 Stage 2 _ Selection of Union Councils (UCs)
In the second stage from each selected district one urban and one rural union
council were randomly selected Thus a total of 4 union councils were taken as a
sample location from both districts
323 Stage 3 _Selection of households from each Union Council
In the third and final stage a list of households was obtained from local union
councillsquos health department (BHU) The following Yamanelsquos (1967) formula was
used to decide sample size of households
Where
- r is the sample size for households
- N is the total households in selected UCs and
- e is the minimum probability of error
The value of ―e was selected at e = 003 with the intension to keep the error at lowest
possible level and select a best representative sample from the given population of
10020 households
The Yamanelsquos formula suggests a sample size of 1000 households from two districts
After deciding sample size households was taken from selected union councils (UCs)
using proportional allocation sampling technique The allocation is said to be
32
proportional when the total sample size n is distributed among the different union
councils in proportion to the size of strata
=
____________________ (2)
Where
- = no of sampled respondents in each stratum
- Ni =population size of ith UCs
- N = the total number of households in selected UCs
- n = total number of households
The number of sampled households selected through proportional allocation method is
given in table 31
Table 31 Total population and sampled households from selected UCrsquos
District Union councils Total households Sampled
households
Mardan Urban 3090 309
Rural 1910 191
Peshawar Urban 3000 300
Rural 2020 202
Total 4UClsquos 10020 1000
Source Local Basic Health Unit (BHU) Peshawar and Mardan
33 Allocation of Sample Size for Different Models
A total of 1000 sampled respondents were selected for this research study from urban
and rural areas of the two districts namely Peshawar and Mardan of Khyber
Pakhtunkhwa Pakistan A sample of 600 respondents was reserved for double
bounded dichotomous choice model For the best estimation of parameters double
bounded model requires large sample size compared to open ended and payment card
model (Calia and Strazzera 2000) Out of total respondents a sample of 400
households were allocated for linear regression model and ordered logit model 200
for each model
33
34Contingent Valuation Survey Designing
CVM produces values contingent upon the description of the resource and the method
of payment The accurate measurement of any resource requires a detailed description
of the resource (Loomis et al 2000) The survey designed for this study started with the
description of the conventional food commodities and uses of different varieties of
chemical pesticides on fruit and vegetables before and after harvest After the
description of pesticides its harmful effects on human being as well as on environment
then pesticide free fruits were discussed with the households After describing the
benefits of pesticides free fruit respondents were asked to rank the relative importance
of each benefit The main reason for asking this question was to reveal householdlsquos
preferences their non-monetary value for use and nonuse benefits and to compare
them with their stated WTP response
Results in CVM are sensitive to the valuation question format and payment mechanism
(Carson and Hanemann 2005) The National Oceanic and Atmospheric Administration
(NOAA) Blue Ribbon Panel recommended the use of single bounded dichotomous
choice CV questions with mandatory payment vehicles (Arrow et al 1993) However
recent studies show that the single bounded dichotomous choice method provides
limited information about householdlsquos WTP and produces higher WTP compared to
open-ended question and payment card method (Zhongmin et al 2006) The single
question dichotomous choice method requires a large number of respondents to obtain
an accurate estimate of WTP (Carson and Hanemann 2005) People in the study area
were not familiar with CV Survey The use of an open-ended question format may
generate high zero WTP responses Consequently this study used the entire three
payment format to elicit householdlsquos WTP for pesticides-free products
35 Householdsrsquo Survey
This research mainly based on primary data The primary data was amassed through
interview schedule On the basis of objectives of the study a well-defined questionnaire
was prepared and was pre-tested in the field A small Pre-test was conducted before the
final data collection About 1000 households from Peshawar and Mardan were face to
face interviewed In contingent valuation studies face to face interview is more reliable
(Carson 2000) Socio-demographic characteristics attitudinal and behavioral
34
information of the households were collected Through this survey the data was
gathered both from rural and urban areas of the selected districts District Peshawar and
urban areas were taken equal to one and district Mardan and rural areas were taken
equal to zero Before asking the respondents for their willingness to pay a price
premium they were briefed about the differences among the conventional and
pesticides free fruit The attitudes of the consumers and knowledge about the minimum
use of pesticides on fruit were also gathered to better know how the respondents relate
different aspects of pesticides free fruit These attitudinal behavior questions were
posed using a modified Likert scale response (where a one equals agree and zero equals
disagree) Different values were assigned to each response according to a well-defined
method in the literature (Cranfield and Magnusson 2003)
36 Conceptual Framework
This section is devoted to the conceptual framework of the study Households utility
and willingness to pay willingness to pay and contingent valuation method and the
estimation of mean WTP are discussed The empirical discussion on the factors
influencing householdlsquos willingness to pay a price premium is also discussed
361 Householdrsquos Utility and Willingness to Pay
Willingness to pay could be analyzed as a householdlsquos choice problem Following
Canfield et al 2003 the study assumes that a household who buys and consumes a
conventionally produced food products encounters the same food products but in
pesticide free form on the market The household who decides to purchase pesticide-
free fruits instead of the conventional one does so because it is assumed that hisher
utility is higher for the pesticide-free food (Magnusson et al 2005) If the utility does
not change then a rational household will not be willing to pay as an increase in the
price results in a lower level of utility compared to the base level of utility Also if the
utility increases then the household may be willing to pay more for pesticides-free
food on the basis that the price increase does not lower the utility beyond the base level
(Cranfield et al 2003) The householdlsquos willingness to pay is therefore a function of
the change in utility arising from the consumption of pesticides-free food Thus
35
Where ∆U is the change in utility
Since the choice of one product over another is a discrete one it is convenient to look at
householdlsquos choice problem in a random utility setting Random utility models have
been used extensively in the valuation literature in the analysis of householdlsquos food
safety valuation and assessment of householdlsquos response to new (or different) products
(Eom 1994 Veeman and Adamowicz 2000 Kuperis et al 1999 Quagrainie et al
1998) Following the random utility framework proposed by Cranfield et al (2003) it
is assumed that a household faces a choice between buying either the conventional or
pesticides-free food variety of the same product The utility derived from consuming a
given product by a household is given as
Where
Where is the utility arising from choosing the ith alternative is the deterministic
component of the utility function is a vector of observable alternative specific
factors that influence utility is a vector of parameters and is the stochastic
component The households choose alternative if and only if for all (or
that without loss of generality
The utility of the household is however not observable What is observed is whether or
not the household chooses to pay a premium for the pesticide free product
362 WTP and CVM
On the basis of stated preferences consumer willingness to pay can be measured by
several methods To extensively elicit consumer preferences for food labels on different
attributes economist and market researchers have used contingent valuation (CV)
choice experiment (CE) and experimental auction (EA) or combination of all the three
methods (Fox et al 1994 Fox 1995 Huffman et al 1996 Hossain et al 2003
Loureiro and Umberger2003 2005) To estimate willingness to pay (WTP) economist
must turn to hypothetical due to unavailability of markets for the good or service
Historically Contingent Valuation Method (CVM) has been used for the evaluation of
consumerlsquos preferences for those goods not available in the market
36
Contingent Valuation Method is a survey based method where respondents are
presented with a hypothetical payment scenario for pesticide free products in this study
pesticides-free fruits Methods used in contingent valuation include face to face
interview surveys and mail to elicit consumerlsquos willingness to pay for organic and
pesticide-free food Contingent valuation method based on a survey approach was
presented by SVCiariacy-Wantrup (1947) however contingent valuation method was
first time empirically used by Davis (1963) Due to its proficiency most of the
researchers and policy makers used this technique to elicit consumerlsquos valuation for
those goods which are not available in the market such as research concerns to
environment health and recreation (Jakobsson ampDragun 1996)
The classification of framework to measure WTP based on the data collection methods
are as presented in Figure 32 We employed contingent valuation method (CVM) to
measure householdslsquo willingness to pay for pesticides-free fruits among the different
available alternative methods in the literature CVM was the most widely used
approach (Hanemann 1984)
Figure 32 Classification framework of methods to measure willingness-to-pay
Source (Breidert Hahsler ampReutterer 2006)
37 Elicitation Techniques
According to Portney(1994)to draw out the value of good and service different
elicitation techniques are used to design CV question scenario It is the important part
37
of any CVM study The elicitation used in contingent valuation methods are of various
types The most popular ones are bidding game approach open ended payment card
and dichotomous choice approach
371 Bidding Game Approach
In this approach a bid is randomly assigned to each respondent from a list of
predetermined bids The assigned bid may be a lower bid or higher bid Respondents
are to answer the bid and the process is continuous until the highest positive response is
recorded (Randall et al 1974 as cited in Venkatachalam 2004) Since this approach
provides market like situation and the respondents can research their preferences so the
results obtained through this approach are quite better
372 Open-ended Elicitation Method
In open ended questions format respondents are asked to identify a single amount
without suggesting them any value Respondents are asked to give their opinion on
―How much they willing to pay for a certain attribute Mitchell and Carson (1989)
found certain drawbacks in using this question format They reported that this method
provides maximum no response no answer and outliers In this method respondents do
not know what value heshe has to select
373 Payment Card Approach
Another technique in contingent valuation method is the payment card approach In this
question format respondents are asked to select an amount in willingness to pay from a
checklist given in absolute value or in percentage of prices (Boccaletti ampNardella
2000 Lacaze Rodriguez and Lupin 2009)This approach is used for small sample
size However it has been noted that the respondents could easily be confused if the
survey is not carefully designed (Wang and Whittington 2005)
374 Dichotomous Choice Model
In this format two choices are provided to respondents ―Yes or ―No This format
resembles the market choice behavior It included single bounded double bounded and
multiple bounded questions format
38
A Single Bounded Method
The single bounded format was first used by (Bishop and Heberlein 1979) The
consumers are asked whether they would be willing to pay a single amount for a certain
goods having an extra quality attribute The answer expected might be ―yes or ―no to
the given amount This format is easy to use but it provides limited information for
willingness to pay amount and the bidding game stop after a single information
provided
Most of the research work done on willingness to pay has suggested that respondents in
contingent valuation methods do not have a single value of price but they might have a
range of economic values in their mind (Cameron ampQiggim 1994 Dobourg Jones-lee
and Loomes 1994)
B Double Bounded Method
In double-bounded questions format respondents are presented with follow-up
questions after asking the first question For example if respondentlsquos answered to the
first question is ―yes willingness to pay a $X the next question might be whether
respondents willing to pay $Y (typically $Y gt $X) On the other hand if respondents
say ―No the first question than heshe might ask whether the respondents willing to
pay $Z (typically $Z lt $X) This questionlsquos approach is also called doubled-bounded
referendum approach (Cameron ampQiggim 1994) In comparison with single bounded
model more statistical efficiency can be seen by estimating doubled-bounded
willingness to pay data with the help of interval based econometric model (Heinemann
et al 1991) Figure 33 shows double bounded choice format
This study used all the three question scenarios to elicit WTP for pesticide free fruits
39
WTP
Yes
wtp
1st bid
yes
wtp 2nd
higher bid
yes No
No
wtp 2nd lower bid
yes No
No
Figure 33 Double Bounded Choice formats
38 Empirical Estimation of WTP by Payment Card using Ordered Logit Model
Regarding discrete nature and ordinal ranking of the WTP variables in payment card
method an ordered logistic regression was applied as the most appropriate choice in
studying these issues (Green 2007) The WTP model can be written under latent
variable framework as follows
Where is an unobserved latent variable reflecting the WTP for pesticides-free fruits
for household i expressed in terms of utility to switch from the traditionally grown
fruits consumption to pesticide free fruits is a vector of parameters reflecting the
relationship between WTP captures a set of socioeconomic and
demographicvariables influencing WTP and is the unobserved disturbance term
reflecting stochastic differences between households not controlled for The
40
relationship between the unobserved and the observedoutcome for household
( =0 12hellipj) can be summarized as follows
It is presumed that ɛ is normally distributed across observation By normalizing the
mean and variance of ɛ to zero and one the following probabilities can be calculated
Where F () indicates distribution function and microlsquos are unknown parameters to be
estimated with β
A natural question arises that when a variable influencing outcome changes than how
this variable influences the probabilities of different outcome For example if age is a
factor which influence consumer willingness to pay different choices then how would a
personlsquos probability of being WTP different choices be effected if heshe was a year
older Aldrich and Nelson stated that the estimated coefficients only determine the
direction of the effect but not the magnitude The magnitude of ordered logit cannot be
simply interpreted but signs and statistical significance agree with linear regression
(Wooldridge 2001) To answer the above question and take the idea marginal effects
can be calculated The marginal effects show that how a change in explanatory
variables affects the probability of willingness to pay that consumers are willing to pay
for different WTP classes In this model the coefficients are not equal to the marginal
41
effects of explanatory variables on probabilities Since the marginal effects can be
calculated by the following equation
There are two broad Cumulative density function (CDF) choices Logistic density
function and standard normal density function The model is said to be ordered logit if
the distribution is cumulative standard logistic (F) and the model is said to be ordered
Probit if the distribution is cumulative standard normal (Φ) Results obtained from
both of these models are same only the difference is in the tail The logistic distribution
has heavier tail than the standard normal distribution As Green (2000) reported ―It is
difficult to justify choice of one distribution over other on theoretical grounds in most
applications it seems not much difference The results obtained from both models
may be quite similar because of the similar distribution However an ordered logit
model is applied in this study
Empirically we estimated ordered logit model where WTPj is an ordered dependent
variable with ten WTP price premium categories
Table 32 Payment card format
Price premium classes (PKR)
WTP
= 0
WTP
1-5
WTP
6-10
WTP
11-15
WTP
16-20
WTP
21-25
WTP
26-30
WTP
31-35
WTP
36-40
Above
40
Source Pre- tested field survey (2017)
42
39 Empirical Estimation of WTP using Double Bounded Dichotomous Choice
Model
For Dichotomous choice question Following Chen et al (2002) and Kimenju et al
(2005) a double bounded dichotomous choice model was used in this study to assess
householdslsquo willingness to pay and the influence of explanatory variables on
householdlsquos WTP a price premium for pesticides-free fruits This model was used
because the dependent variable was double dichotomous whether the respondents
would be willing to pay or not so they provide answer with ―yes or ―no Many
researchers used double-bounded dichotomous choice method in their research such as
(Ara 2002 Rodriguez et al 2007 Abdullah and Jeanty 2011 and Claudy et al
2011)
The double-bounded method confronts each respondent with two dichotomous choice
WTP questions (bids) The 2nd
bid value is contingent on the respondentlsquos reply to 1st
bid If the respondent responds in ―yes to the first bid (B) than the second bid (Bu) is
some amount higher than the first bid (Bu
gt B) If the respondent says ―no to the first
bid the second bid (Bd) is then some lower amount (B
d lt B) Thus there are the
following four possible outcomes for the double-bounded WTP question ―yes-yes
―yes-no ―no-yes and ―no-no
According to Hanemann et al (1991) the probability of answering ―yes-yes (Pryy) is
= )
Where Pryy is the probability of answering ―yes-yes WTP is the respondentlsquos
willingness to pay for the product and F is the cumulative distribution function with
parameter vector Similarly the probability for each of the other three outcome
responses is
]
43
Where and are the probabilities for saying ―yes-no ―no-yes and ―no-
no to the double-bounded question respectively Thus the log-likelihood function for
the ith
respondent can be written as
sum
(
)
(
)
Where
are binary valued (0 or 1) indicators and the formulas
for the corresponding response probabilities are given above The model was estimated
through maximum likelihood estimation method and the results were used to find out
the mean and individual WTP (s) for pesticides free fruits
Where ƒ(WTP) is a function X is a set of socio-economic characteristics are
coefficients and is error term The models were estimated using maximum
likelihood estimation method
391 Factors which could Influence WTP
As Kimenju et al (2005) has indicated WTP is influenced by householdlsquos knowledge
and perception in addition to price and socio-economic factors Moreover
householdlsquos WTP may be influenced by individuals tastes and preferences income
and perceptions on the products in addition to household and socio-economic
characteristics (Cranfield and Magnusson 2003)
A number of different explanatory variables were included in the WTP model These
include demographic variables regional variables and perceptional variables The
variables that are included may depend on the manner by which the data is gathered
(ie contingent valuation surveys experimental methods etc) Factors which
influence householdlsquos willingness to pay for pesticides-free fruits are formally specified
as
44
392 Bids Design
In this study hypothetical prices (bids) for double-bounded dichotomous choice model
were designed based on the prices available for conventional fruit in the market On
average (Rs100kg) To minimize starting bids bias bidding system was used in table
31 Respondents were asked different bid
Table33 Bid system for Pesticides free fruits
First bid High bid Low bid
10 20 5
20 30 10
30 40 20
40 Above 30
Source Field Survey (2017)
310Empirical Estimation of WTP using Linear Regression Model
For open ended questions data a linear WTP model was used to estimate WTP and
identified its determinants
sum
Where
= is the WTP of the jth household for Pesticides-free fruits
= Set of socioeconomic characteristics of the jth household
Factors effecting consumerslsquo willingness to pay for pesticides free fruits can be written
as
Willingness to pay is actually represents the demand of the household The difference
in both is only the consumer surplus If we suppose zero consumerslsquo surplus than the
two identities are the same Therefore willingness to pay in the above model showed
percentage of expenditure on pesticides free fruit of the total food expenditure The
explanatory variables included were age gender education householdlsquos size income
45
location health concern environment concern and awareness Since the dependant
variable in the model is continuous so the appropriate method of estimation was
ordinary least square (OLS)
311Description of Variables
Table 34 presents a list of explanatory variables used in estimation of willingness to
pay a price premium for pesticides-free fruits
Table34 Description of explanatory variables
Respondents willingness to pay
WTP ( Price Premium)
0= Not willing to pay
1= Willingness to pay 1-5
2= Willingness to pay 6-10
3= willingness to pay 11-15
4= willingness to pay 16-20
5= willingness to pay 21-25
6= willingness to pay 26-30
7= willingness to pay 31-35
8= willingness to pay 36-40
9= willingness to pay above
Age of the householdlsquos head
Age Age of the householdlsquos head measured in years
Gender of respondents (Dummy variable)
Gender 0= Female
1= Male
Householdlsquos head education
Education Education of the householdlsquos head in years
Member in each household
Householdslsquo Size In number including all family members
Households location 0 = Rural households
1= Urban households
Awareness Household knowledge regarding pesticides uses on fruits
where 1 shows aware respondents and 0 shows unaware
respondents
Income Income of the households in Pakistani rupees
Consumer attitude towards impact of pesticides on health
Health concern 1 if respondents concern to health 0 if not concerned
Consumer attitude towards impact of pesticides on environment
Environment concern 1 if respondents concern to environment 0 if not
concerned
46
1V RESULTS AND DISCUSSION
This chapter illustrates the major finding of this research endeavor These findings are
computed in the light of major objectives and hypotheses constructed for this research
The collected primary data was punched into the computer and was estimated
encompassing double bounded dichotomous choice model ordered logit model and
linear regression model in the STATA econometric software This chapter is further
bifurcated into three sections In the first section a descriptive statistics is computed to
elaborate the respondentlsquos traits of the study area that includes socio-economic and
demographic aspects as well Followed by the analysis of major attributes such as
attitudinal behavior perception about pesticides free fruit and householdlsquos consumption
behavior that has attain the specific objectives of this study The empirical results on
willingness to pay are underscored in section two Moreover the three different
questionnaires ie dichotomous choice open ended and payment card are adopted and
their results are discussed and compared with each other in section three
41 Descriptive Analysis
Descriptive analysis is a statistical tool that is used to summarize the collected data in
tabulated form The range of data mean value median standard error and variance
coefficients are highlighted via statistical analysis This helps the researcher and readers
to get understanding about the pattern of data This section consists of the descriptive
part of the analysis Socio-demographic characteristics such as age gender education
and other attributes of the respondents are shown in the tabulated form Moreover
socio-economic portfolio that includes income consumption and certain perception
along their attitudinal trend regarding organic and conventional fruits are given and
discussed
411 Demographic and Socio-economic Characteristics
This section demonstrates the demographic and socio-economic characteristics of the
respondents The information was gathered from 1000 household of the study area
47
Age of the householdrsquos head
Householdslsquo age is an essential demographic characteristic and an important factor that
can influence householdslsquo willingness to pay An average age of the household in
district Peshawar and Mardan is computed and given in Table 41 The computation
depicts that an average age of the respondents in Peshawar is reported around 40 years
while in Mardan an average age is observed as 54 years Result reveals a significant
difference in the mean age of rural and urban location of Peshawar with a probability of
(0001) Whereas no significant difference was found in householdlsquos age in urban and
rural region of district Mardan
Table 41 Age of the householdrsquos head (Years)
District Age of the Respondents
Mean Rural Urban T-test
Peshawar 3997 35382 42333 7217
(0000)
Mardan 5402 53188 55870 1104
(0136)
All 46995 47310 46659
Source Authorrsquos calculation based on Survey Data 2016-17
Educational Level of the Householdrsquos Head
An individual entails modern education about developments in technology science and
an array of other managerial skills that drives consumerlsquos behavior Education can also
play a pivotal role in consumerlsquos awareness while choosing improved quality of food
Therefore education can be considered as an imperative factor influencing consumerlsquos
decision to pay higher price for pesticides free fruit Several research studies carried out
across the globe have corroborated that an educated households with higher
qualification are more conscious while making purchasing decision and prefer to
choose pesticides free fruit
Keeping in view an education as a substantial factor persuading consumer behavior the
householdlsquos head education level was analyzed and is presented in Table 42The
descriptive statistics divulged that the mean educational level was observed as 978 and
1138 years of schooling of the household head in Mardan and Peshawar respectively
Estimates of t-test further depicts a significant difference in educational level in rural
48
and urban region of both districts with a p-value of (0001) and (0000) for Mardan and
Peshawar respectively These findings suggest a higher level of education in urban
households compared to rural households These results are in line with Shah et al
(2016)
Table 42 Educational Level of the Householdrsquos Head (Years)
Districts Educational Level
Mean Rural Urban T-test
Mardan 978 8782 12012 3780
(0001)
Peshawar 1138 7735 13257 8016
(0000)
All 1058 8436 12855
Source Authorrsquos calculation based on Survey Data 2016-17
Households Size in the Study Area
Householdslsquo size is an important demographic characteristic which shape households
purchasing behavior Large householdslsquo size increases the consumption without taking
quality in consideration The probability of choosing an improved version of fruit
quality decreases with an increase a member in a household Small size households are
more concerned about good quality of fruit
An estimation of household size data illustrates that an average household size in
district Peshawar and district Mardan was reported as 06 and 09 members respectively
The results shown in Table 43 have suggested no significant difference in householdslsquo
size in urban and rural areas of both districts The average householdlsquos size was
computed as 715 members These results are consistent with Shah et al (2016) who
depicted similar findings for household size in KP
Table 43 Householdsrsquo size of the Respondents (Member in Number)
District
Mean Rural Urban T-test
Mardan 863 8666 8548 0965
(0400)
Peshawar 567 6029 5484 -2122
(0018)
All 715 7796 6463
Source Authorrsquos calculation based on Survey Data 2016-17
49
Income of the Households
The household income level is one of the driving aspects that manipulate the
consumption and saving behavior of an individual Those societies where individuals
earn high income are usually deemed as food secured societies across the globe
however low income group of the poor societies are generally reported as food
insecure It is worth-mentioning that surge in an income can subsequently leads to
choose high quality food (that includes cereals fruits vegetables pulses and their
byproducts) by individuals Likewise householdlsquos income has considered as an
important determinant of willingness to pay for quality attributes such as pesticides
free
An income status of the households in the study area is outlined in Table 44 The mean
income of the Household was calculated as Rs62130 and 42430 in district Mardan and
Peshawar respectively There was a significant difference in the mean income of
respondents from urban and rural areas of both the districts The T-value of Mardan
region was signified as 6018 and had a probability of (0000) while in Peshawar region
was 950 with P-value of (0000)
Table 44 Householdsrsquo Income in Pakistanrsquos Rupee (PKR)
District
Mean Rural Urban T-test
Mardan 63130 5489855 8145161 6018
(0000)
Peshawar 42430 2923529 4922727 9504
(0000)
All 52780 4642718 5952577
Source Authorrsquos calculation based on Survey Data 2016-17
Householdrsquos Expenditure on Food
Food consumption expenditure is the monetary expense incurred by household to
purchase food items Such food expenditure is the key component of current
expenditure to buy consumable goods The data regarding householdlsquos expenditure on
food is estimated and is shown in Table 45 The mean expenditure incurred on food by
the household in Mardan and Peshawar was determined as Rs 49280 and 34860
respectively A significant difference in rural and urban householdlsquos food expenditure
has been reported The computed t-value observed as 425 and 743 with a p-value
0000 which implies that householdlsquos expenditure in urban region was higher as
compared to rural households
50
Table 45 Households expenditure on food (PKR)
District
Mean Rural Urban T-test
Mardan 49280 4511594 5854839 4256
(0000)
Peshawar 34860 2544118 3971212 7435
(0000)
Total 42070 3862136 4573196
Source Authorrsquos calculation based on Survey Data 2016-17
Note Values in parenthesis is P-Value
Householdrsquos Monthly Expenditure Share on Fresh Fruit
Expenditure share is an amount of income that is incurred by an individual on certain
goods out of total spending Households in the study area have allocated their income
share to make an expense for fresh fruits which is shown in Table 46 It has been
observed that in districts Mardan an average spending for fresh fruit was computed as
4172 (PKR) per month by the household Whereas expenditure share for fresh fruit by
Peshawarlsquos household was 3800 (PKR) which was less as compared to Mardan The
given t-values of the estimates confirm a significant difference in expenditure share
incurred for fresh fruits by rural and urban region households of both the districts This
significant difference implies that householdlsquos expenditure share for fresh fruit in urban
area is higher as compared to rural households
Table 46 Householdrsquos monthly expenditure share on fresh fruits (PKR)
Respondents
Mean Rural Urban T-test
Mardan 4172 3798551 5003226 3055
(0000)
Peshawar 3800 2411765 4515152 5103
(0000)
All 3986 3340777 4671134
Source Authorrsquos calculation based on Survey Data 2016-17
51
412 Householdrsquos Awareness and Perceptions about Pesticides Application on
Fruit
This research endeavor was mainly designed to assess the consumer willingness to pay
for pesticides free fruit Therefore it was pertain to glean data about their awareness
about pesticide use on locally produced fruit in the study area These fruit include
Apple Peach and Mango Due to irrational use of pesticides environmental hazards are
also reported by previous research studies therefore there respondents were asked about
their perception about environmental hazards Major findings about the aforementioned
aspects are underscored in Table 47 which reveals that 61 percent of respondents have
a perception that there is an irrational and intensive use of pesticides on fruit by the
local fruitlsquos farmers Around 88 percent of the respondents perceived environmental
and health concerns over pesticides residues in food Similarly 91 percent of the
respondents believed that farmer should engage in environmental friendly agricultural
production practices which have a minimum adverse impact on health and the
environment
However the overall results indicate that sampled households were not entirely
cognizant about an intensive use of pesticide on local fruits however they were
correctly perceived over the impacts of pesticides on human health and environment
Table 47 Householdrsquos Awareness and Perceptions of Pesticides use on Fruit
Grown
Statements Agreed Disagreed
Local farmers are intensively using pesticides on
Apple Peach and Mango fruits
61 39
I feel the use of pesticides in agriculture has
negative effect on the environment
881
119
I am concerned about pesticide residue in our
food supply
876 124
I believe farmer should engage in environmental
friendly agricultural production practices with
minimum impact on human health
901
99
Source Authorrsquos calculation based on Survey Data 2016-17
52
42 Empirical Results of this Research Endeavour
The empirical analysis of the gleaned data was made to achieve the major objectives
and to address the research questions of this research endeavor Major estimates on
―willingness to pay for pesticide free fruits have been made and conferred in this
section Different elicitation techniques were employed to assess householdlsquos
willingness to pay price premium These estimation techniques encompassed double
bounded dichotomous choice model ordered logit model and linear regression model to
appraise dichotomous choice payment card and open ended question
421 Distribution of responses on householdsrsquo willingness to pay
(WTP)
Householdlsquos preferences to pay higher prices for pesticides free fruit were investigated
and highlighted in Figure 41 which demonstrates the distribution of response about
WTP price premium for pesticide free fruit in the survey area The households were
asked whether and how much they were willing to pay higher prices for pesticide free
fruit than conventional produced fruit The primary data estimates confirm that about
935 percent of respondents are willing to pay a higher price premium for pesticide free
fruit in the sampled districts These results are similar with the previous research study
undertaken by Hayati et al(2017) in Iran by using contingent valuation method
Furthermore an ordered logistic regression model was employed which depicts that out
of 394 respondents who were interviewed 97 percent of respondents were willing to
pay price premium for pesticides free fruits and vegetables These results are supported
by Nandi et al(2017) who conducted a study in India by using contingent valuation
method and applying binomial logistic regression model Data was obtained from 250
respondents and reported that more than 90 percent of the respondents were willing to
pay higher price for better quality fruits and vegetables Decomposing the responses 35
percent of the households are willing to pay 16 to 20 percent higher prices for
pesticides free fruits than the conventional 24 percent willing to pay 6 to 10 percent
higher price and 65 are not willing to pay higher price A plausible reason for higher
WTP for significant portion of the population is due to awareness As most of the
respondents in the study area were aware they may have some knowledge about
adverse effects of chemical pesticides Therefore they were willing to pay higher prices
for pesticide free fruits if available
53
NotWTP
1_5 6_10 11_15 16_20 21_25 26_30 31_35 36_40 Above40
650 4
24
9
35
6 550 150
550 3
Figure 41 Distribution of willingness to pay responses (Rskg)
422 Householdrsquos willingness to pay using ordered logit model
Estimated parameters and coefficients of ordered logit model are presented in table 48
Model is specified on the bases of R2 estimated from restricted and unrestricted
likelihood function The likelihood ratio test is used to test the null hypothesis that the
overall effect of coefficients is zero The p-value is 0000 shows that the model is
statistically significant at 95 level of significance The estimated model with a scaled
R2
about 022 which is in consist with the generally R2 value mostly observed in cross
sectional data In cross sectional data like the one used for this study the value of
Pseudo R2 is typically low The conventionally computed R
2 is of limited value in those
models having qualitative nature In most cases this value is low and use of coefficient
of determination as a summary statistics should be avoided in those cases where the
response variables are qualitative (Gujrati 1995)This pseudo R2 cannot be interpreted
separately or across the dataset but could be used when evaluating multiple models
which predict the same results on the same set of data It has only meaningful when
compared to some other pseudo R2 in the same data on the same type and predicting
the same results In this case pseudo R2 indicates which model better predict the results
(Bruin J 2006)This value pointed out overall ability of the model for the correct
prediction of willingness to pay of the consumer based on explanatory variables The
null hypothesis that the joint influence of explanatory variables was zero on the bases
of chi-squire value null hypothesis was rejected
Predicted probabilities and marginal effects are calculated separately because of the
non-linear behavior of logit model Most of the coefficients are statistically significant
54
The variables like householdlsquos age education level of the respondents awareness
income and health concern variables and household size are significant at five percent
The negative sign showed that as the size of numbers in a family increased the log
odds for willingness to pay decreased The same was reported in a relevant study by
Govindasamy and Italia 1999 carried out a research study in New Jearsy to provide
opinion on organic produce Objective of the study was to evaluate demographic
characteristics caused consumers to pay higher prices to obtained organic food
products Findings of the study showed female respondents consumer with higher
annual income and younger individual were more likely to pay higher premiums for
organic produce Our finding shows variables gender was not significant because most
of the respondents in the study area were male
Positive sign on income showed that consumer with higher income were more likely be
willing to pay higher prices for pesticides free fruit It has been also noted that with
increased in income purchasing power of the respondents increased that changed the
purchasing pattern of the respondents This was also confirmed by Roitner-
Schobesberger et al(2008) They conduct a study on consumerslsquo perception regarding
organic food in Bangkok and found that more than a third of the 848 respondents
reported having purchased organic fruits or vegetables and the main reason for buying
organic food was the expectation of the consumers that the food are healthier and
environmentally friendly The respondents who purchased organic vegetables were
those having more aged higher income and more education
Findings of our study also showed that respondents with friendly attitude regarding
environment would be willing to pay higher price for such fruit These results were in
line with Haghjou et al (2013) carried out a research study on factors effecting
consumerlsquos potential willingness to pay for organic food in Tabriz Iran By adapting an
ordered logistic regression model results showed that factors like income of the
respondent family dimension environmental concern and wholesome diet besides
consumerslsquo awareness were significantly increases consumerslsquo willingness to pay for
organic food Results revealed that consumers with higher care about their health were
more likely to be willing a higher price for such pesticides free fruit
55
Table 48 Factors influencing respondent householdrsquos WTP (Ordered logit
model)
Variables Estimated
Coefficient
Std Error Z-ratio P-value
Age 00698807 00147356 474 0000
Gender -02469171 08432503 -029 0770
Education 00821316 00223365 368 0000
Household size -00975395 00502583 -194 0052
Location
Urban
02783974 02961745 094 0347
Income 00000277 000000502 551 0000
Health concern 2600153 05346547 486 0000
Environment
concern
03993532 0574947 069 0487
Awareness 09595126 02836742 338 0001
Source Authorrsquos calculation based on Survey Data 2016-17
Log likelihood = -29863 Pseudo R-squared = 020 LR chi2 (9) = 15849
Number of observation = 200 Probability gt chi2 = 0000
Note indicate statistical significance at 5
56
423 Predicted probabilities and Marginal effects of ordered logit
model
Predicted probabilities and marginal effects of explanatory variables are underscored in
Table 49 These predicted probabilities indicate a strong likelihood that the average
respondent is willing to pay more prices for pesticides free fruit Producers usually
expect high price for their production so if they sought high premiums than marketing
efforts would be diverted to such fraction of consumer where they would probably
willing to pay high price than the conventional price Alone these predicted
probabilities are not too much informative what is more informative is the impact of a
change in predictors on the predicted probabilities (ie marginal effects)
Due to the non-linear behavior of ordered logit model to measure the impact of a
change in particular independent variable on householdslsquo willingness to pay marginal
effects of explanatory variables are calculated Marginal effects show the change in
predicted probabilities for different class of willingness to pay regarding an average
household concerning the particular variable For qualitative choice model estimated
coefficients affect marginal probabilities These marginal probabilities (probability
derivatives) were calculated from the estimated model They measure the change in the
probabilities of each willingness to pay outcome with respect to change in each
explanatory variable The sum of marginal probability is zero in each row because an
increase of the probability in one category must be set off a decrease in the other
category or categories
For continuous variables the interpretation is simple and straight forward Keeping all
other variables fixed a unit change in explanatory variable will results an increase or
decrease in the predicted probability equal to the degree of marginal effect of the stated
variable However in case of binary variable marginal effects shows change in
predicted probabilities based on whether the respondents falls in that category or not
Our results suggest some meaningful insight into the role of socio-economic and
demographic variables on householdlsquos WTP for pesticides-free fruit
Age has a positive and significant influence on householdlsquos WTP for pesticides free
fruit The results show that with an increase in age WTP also increases This finding is
consistent with other researchers who reported that WTP of organic and healthy food
57
increases with age beyond 30-40 years (Hayati et al 2017 Boccaletti and Nardella
2000 and Zellner and Denger 1989)With increase in age people are more concerned
about their health as they may perceive that they are prompt to low immunity and
higher risk for diseases With realization of aging they are more likely to pay higher
price premium for safer foods Our result suggests that the marginal effects of age is
negative for first three WTP classes (ie Not willing to pay WTP 1-5 percent WTP 6-
10 percent and WTP11-15 percent) while positive for the rest of the four classes in
upper tailsmdashindicating that higher age is associated with higher likelihood of paying
premium on upper tails The highest marginal effect of age 0007 is found for category
16-20 percent higher premium This indicates that an increase in age by one year is
associated with 07 percentage point increase in likelihood of paying 16-20 percent
higher premium for pesticides free fruits over conventional These results are in
contrast with Cranfield and Magnusson (2003) conducted a research study on
consumerlsquos willingness to pay for pesticides free food products in Canada by using
contingent valuation method and reported that younger consumers have the strongest
marginal effects (those consumers had an age less than 35 years younger) followed by
those consumers had an age less than 50 years Results showed younger consumers pay
more for healthy foods as compared to older in case of Canadian consumers However
our results are in consistent with several other studies (Hayati et al 2017 Zellner and
Denger 1989) finding a positive influence of age on consumerlsquos WTP for organic and
healthy foods In another study Boccaletti and Nardella (2000) conducted a study on
consumer willingness to pay for organic produce in Northern Italy By adapting an
ordered logit model the impacts of relevant explanatory variables were reported
Results suggests a positive impact of consumerlsquos age on WTP a price premium
The marginal effects for gender indicate female respondents are less likely to be willing
to pay more prices or likely to pay less amount for pesticides free fruit Female
respondents like to pay a price premium but less as compared to male respondents (no
premium or 1 to 5 percent premium) One can observe that most of the respondents in
the study area were male which support our findings These results are in contrast with
Cranfield and Magnusson (2003) The probability of marginal willingness to pay
decreased by (-0001 percent) for higher amount
58
Another significant variable affecting WTP in our study is the years of education of the
householdlsquos head Our result suggests a positive relationship of education on WTP for
pesticides free fruit Households with more formal education have better understanding
of the adverse effect of consuming fruit contaminated with pesticides So they may
better understand the benefits of pesticides free fruit Marginal effects of education are
positive as WTP progresses for higher classes (categories) beyond 16-20 percent (table
49) Among these the highest effect of education 0020 is shown for WTP category
36-40 percent which implies that an additional year of schooling of the household head
increases likelihood of paying 36-40 percent higher price premium for pesticides free
fruit over conventional by around 2 percentage These results are in line with the
findings of Haghjou et al (2013) who found a positive effect of education on WTP for
organic food products in Iran However these results are in contrast with Boccaletti and
Nardella (2000) who reported an inverse relation of consumer education with WTP a
price premium
We also found a significant effect of the household size and household income on WTP
for pesticides free fruit The effect of household size is negative Marginal effect in
table 49 shows that the highest negative effect of 012 is shown for 16-20 WTP
categories which indicate that an additional household member decreases the likelihood
of paying 16-20 percent higher premium for pesticides free fruits by 12 percent One of
the convincing reasons for this negative effect of household size can be the householdlsquos
budget constraint Budget constraint limits the extent to which consumer pay higher
prices for food products (Cranfield and Magnusson 2003) Our findings are consistent
with previous studies Ariyawardana et al (2009) conduct a study on consumerslsquo
willingness to pay for organic ethnic specialty produce in USA reported that marginal
effect of price premium decreases with an increase in householdslsquo member
In regards to income households with higher income are more willing to pay higher
premiums for pesticides free fruit Income always played a significant role in changing
consumerlsquos behavior to change hisher decision from not willing to pay or less willing
to pay to higher willing to pay for organic products Households in highest income
class showed a strong propensity to pay more prices Marginal effects of income for the
first four classes emerged negative Our results suggest a strong propensity to pay
higher prices as household income increases Our marginal effects of income show a
59
monotonic increase in the income effect as WTP premium level progresses beyond 16-
20 percent It implies that at low level of income households are unwilling to pay more
but with rise in income households are ready to pay higher premium for pesticides free
fruit a significantly higher magnitude is shown for the highest category (010 income
coefficient for more than 40 percent premium) Overall it clearly suggests that
household with higher level of income would pay more prices for pesticides free fruit
These results are in line with Hayati et al (2017) and Cranfield and Magnusson (2003)
who found that an increase in income increases purchasing power of consumer which
results a change in purchasing pattern Boccaletti and Nardella (2000) conducted a
study on consumerslsquo willingness to pay for pesticides free fresh fruits and vegetables in
Italy and found that willingness to pay is significantly and positively related to income
We also included variables indicating health and environmental concern of the
respondent Results indicated that the more the households were concerned about the
impact of pesticides in fruits on health and environment the more the probability of
willingness to pay The marginal effects for health concern is negative for first three
willingness to pay classes (ie not willingness to pay willingness to pay 1_5 wiliness
to pay 6_10 percent) and for environment concern it is negative for first four classes
while for the remaining WTP classes it is positive Strikingly the highest magnitude of
marginal effects up to 041 among all variables is found from the health concern
variable On one hand a significantly positive effect suggests that the health concerned
householdslsquo are more likely to pay higher premium for WTP than those not concerned
A magnitude of higher scale on marginal effect on the other hand strongly supports
the distinct difference in WTP between health concerned and non-concerned
individuals Overall this also highlights the importance of this variable on modeling
WTP for pesticides free fruits For example a 041 marginal effect of health concern
variable on 16-20 premium category of WTP suggest that health concerned individual
are 41 percent more likely to pay 16 to 20 percent higher premium for pesticides free
fruit as compared to non-concerned households The effect of health concern on WTP
is consistent and distinctly higher in magnitude from previous similar studies in other
countries For example Hayati et al (2017) found that health concerned individual were
26 percent more likely to pay 16 to 20 percent in Iran This indicates that health
concern factor is an important motivation to premium price for pesticides free fruits in
Pakistan
60
Finally we found a significant effect of awareness variable Recall that our awareness
variable is represented by dummies Our result suggests that the households in the study
area were aware of the fact that farmers are intensively using pesticides on fruits so
they were willing to pay more price premium for pesticides free fruits Marginal effects
show a negative signs for modest price premiums on WTP categories 1-5 and 6-10
while positive signs for all higher categories 16-20 21-25 26-30 31-35 36-40 and
above 40 This may indicate that households are more aware of the adverse impact of
pesticides on health and environment Probably awareness comes from education as our
results shows that the average years of education is higher in the study area
424 Matrix of Correlation Coefficient
Income is generally related with age and education of the households in the study area
(table 410) This result may indicate that more aged households have higher income
and advanced education Households in high income and more educated class shows
high propensity of willingness to pay for pesticides free fruit As the results indicated
that more aged people do care more about their health and high class income
respondents have more discretionary income to spend on fruit Overall the results show
that explanatory variables are not highly correlated hence no problem of
Multicollinearity was diagnosed in the data
61
Table 49 Predicted probabilities and marginal effects from the estimated ordered logit model
Not WTP
()
WTP 1-5
()
WTP 6-
10 ()
WTP 11-
15 ()
WTP 16-
20 ()
WTP 21-
25 ()
WTP 26-
30 ()
WTP 31-
35 ()
WTP 36-
40 ()
WTP
Above 40
()
Predicted Probabilities
00122 00179 02616 01183 04434 00620 00510 00110 00201 00026
Marginal effects
Age -0000 -0001 -0011 -0002 0007 0003 0003 0006 0001 0001
Gender 00039 00054 00623 0015 -0033 -0019 -0019 -0004 -0008 -0001
Education -0000 -0001 -0013 -0002 0010 0003 0003 0010 0020 0002
Household size 0002 0002 0012 0004 -0012 -0004 -0004 -0001 -0020 -0002
Urban rural -0003 -0004 -0049 -0009 0031 0013 0013 0002 0005 0001
Income -0003 -0004 -0004 -0010 0003 0001 0001 0002 0005 0010
Health concern -0103 -0113 -0372 0030 0410 0100 0100 0014 0030 0003
Environment
concern
-0005 -0007 -0072 -0010 0052 0017 0015 0003 0006 0008
Awareness -0014 -0020 -0120 -0030 0122 0045 0041 0010 0020 0002
Source Authorrsquos calculation based on Survey Data 2016-17
62
Table 410 Matrix of correlation coefficient between explanatory variables
Source Authorrsquos calculation based on Survey Data 2016-17
Variables Age Gender Education Location Households
size
Income Health
Concern
Environment
Concern
Age 10000
Gender -00193 10000
Education 00872 -00147 10000
Location 00725 00689 01047 10000
Households size -00294 00277 -00161 -01704 10000
Income 04123 -00690 02133 - 00405 01583 10000
Health Concern 01604 00224 02229 00660 - 00422 02102 10000
Environment Concern -00786 00944 -00245 00570 -00059 -00350 00118 10000
63
43 Householdrsquos willingness to pay using double bounded dichotomous
choice model
The double bounded dichotomous choice model was used to find out how much
households are willing to pay a price premium for pesticides free fruit The model has
been proved useful for the determination of the contribution of independent variables in
householdslsquo willingness to pay for pesticides free fruit Mainly those factors that
influenced the householdslsquo willingness to pay are age of the householdlsquos head
householdlsquos size gender awareness income head education and their perceptions
The Likelihood Ratio test statistic the Wald Chi2 value is 27228 with a p-value of lt
0001 confirmed that the model with all the explanatory variables has good prediction
power of householdslsquo choice and WTP for pesticides free fruit (table 411) The
estimated coefficients for most of the explanatory variables are statistically significant
and have signs consistent with prior expectations Headslsquo characteristics such as age
education level and awareness of pesticides use on fruits perception of health and
environmental concerns of pesticides are the most import determinants of the
householdlsquos WTP for pesticides free fruit Householdlsquos income and number of
individuals have significant effect on their price premium for fruits free of pesticide
residue
The coefficient for Age is positive and its value is 0294 which reveals that a one year
increase in headlsquos age would increase householdlsquos willingness to pay a price premium
of 0294 rupees for pesticides free fruit at constant level of other variables This
generally implies that household headed by an old individual has strong preferences
and high WTP for pesticides free fruits as compared to others These results are
supported by Vidogbena et al 2015 reported a positive significant effect of consumerslsquo
age WTP in Benin for minimized pesticides residues Results suggest older households
are more concerned about health benefits associated with fresh pesticides free food
This positive correlation of householdslsquo age and Willingness to pay a high price
premium for pesticides freeorganic food is also in agreement with findings of (Anifori
2013 Haghiri et al 2009 Misra et al 1991) However these findings are in contrast
with (Govindasamy and Italia 1999) carried out a research study on consumerslsquo
willingness to pay for organically produced fresh produce in New Jersey to find
64
opinion on organic produce and found that all the three age category younger people
like to pay a high price premium
Headlsquos education level has a positive significant association with householdlsquos
willingness to pay a price premium for pesticides free fruit A likely explanation is that
education increases consumerslsquo awareness regarding the adverse effect of pesticides on
human health and natural environment Consumerslsquo with a high level of education can
better understand the benefits attached to the consumption of food produced without the
use of pesticides These results are also in line with Vidogbena et al (2015) studied
consumerslsquo willingness to pay for cabbage with minimized pesticides residues in
Southern Benin and reported that consumers with high level of education were
positively affected WTP In some other related studies Darby et al (2008)Liu et al
(2009) and Misra et al(1991) also confirmed positive association of consumerlsquos
education and willingness to pay price premium for pesticides free organic fruits
Headlsquos awareness of pesticides use on local fruits production and their health and
environmental concerns over pesticides use are also the most important determinants of
householdlsquos willingness to pay for pesticides free fruits As discussed in the previous
section householdlsquos awareness and perception of pesticides use on fruits and their
education level are connected and have significant influence for creating market for
pesticides free organic fruits
Householdlsquos demand for best quality fruit is expected to rise with increase in their
income level The estimated coefficient for householdlsquos income is positive which
implies direct association with their price premium for pesticides free fruits and is
consistent with general theory and our prior expectations In future with economic
growth increased in per capita income is expected and this increase in per-capita
income will increase the demand for pesticides free fruits
We found a negative significant effect of the householdlsquos size on WTP for pesticides-
free fruit As the number of members increases household become less likely to pay a
price premium for pesticides free fruit More mouths to feed reduces budget for best
quality fruits as noted previously by (Oyawole et al 2016 Ghorbani and Harnraz
2009) In another study Govindasamy et al (2001) findings suggests that each
member in a lager household has less discretionary income to spend compared to a
65
smaller household and may consider paying a premium for integrated pest management
a luxury
Table 411 Factors influencing consumersrsquo WTP (double-bounded dichotomous
choice model)
Variables Coefficient Std Error z-statistic Pgt|z|
Constant -8614601 3640408 -237 0018
Age 0294755 00638171 462 0000
Gender -0133885 - 4628428 003 0977
Education 04521878 01574002 287 0004
Income 00001208 00000284 426 0000
Householdlsquos
Size
-06690743 2499154 -268 0007
Health concern 6165207 1882292 328 0001
Environment
concern
6739389
2053786 328 0001
Awareness 8194937 1693789 484 0000
Urban Rural 02295739 1339268 017 0864
Source Authorrsquos calculation based on Survey Data 2016-17
Log likelihood = -61347 Number of observation = 600
Wald chi2 (9) = 27226 Probabilitygt chi2 = 0000
Note indicate statistical significance at 5
431 Householdsrsquo estimated Mean WTP
The estimated model was used to derive each householdlsquos willingness to pay price
premium for pesticides free fruits Table 412 and figure 42 presents the summary
statistics for the estimated price premium The Table shows that householdlsquos estimated
mean willingness to pay price premium is around 26 rupees with a standard deviation
of 106 and the estimated minimum and maximum price premium are 0 and 445
rupees respectively These statistics reveals that householdslsquo on average are willing to
pay 26 percent more price premium for pesticide-free fruits than the existed market
producing pesticide free fruits
66
2
125 115
38
325
35
-5
0
5
10
15
20
25
30
35
40
45
0 1-10 11-20 21-30 31-40 gt40
Fre
qu
en
cy o
f th
e h
ou
seh
old
s
WTP bins
Table 412 Households mean estimated WTP
Mean Std Dev Min Max
WTP 25798 10601 0 44511
Source Authorrsquos calculation based on Survey Data 2016-17
Figure 42 householdsrsquo estimate WTP bids
432 Households Response to First Bid (Amount)
Table 413 and figure 43 shows households response to first bid of the WTP question
The Table clearly show the sensitivity of a householdlsquos yes - no response to the bid
amount As the bid amount goes up the probability of acceptance is expected to
decrease Results show that higher bids reduced the likelihood of acceptance For
example for a bid amount of Rs10 as price premium for pesticides free fruits 8833
percent of the households are willing to pay while it dropped to 222 percent when the
bid amount is increased to Rs40 which is consistent with the standard theory
67
0
01
02
03
04
05
06
10 20 30 40
Table 413 Householdsrsquo Response to First Bid (Amount)
Households
with YesNo
response
First bid amount (PKR)
10 20 30 40
Households
with No
response
21 (1167) 24 (2581) 141 (5732) 63 (7778)
Households
with Yes
response
159 (8833) 69 (7419) 105 (4268) 18 (2222)
Total
Households
180 93 246 81
Source Authorrsquos calculation based on Survey Data 2016-17
Figure 43 Probability of WTP given bids
44 Post Estimation Diagnostic Test
The model was tested against Multicollinearity by using (variance inflating factor
criteria) and for Heteroskedasticty (Breusch-Pagan test) and the results are presented in
table 414 Rule of thumb for VIF is that if the value is ge 10 than the problem of
Multicollinearity is severe According to our findings the mean value of variance
inflating factor is 114 less than the critical value suggests that there is no
Multicollinearity problem in the model Breusch-Pagan test is used for detecting
Heteroskedasticty problem The (χ2) value is 066 and p- value is 041 This p-value
suggests that the probability of rejecting the presence of Heteroskedasticty is 41percent
68
Table 414 Diagnostic test results
Problems Diagnostic Test Mean value P-value
Multicollinearity VIF 112 _
Heteroskedasticty Breusch-Pagan 066 041
Source Authorrsquos calculation based on Survey Data 2016-17
441 Householdsrsquo willingness to pay by using linear regression model Results of householdlsquos willingness to pay for pesticides-free fruits using linear
regression model is shown in table 415 Variables such as age education awareness
income householdslsquo size and consumer perceptions regarding health and friendly
environment are significantly influencing consumerslsquo WTP for pesticide-free fruits
Age has a positive and significant influence on willingness to pay ie the result shows
that with an increase in age willingness to pay also increases This result is slightly
different from few findings of other researchers who reported a high WTP in young and
middle age consumerslsquo (30-40) years Govindasamy and Italia (1999) But there are
some logical reasons behind our findings As young people are not so much health
conscious but with getting older and older the disease of aging caught their minds and
they keep more care about their health Another reason with an increase in age
education and experience increases as a result an increase in WTP for pesticides free
fruits These results are supported by Muhammad et al (2015) found a positive and
significant association between age and consumer willingness to pay Their results was
supported by the fact that young individual health consciousness is a rare phenomena
but as the people get older and older many diseases related to health induce them to
pay more attention towards safe and healthy food such as pesticides free organic food
Education and monthly income are the other factors positively and significantly
influencing householdslsquo WTP Households with more formal education have more
concern and better understanding of the risk associated with consuming food
contaminated with pesticides So they better understand that fruits produced without the
use of chemicals pesticides could be beneficial for health Results show that a one year
increase in formal education householdslsquo WTP increases by rupees 025 for pesticides
free fruit as compared to those having no education In regards to income respondents
with higher income are willing to pay more price premium A one rupee increase in
income will increase householdlsquos WTP by 0001 Muhammad et al (2015) reported a
69
significant effect of income and education on householdslsquo stated willingness to pay for
organic food in Arab Emirates consumer
Householdslsquo size is usually reported as negative influence on WTP Findings of our
study show a negative significant influence on householdlsquos willingness to pay This is
likely due to larger households requiring additional funds to satisfy households demand
for pesticides free fruit which may induce households to buy conventional fruit Other
reason may be as with limited resources feeding more mouths is increasingly difficult
These results are in contrast with Muhammad et al (2015) conducted a study on
factors affecting consumerlsquos willingness to pay for certified organic food products in
United Arab Emirates and reported a positive relationship of willingness to pay and
householdlsquos size Usually householdslsquo size is large in Arab Emirates and hence more
earning resources compared to small households which support their findings Our
finding shows a decrease of 085 rupees by an addition of one member in a household
Other important variables are householdslsquo concern regarding health and environment
Results show that respondentslsquo are highly concerned about residual effect of pesticides
on human health and environment Our results support these findings by positive WTP
Table 415 shows householdslsquo concerned regarding health and environment Results
suggest that households with more concerned for health and environment are willing to
pay Rs582 and Rs020 respectively higher prices for pesticides free fruit compared to
those not concerned
Finally we found variable awareness positively and significantly influencing
householdslsquo WTP for pesticides free fruit in survey area The result shows that more
aware households are willing to pay more price premium compared to unaware
households Awareness usually increases with education and age as can be evidence
from our findings a positive and significant influence of education and income on
householdlsquos WTP When households education level and age increases their awareness
regarding pesticidelsquos negative impact on health increase and hence an increase in WTP
for pesticides free fruit
70
Table 415 Estimated parameters using liner regression model
Variables Coefficient Std Error t-Statistics P-value
Constant -6174109 - 4353038 142 0158
Age 02348861 00467651 502 0000
Gender -2828394 3096026 - 091 0362
Education 0243413 00772618 315 0002
Income 00001237 00000157 790 0000
Householdlsquos
size
-03936806 01755667 -224 0026
Health concern 5567941 1465789 380 0000
Environment
concern
02999708 2023651 015 0882
Awareness 3567843 1001883 356 0000
Urban rural 0587075 1047051 056 0576
Source Authorrsquos calculation based on Survey Data 2016-17
Note indicate statistical significance at 5
No of observation = 200 F (9) = 2859 Probgt F = 0000 R-squired adjusted = 055
45 Comparison of elicitation questions formats Mean WTP by using double dichotomous payment card and open ended elicitation
format are reported in table 416The willingness to pay evaluated using average values
for the explanatory variables are Rs2576 for double bounded 1632 is for payment
card and 1437 for linear regression Results indicated that householdslsquo evaluated
through double dichotomous choice payment card scenario and open ended format are
willing to pay 26 16 and 14 more price for pesticides free fruits in the study area
These results are in line with Ngo et al (2013) conducted a study on consumerslsquo
willingness to pay for organic vegetables in Vietnam and found 70 more price
premium Rodriguez et al (2008) carried out a research study in Argentina on
consumerslsquo willingness to pay for organic food products and reported that consumers
were willing to pay a higher premium of 87 for leafy vegetables Mean willingness to
pay for double dichotomous model was calculated by maximum likelihood estimation
mentioned in the model while for payment card and open ended format logit regression
of response on bid amount was used All mean WTP values are significantly different
71
from zero and are different across the three questions format The probability (Plt
0000) between double bounded open ended and payment card method shows a
significant difference in estimated mean values of all the three questions elicitation
formats A t-value of 1483 250 and 1222 means that the mean values calculated
through different methods are significantly different from each other
Table 416 Mean willingness to pay comparison from CV question format
CV questions format Open ended
Mean WTP (1437)
Payment card
Means WTP (1632)
Payment card
Mean WTP (1632)
MD (194)
t-value (250)
P-value (0006)
--------
Double bounded
Mean WTP (2576)
MD (1143)
t-value (1483)
P-value (0000)
MD (949)
t-value (1222)
P-value (0000) Source Authorrsquos calculation based on Survey Data 2016-17
1MD = Mean difference 1US$=105 PKR in 2017
451 Response rate for zero WTP
Table 417 shows householdlsquos response rate to different elicitation formats The
response rate of payment card format is more than both DC and OE questions formats
Results show that 87 of the respondents respond to the willingness to pay question for
payment card method For dichotomous choice the response rate is 58 and for open
ended respondentslsquo response rate is 46 Taken together these results suggest that the
payment card format is easy for valuation task faced by respondents and lead to
efficiency in data collection
Table 417 Comparison of response rates by CV question format
Percent Response
to WTP question
Double dichotomous
choice
Payment card
method
Open ended
method
Yes 5850 87 4650
No 4150 13 5350
Source Authorrsquos calculation based on Survey Data 2016-17
72
46 Discussion about Major Findings This study was design to explore householdlsquos preferences and willingness to pay for
pesticides free fruit in Khyber Pakhtunkhwa Pakistan For this study a detailed
questionnaire was designed to obtained information from the households on their socio-
demographic characteristics perception regarding pesticides used on conventional fruit
and their willingness to pay a price premium for pesticides free fruit The overall
objective of the study was to know householdslsquo willingness to pay a price premium for
pesticides free fruit such as Apple Peach and Mango In response to willingness to pay
question 93 percent of the households were willing to pay a price premium while a
negligible portion were unwilling to pay any premium for pesticides free fruit Out of
total WTP 35 percent of the households were willing to pay16-20 percent higher
amount for pesticides free fruit
With regards to gender status of the households findings of the research showed most
of the respondents in the study area were male and a minor portion were female
Variable gender was not significant in this study because of the area structure where
male households are the primary purchaser of householdlsquos food items In this research
we found that majority of the respondents were educated most of them were highly
educated while a negligible portion of the respondents had no formal education The
mean education in Mardan and Peshawar was almost 10 and 12 years of schooling
respectively A significant difference was observed in urban and rural householdslsquo
education level in both the districts
Householdslsquo expenditure on food and fresh fruits were also calculated The mean
expenditure on food in district Mardan was PKR- 49280 and in district Peshawar was
PKR- 34860 Based on t-test a significant difference was observed on the consumption
of fresh fruit in urban and rural areas of the two districts Total expenditure on fresh
fruits in Mardan and Peshawar was 3340 and 4671 respectively Based on findings of
the study it could be concluded that respondents in urban region spent more income on
fresh fruit and consume more fresh fruits compared to rural region
Householdslsquo awareness of pesticides use on locally produced fruit such as Apple
Peach and Mango and their health and environmental concerns over pesticides use
were estimated The results revealed that 61 percent of the respondents were agreed that
local farmers use intensive pesticides on fruit Around 88 percent of the respondents
perceived environmental and health concerns over pesticides residues in food
Similarly 91 percent of the respondents believed that farmer should engage in
73
environmental friendly agricultural production practices which have a minimum
adverse impact on health and the environment These results induced households to pay
higher prices for such pesticides free fruit if available in the market The overall results
indicated that sampled households were not fully aware of the intensive pesticides use
on local fruit however they were correctly perceived over the impacts of pesticides on
human health and environment
The empirical findings of the study revealed socio-demographic characteristics had a
significant influence on householdslsquo willingness to pay a price premium for pesticides
free fruit Results showed more aged householdslsquo head were willing to pay more price
premium This is supported by the fact that older people are more health concern
compared to young individual Householdslsquo head education level also played a positive
and significant role with high education consumers seems slightly more willing to pay
These results are in line with Haghjou et al (2013) Householdlsquos size was negatively
influencing householdlsquos WTP and accord with the expectation Due to income
constraint with increase a member in a household will decrease WTP for pesticides-
free fruit because feeding more mouths with limited resources would be difficult These
results are in line with Oyawole et al 2016 Many Conflicting results are also reported
regarding household size Some studies indicated the presence of more children
positively influencing WTP for organic food while some results reported an inverse
relationship between WTP and householdslsquo size Findings of our research revealed a
negative significant influence on householdslsquo willingness to pay for pesticides free
fruits These results were also according to our expectation With an increase in family
size the households do not care much about quality but mostly quantity
Income of the householdslsquo head was taken as continuous variable in this research study
In most cases especially in willingness to pay research studies a positive association of
income and households WTP was observed Any increase in householdslsquo income leads
to rise in their willingness to pay for safer healthier and pesticides free fruit Despite
high prices for pesticides free food products householdslsquo with high income showed
likelihood to pay a price premium Our findings also showed a positive effect of
income on householdslsquo WTP for pesticides free fruit An increase in income changes
householdslsquo purchasing behavior and choose better quality of food So with an increase
in income households were willing to pay more price premium Same results were
reported by Cranfield and Magnusson 2003
74
Variable awareness played a significant role while consuming better quality of food
Findings of our study also showed a positive and significant influence of variable
awareness on householdslsquo WTP for pesticides free fruit More than half of the
respondents were aware of the intensive use of pesticides on fruit Majority of the
households knew about the risk attached with fruits produced with agrochemicals The
more aware households were willing to pay more price premium for pesticides free
fruit compared to unaware households These results are also supported by Oyawole et
al2016
Moreover results of this study are also consistent with previous studies that health and
environmental concern are the important factors in householdlsquos preferences for
pesticides free food and reduced input food products We also found a positive
significant influence of health concern and environment concern on WTP These results
suggest that respondents in the study area are more conscious about health and
environment They are willing to pay more prices for such fruit free from pesticides
residues Based on above results most of socio-demographic characteristics have
positive influence on householdlsquos willingness to pay for pesticides-free fruit in the
study area On the basis of these findings we reject the null hypothesis and accept the
alternative hypothesis by concluding that socio-demographic characteristics have
influencing behavior on householdslsquo WTP
Willingness to pay across urban and rural regions shows no significant difference The
P-value of 0864 showed that WTP of households in urban regions were not statistically
different from those in rural regions Although we had expected a positive and
significant difference among urban and rural households willingness to pay for
pesticides free fruit and the difference in householdslsquo income education and
expenditure across urban and rural households support our expectation One of the
reasons for no significant difference is the selection of rural union councils which are
nearby urban union councils If the study is spread to more rural union councils than an
expected difference in urban and rural households may be observed Based on these
results the null hypothesis of no significant difference between urban and rural
households is accepted and can be concluded that no significant difference was found
in willingness to pay amount across rural and urban households
75
A Payment Card Approach
In this approach respondents are asked to select their WTP from a payment card given
in absolute value or in percentage of prices (Boccaletti amp Nardella 2000 Lacaze
Rodriguez and Lupin 2009) Payment card requires smaller sample sizes for the
efficient estimation of parameters than the double bounded model A recent research
found that payment card is to be free of range and centering biases when the
willingness to pay values on the payment card is sufficiently large and the respondents
are not constrained (Rowe et al 1996) However choosing an amount from payment
card may be more cognitively burdensome on the respondents and difficult than simply
yes or no response
B Open Ended Approach
In open ended question respondents are asked to state their WTP for a certain attribute
without suggesting them any value This technique does not require an interviewer and
does not result in any starting bias This approach is easy for the respondents to answer
Due to non provision of any value respondents find it difficult to answer and results
large non- response rate
C Double Bounded Approach
The dichotomous choice contingent valuation method is an important method in
contingent valuation surveys Due to simplicity this method is popular and widely used
for data collection Two questions formats are used in this method single bound and
double bounded questions are asked from the respondents For single bound question
format the respondentlsquos only reply in yes or no while in double bounded approach
second question contingent on the first response is asked
Hanemann et al (1991) recommended double bounded dichotomous choice model for
eliciting householdslsquo WTP In the double bounded formate each respondent is
presented with two bids The level of the second bid is contingent upon the response to
the first bid If an individual responds in ― yes to the first bid Bi the second bid (Bu) is
some amount greater than the first bid (Bi lt Bu) is askedIf the respondent responds
―no to the first bid the second bid (Bl) is some amount smaller than the first bid (B
llt
Bi) is asked
76
Henemann et al (1991) and Leon (1995) confirmed that double bounded model is more
effcient than single bound model For the correction of poor choice of the initial vector
double bounded model was suggested Researchers also found that double bounded
method produce more precise point estimates of parameters Double bounded model
requires more sample size due to the statistical inefficiency imposed by the data
compared to payment card and open ended model If sample size is large enough
double bounded model estimates accurate results
Due to its potttential inconsistency with response to the first binary question and larger
scope for biased results double bounded model is contravartial Bateman et al (2001)
concluded that the respondents feel fury and guilt when the second question is asked
making the response of the double bounded internally inconsistence One of the main
disadvantage of double bounded model is that response of the respondents may be
influenced by the first offered amount which is generally called starting point bias
(Flachaire and Hollard 2005)
There are few notable patterens while studying consumerlsquos willingness to pay by using
different elicitation formats Estimated willingess to pay based on double bounded
format and payment card format tend to be large compared to open ended questins
format Furthermore estimated willingness to pay from double bounded model would
be larger than payment card format
Not surprisingly as shown in table 416 the estimated mean willingness to pay for
pesticides free fruit based on the models were significantly different across the three
elicitation format Estimated WTP for double bounded format payment card format
and open ended was 25 percent 16 percent and 14 percent respectively The estimated
mean WTP for double dichotomous model is higher than twice the estimated mean
willingness to pay based on payment card and open ended data
When comparing response rate of households to the willingness to pay questions
format was different across the three elicitation methods In double bounded method
the question was whether the households were willing to pay a specific amount in
payment card method households were asked to select the amount from a specified
values provided on a card whereas in open ended question households were asked to
say how much extra they were willing to pay for pesticides free fruits The difference in
questions leads us to expect that more individual would respond positively to
willingness to pay question in payment card method because in this elicitation format
consumers had to select from payment level The response rate of payment card format
77
is more than both DC and OE questions formats Results show that 87 of the
respondents respond to the willingness to pay question for payment card method For
dichotomous choice the response rate is 58 and for open ended respondentslsquo response
rate is 46 Taken together these results suggest that the payment card format is easy
for valuation task faced by respondents and lead to efficiency in data collection
It has been remained an unresolved issue that which CV questions format is best to use
While the NOAA panel (Federal Register 1993) recommended using double bounded
dichotomous choice model due to its easy use and resemblances in day to day decision
making In this study we found that the response rate in double dichotomous choice
model is lower than payment card format and higher mean willingness to pay than both
open ended and payment card format In contrast payment card format has desirable
response properties
One elicitation format is not clearly better than the others on priority ground The
appropriateness of any elicitation format depends upon the circumstances of the study
For example payment card elicitation format better suits if the sample size is small If
the sample size is large enough double bounded elicitation format is preferred
78
V SUMMARY CONCLUSION AND RECOMMENDATION
This chapter presents findings of the research study as well as policy recommendations
This chapter also outlined limitation in this research and suggestion for further research
in future
51 Summary
Conventional agriculture has gained the power of providing food to majority of the
world population but at the cost of damaging the environment and human health While
pesticides free farming on the other side is environmental and human health friendly
farming that avoids the use of such hazardous chemicals which are harmful for human
plants and animal planet Pesticides free farming system is increasingly becoming
popular in producers as well as in consumer The term pesticides free denote production
of fruit without the use of pesticides and play a vital rule in future agriculture
commodities production It has been observed that fruit produced without the use of
chemicals pesticides are generally higher in prices than the conventional fruit
production in most part of the world However pesticides free farming and pesticides
free food is a relatively new phenomenon and very few people especially in developing
countries are aware about the beneficial impacts of such food on health and
environment Willingness to pay for pesticides free fruit is different from fruits
produced through the use of chemicals pesticides because pesticides free fruits are
relatively expansive
The main theme of this study was to investigate householdslsquo awareness and willingness
to pay for pesticides free fruit and to determine socio-economic and socio-demographic
characteristics in relation to their impact on willingness to pay a price premium This
study was carried out in two districts of Khyber Pakhtunkhwa (Pakistan) namely
Peshawar and Mardan The household level data employed in this study were obtained
from 1000 households through face to face interview by employing pretested
questionnaires Householdslsquo perception and attitude about pesticides free fruit were
also analyzed Three questionnaire elicitation formats ie dichotomous choice payment
card and open ended were used in this study For the estimation of dichotomous choice
data double bounded dichotomous choice model was used An ordered logit model was
used for the estimation of payment card type data and for the estimation of open ended
79
questionnaires linear regression model was used to estimate householdslsquo willingness to
pay price premium for pesticides free fruits
52 Conclusions
Adoption of technological advancement in agriculture has attracted considerable
attention in many developing countries because majority of population in less
developed countries derives its likelihood from agricultural production New
technologies provide farmers an opportunity to increase production and enhance
economic growth (Carvalho 2006) Although the green revolution spread across
developing countries in Asia and resultant in increased food production by adopting
technological inputs like fertilizer and pesticides However the high usage of these
chemicals to bring this spectacular growth in agriculture production is not without its
problems In most countries it has been observed that using commercial agricultural
practices causes many problems like environmental degradation and human health
effects (Wilson 2000) Coordinated efforts are needed to increase food production
with a view to enhance food safety and quality Although chemicals free agriculture is
gaining more and more support for safer food but still not providing enough food to
support need of the population in developing countries
Demand and markets for pesticides free fruit has gained a significant and valuable
interest of research scientist in all over the world Several research studies have been
identified price premium that consumers are willing to pay for pesticides free fruit and
also showed some socio-demographic factors influencing their decision to pay more
price premiums Different approaches are adopted in these studies depending on their
objectives These research studies mainly focused on attitudes and perception towards
these foods and not their actual purchase According to our knowledge studies on
householdlsquos willingness to pay and the most relevant factors influencing their decision
to pay more price premium are limited in developing countries such as Pakistan
The general objective of this survey was to study the socio-demographic and socio-
economic characteristics of the householdslsquo and to investigate factors influencing their
willingness to pay for pesticides free fruit A variety of factors including respondentlsquos
age gender householdlsquos size respondentlsquos income householdlsquos head education
awareness and certain attitudinal questions like health concern and environment
concern appear to influence householdlsquos willingness to pay a price premium Findings
80
of the study suggest health concern and environment concern has significant influence
on householdslsquo willingness to pay Hence it can be concluded that households in the
study area are more concern about their health and surrounding environment Results of
the study also indicated no significant difference in willingness to pay across rural and
urban regions of the study area
Study concluded that the most relevant explanatory variables positively influencing
householdslsquo willingness to pay for pesticides free fruit are age of the householdlsquo head
income of the household headlsquos education householdslsquo awareness health concern and
environmental concern while householdlsquos size is negatively significant which usually
reported that householdslsquo with more members do not care much about quality but more
quantity because feeding more people with limited resources are difficult Majority of
the households are willing to pay price premium for pesticides free fruit especially
those with high level of income household leads to high degree of willingness to pay
Education level also became an important factor in willingness to pay higher price for
pesticides free fruit More aged people have always been concern about their health As
the people get aged more and more the diseases of aging caught their minds so they
like to pay more for safer food While when it become to pay more price variable
gender shows insignificant affect due to the limited availability of female respondents
in the sample data
Results of the households awareness regarding pesticides used on conventional fruit
and its impact on health and natural environment are positive Most of the households
are highly concern about health and environment Results suggest that more than half of
the households are aware of the adverse impact of pesticides on health and
environment Survey suggested that more than half of the households are strongly
agreed that farmers should produce such an agricultural food product which has
minimum adverse impact on human health and natural environment Results of the
study are consistent with other findings conducted on consumerslsquo willingness to pay for
organic food and pesticides free food and reported that health and environmental
concern were the most important factors
Health and environmental concern is an important factor constituted a significant
influence which inclined households towards willingness to pay for pesticides free fruit
Krisoff (1998) reported that consumers perceived pesticides free food as healthier safer
and environmental friendly as compare to food produced by conventional method
81
From this study it is observed that households perceived pesticides free food as
healthier they are willing to pay more price premium
Results obtained from this study concluded that 93 percent of the households are
willing to pay more prices for pesticides free fruit Out of this proportion 35 percent of
households are willing to pay 16 to 20 percent more price above the regular price while
24 percent are willing to pay 6 to 10 percent higher price for pesticides free fruit
Households are willing to pay above than 20 percent comprised of 215 percent of the
sample data Results show that out of total willingness to pay 4 percent of the
households are willing to pay 1 to 5 percent price premium and 9 percent are willing to
pay 11 to 15 percent more price premium Results also show that only a minor portion
65 percent of the sampled respondents is unwilling to pay any more
Householdslsquo willingness to pay was also assessed The study revealed that on average
the respondents are willing to pay 26 percent higher price for pesticides free fruit than
the regular price which concluded that households in the study area are responsive
towards safer food and they like to pay higher premium for such fruit
53 Recommendations
This study is one of the first analytical attempts to measure householdslsquo willingness to
pay for pesticides free fruit in Pakistan Since not much research work is done on
pesticides free fruit in Pakistan so this study would contribute a little for future
researchers Findings of the survey suggest some recommendations for consumers and
producers Researchers may consider this study as basis for further research
An important task is to provide more information to consumers regarding
pesticides free fruit and the perceived benefits by consuming these fruit This
research study also provides information to consumers that how pesticides free
fruit is differ from fruit produced conventionally The sampled studied shows
that there is a potential for market growth of pesticides free fruit To identify
these potential consumers knowledge about their socio-demographic and socio-
economic characteristics is important
With potential demand and high price premium pesticides free fruit production
could be one of the lucrative strategies for producers to earn higher net margin
from their production so like other new technologies management practices
and production system pesticides free fruit production also needs government
82
assistance such as advertisement consumers awareness campaigns financial
aids as well as green subsides and loans to the producers to develop well
established market and efficient supply chain in Pakistan
By adopting new agricultural practices and comply with standards of World
Trade Organization (WTO) this will not only abridge the supply demand gap
for pesticide free fruit sat domestic level but also will boost the economy of the
country due to increase in fruit and vegetables exports
Contribution in the field of pesticides free fruit production from academics
research workers extension graduates scientist and other professionals are
necessary to brief producers as well as consumers about the negative impact of
pesticides due to incorrectly use of these hazardous chemicals on human and
animals health as well as effect on natural environment
Based on the findings from this research government non-government
organization and other stakeholders should formulate policies and would
promote and encourage the production of pesticides free fruit in Pakistan
Demonstration centers should be established within the agriculturist community
for the awareness of farmers regarding the production of pesticides free food
As the results identified householdlsquos willingness to pay is effected by
explanatory variables so more independent variables should be included in the
model to further explain willingness to pay for pesticides free fruit
In addition the area of sampling could be more spread and not be limited to only
two districts of Khyber Pakhtunkhwa If data are collected from different
provinces and districts all over Pakistan the results obtained might be a better
representation of the whole population
As this research study conducted only at few fruit such as Apple Peach and
Mango future research should focus on more fruit as well as on vegetables
54 Limitation and Suggestion for Future Envisage
A couple of limitations were encountered during this research study
This research study has investigated willingness to pay for fruit only due to
time and budget constraint In future a large scale research study should be
carried out both on fruit and vegetable
83
Second since only two districts of Khyber Pakhtunkhwa were examined in
the future such studies should be replicated to other districts and provinces of
Pakistan to determine householdslsquo willingness to pay for pesticides free fruit
Third some variables employed in this study were not statistically significant
presumably due to small sample size To overcome this problem in future
study large sample size should be taken into consideration in order to enhance
the degree of freedom
56 Suggestions
The future of pesticides free agriculture production is very bright To lead a healthy life
human being needs pure food and pollution free environment It has been proved that
pesticides free agriculture is the only solution to provide safe and healthy food to the
world population Chemicals free agricultural system is a natural phenomena and
human being can feel its importance By adopting pesticides free farming soil fertility
can also be maintained Farmers can provide healthy and safer environment by
strengthening the sustainable and pesticides free agriculture Now a daylsquos demand for
pesticides free food is increasing very fast and in the future it would be necessary to get
rid of food produced by using chemical fertilizer and pesticides
To inform consumers long term investment in promotion and education campaigns
would help to develop individual concern regarding the risk associated with pesticides
on food products This concern will translate individual willingness to pay towards a
positive price premium
84
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Calia P and Strazzera E 2000 Bias and efficiency of single versus double bound
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Nutrition Bulletin VialedelleTermepp 1ndash61
Food and Agriculture Organization2002Submission and evaluation of pesticide
residues data for the estimation of maximum residue levels in food and feed
FAO Rome 1ndash279
Fox J A1995 Determinants of consumer acceptability of bovine
somatotropin Review of Agricultural Economics 51-62
Fox J A D J Hayes J B Kliebenstein and J F Shogren1994 Consumer
acceptability of milk from cows treated with Bovine Somatotropin1 Journal of
Dairy Science 77(3) 703-707
Federal Register 1993Natural resource damage assessments under the oil pollution act
of1990Department of commerce national oceanic and atmospheric
administration 58(10)
Gumber G and J Rana 2017 Factors Influencing Willingness to Pay Price Premium
forOrganic Food in IndiaInternational Journal of Emerging Research in
Management ampTechnology 6 (2)
Government of Pakistan 2016 Fruit vegetables and condiments statistics of Pakistan
Provincial Agricultiural Marketing Departments
GhorbaniM and S Hamraz 2009A survey on consumerlsquos potential willingness to pay
for organic products in Iran Trends in Agricultural Economics2(1)10-16
Griffith R and L Nesheim 2008 Consumer willingness to pay for organic products
CEPR Discussion Paper No DP6905 Available at
SSRN httpsssrncomabstract=1240215
GraciaA and TDMagistris 2007 Pesticide free good product purchase behavior
Spanish journel of agriculture research 5(4) 439-451
89
Gil J M A Gracia M Sanchez 2000 Market segmentation and willingness to pay
for organic products in SpainThe International Food and Agribusiness
Management Review 3(2) 207-226
Govindasamy R and J Italia 1999Predicting willingness to pay a premium for
organically grown fresh produce Journal of Food Distribution
Research30(2)0044
HayatiB M Haghjou and E Peshbahar 2017Effecting factors on consumerslsquo
willingness to pay a premium for pesticide-free fruit and vegetables in Iran
MOJFoodProcessingampTechnology4(5)00105Availablehttpmedcraveonline
comMOJFPTMOJFPT-04-php
HUICL C W MAY and W K LI 2013 Research on householdlsquoslsquo willingness to
pay for pesticide free productsUniversity Tunku Abdul RahmanFaculty of
Accountancy and Management Department of Economics
Hai M N M Moritaka and S Fukuda 2013 Willingness to pay for organic
vegetables in Vietnam An empirical analysis in Hanoi capital J Fac Agr
Kyushu Univ58 (2) 449-458
Haghjou M B Hayati E Pishbahar RMohammadrezaei GDashti2013 Factors
affecting consumerslsquo potential willingness to pay for organic food products in
Iran Case study of Tabriz Journal of Agricultural Science and Technology
15(2) 191-202
Haghiri M J E Hobbs and M LMcnamara 2009 Assessing consumer preferences
for organically grown fresh fruits and vegetables in Eastern New Brunswick
International Food and Agribusiness Management Review Volume 12( 4)81
HeoSW and H Kim 2004 Green marketing strategies and willingness to pay for
environment-friendly agricultural products in the metropolitan area Korean
Journal of Organic Agriculture
90
HossainF B Onyango B Schilling W Hallman and AAdelaja2003 Product
attributes consumer benefits and public approval of genetically modified
foods International Journal of Consumer Studies 27(5) 353-365
Hanemann M J Loomis and B Kanninen 1991Statistical efficiency of double-
bounded dichotomous choice contingent valuationAmerican Agricultural
Economics 73(4)1255-1263
HanemannWM 1984Welfare evaluations in contingent valuation experiments with
discrete responses Am J Agric Econ 66(3) 332ndash341
Jakobsson K M and A K Dragun 1996 Contingent valuation and endangered
species methodological issues and applications Edward Elgar Publishing
Khan J M M S Zia and M Qasim 2010 Use of pesticides and their rule in
environmental pollution International Journal of Environmental and Ecological
Engineering4 12-25
KalogerasN S Valchovska G Baourakis and P Kalaitzis2009Dutch householdlsquos
willingness to pay for pesticide free olive oilJournal of International Food amp
Agribusiness Marketing 21(4) 286-311
Kimenju S C and HD Groote 2008 Householdlsquos willingness to pay for genetically
modified food in Kenya Agricultural economics 38(1) 35-46
Krystallis A and G Chryssoidis 2005 Consumers willingness to pay for organic
food Factors that affect it and variation per organic product type British Food
Journal 107(5) 320-343
Kuperis A P M MVeeman and W L Adamowicz 1999 Householdlsquosresponse to
the potential use of Bovine Somatotrophin in Canadian dairy production
Canadian Journal of Agricultural Economics47(2) 151-163
KmentaJ 1997Elements of Econometrics University of Michigan Press Second
edition
91
Lusk JL and Hudson D 2004 Willingness-to-pay estimates and their relevance to
agribusiness decision making Review of Agricultural Economics 26(2) 152-
169
Liu Y Y Zeng and X Yu 2009Consumer willingness to pay for food safety in
Beijing a case study of food additives In Contributed paper prepared for
presentation at the international association of agricultural economists
conference Beijing China (pp 16-22)
Loureiro M L and W J Umberger 2005 Assessing consumer preferences for
country-of-origin labeling Journal of Agricultural and Applied
Economics 37(1) 49-63
Loureiro M L and W JUmberger 2003 Estimating consumer willingness to pay for
country-of-origin labeling Journal of Agricultural and Resource
Economics28(2) 287-301
Loomis J P Kent L Strange K Fausch and A Covich 2000 Measuring the total
economic value of restoring ecosystem services in an impaired river basin
results from a contingent valuation survey Ecological Economics 33(1) 103ndash
117
MuhammadS E Fathelrahman and RUT Ullah 2015 Factors affecting
householdlsquoslsquo willingness to pay for certified pesticide free food products in
United Arab Emirates Journal of Food Distribution Research 46(1)37-45
MagnussonE and J A L Cranfield 2005 Householdlsquos demand for pesticide free food
products in Canada A Probit Analysis Canadian Journal of Agricultural
Economics53(1) 67ndash81
MagnussonK MA Arvola UKKHursti L Aringberg PO Sjoumldeacuten 2003 Choice
oforganic foods is related to perceived consequences for human health and to
environmentallyfriendly behavior Appetite40 (2)109ndash117
92
Millock K H and L G Hansen 2002 Willingness to pay for pesticide-freefoods A
Comparison between Survey Data and Panel Data from Denmark Available at
httpmpraubuni-muenchende47588
Mitchell R C and R T Carson 1989 Using surveys to value public goods the
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Maddala G S 1986 Limited-dependent and qualitative variables in econometrics (No
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Mitchell R C amp Carson R T 1984 A contingent valuation estimate of national
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Agency Washington DC Resources for the Future
Nandi R W Bokelmann N VGowdruand G Dias2017 Factors influencing
consumerslsquo willingness to pay for organic fruits and vegetables Empirical
evidence from a consumer survey in India Journal of Food Products
Marketing 23(4) 430-451
Ngo Minh H M Masahiro andF Susumu 2013 Willingness to pay for organic
vegetables in Vietnam An empirical analysis in Hanoi capital J Fac Agr
Kyushu Univ 58(2) 449-458
NouhoheflinT O Coulibaly A J Cherry R A Hassan and PYAdegbola2004
Consumerslsquo perception and willingness to pay for pesticide free vegetable in
Benin and Ghana African Association of Agricultural EconomistsThe role of
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Oyawole F P D Akerele and A O Dipeolu 2016 Factors influencing willingness to
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OwusuV and M OAnifori2013Consumerwillingness to pay a premium for pesticide
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93
OwusuV and A M Owusu 2010Measuring market potential for fresh pesticide free
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OramanY and G Unakitan 2010Analysis of factors influencing organic fruit and
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PiyasiriAGSA and A Ariyawardan2011 Market potentials and willingness to pay
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Farminghtml
Portney P R 1994 The contingent valuation debate why economists should care The
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RodriacuteguezE V Lacaze and B Lupiacuten 2008Contingent valuation of householdslsquo
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European Association of Agricultural Economists
Roitner-Schobesberger B I Darnhofer SSomsook and C R Vogl2008Consumer
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Randall A B Ives and C Eastman1974 Bidding games for valuation of
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Salmet A S A k Nakayasu and H Bai 2016The determinants of organic vegetables
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SyedJ H A Alamdar A Muhammad K Ahad Z Shabir HAhmad SM Ali SG
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2014Pesticide residues in fruits and vegetables from Pakistan a review of the
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SangkumchaliangP and W C Huang 2012 Consumerslsquo perceptions and attitudes of
organic food products in Northern Thailand International Food and
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Chemical Industries KalashahKaku Pakistan Environmental Earth Science
62(6)1311ndash1321
Smith A T C L Hung and B H Lin 2009 Does Price or Income Affect Organic
Choice Analysis of US Fresh Produce Users Journal of Agricultural and
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Taiba B M Khan M Nazir M Sajjad D Jan and A U Jan 2011 Estimation of
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Vidogbena F A Adeacutegbidi R Tossou F A KomlanAnselme T Martin M
Ngouajio S Simon L Parrot and K K Zander 2015Consumerslsquo
Willingness to Pay for Cabbage with minimized pesticide residues in Southern
Benin Environments 2(4) 449-470
Valerian J E Domonko S Mwita and A Shirima 2011Assessment of the
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MunicipalReport of the original work done for Sustainable Agriculture
Tanzania (SAT)
95
Veeman M and W Adamowicz 2000Consumerlsquos perceptions of environmental risks
and the demand for food safety httpsdoiorg107939R3ZS2KG11
Wooldridge J M 2010 Econometric analysis of cross section and panel data MIT
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Wang Q and J Sun 2003 Consumer preference and demand for organic food
Evidence from a Vermont survey Paper prepared for American Agricultural
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Zia M S M J Khan M QasimandARehman 2009Pesticide residue in the food
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Zhongmin X U J Loomis Z Zhiqiang and K Hamamura 2006Evaluating the
performance of different willingness to pay question formats for valuing
environmental restoration in rural ChinaEnvironment and Development
Economics 11(5) 585ndash601 httpsdoiorg101017S1355770X06003147
Zellner JA and RL Degner1989Consumer willingness to pay for food safety Paper
presented at the Southern Agricultural Economics Meeting Nashville TN
96
Appendix- 1 Questionnaire
Q1Socio-economic characteristics
1 Location
o Rural
o Urban
2 Name ____________________
3 Age ____________________(years)
4 Gender
o Male
o Female
5 Educational status ______________ Years
6 Household Size_________________ No
7 Monthly income _______________________________Rs
8 Monthly consumption expenditure _________________Rs
9 How much you spend on Fresh Fruits Rs __________month
10 How much you consume the following fruits
Fruits Quantity
Apple
Mango
Peaches
11 Local farmers are intensively using pesticides on Apple Peach and Mango fruits
o Aware
o Not aware
97
12 Attitudinal question responses
Householdrsquos Awareness Perceptions of Pesticides use
Questions Agreed Disagreed
Local farmers are intensively using pesticides on
Apple Peach and Mango fruits
I feel the use of pesticides in agriculture has negative
effect on the environment
I am concerned about pesticide residue in our food
supply
I believe farmer should engage in environmental
friendly agricultural production practices with
minimum impact on human health
The effect of pesticides residues on human health
The use of pesticides can badly affect the agro-ecological system as well as human
health Human health related problems may vary with the composition of chemicals
The most common problems are skin flue and headache while severe health hazards
include paralysis cancer etc Studies show that globally around 30 lakh people are
poisoned annually from consumption of pesticides contaminated food and 2 lakh of
them die from different heath problems caused by pesticides residues Most of the
pesticides used on agricultural crops are banned by the WHO
13 Householdrsquos willingness to pay for pesticide free fruit
Wording for Dichotomous choice question
Suppose your favorite fruit such as apple mango and peach regularly cost on average
Rs 100kg Assuming no difference in taste and nutritional content would you pay Rs
X more to consume pesticide free version of the same fruits
Yes No
Wording for open ended question
Suppose your favorite fruit such as apple mango and peach regularly cost on average
Rs 100kg Assuming no difference in taste and nutritional content how much would
you pay for pesticides-free version of the same fruits
Rs _________
98
Wording for payment card question
Suppose your favorite fruit such as apple mango and peaches regularly costs on
average Rs 100kg you purchase Assuming no difference in taste and nutritional
content would you pay slightly more for a pesticides free version of the same fruits
Yes No
If yes how much would you pay to consume pesticide free version of the same fruit
Select from the given payment card
1 WTP= 0
2 WTP= 1-5
3 WTP= 6-10
4 WTP= 11-15
5 WTP= 16-20
6 WTP= 21-25
7 WTP= 26-30
8 WTP= 31-35
9 WTP= 36-40
10 WTP= Above than 40
If no what are the reasons for not paying price premium for pesticide free
commodities (PFC) Please select the most relevant one
o I canlsquot afford to pay price premium on PFC
o The pesticide have no harmful effect on health
o We do not use fresh fruits
o Other reasons ___________________________
99
PLAGIRIASM UNDERTAKING
It is certified that the research work presented in the Ph D dissertation of Mr Jahangir
Khan C No 45 University Registration No2006-Agr-U-13234 Session 2014-2017
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar under the titled ―HOUSEHOLD
PREFRENCES AND WILLINGNESS TO PAY FOR PESTICIDES FREE FRUIT IN
KHYBER PAKHTUNKHAWA (KP) PAKISTAN was conducted under the
supervision of Dr Abbas Ullah Jan
I understand the zero-tolerance policy of HEC and the University of Agriculture
Peshawar towards plagiarism Therefore I as an author of the above titled research
thesis declared that no portion of my thesis has been plagiarized and the material used
for references is properly cited
I undertake that I found guilty at any time and any statement is found to be incorrect or
plagiarized in the above mentioned titled thesis even after my graduation the
University has the right to withdraw my Ph D degree and the HEC has the right to
publish my name on the HECUniversity website on the list of persons who submitted
plagiarized thesis of guilty under plagiarism policy
Jahangir Khan
100
AUTHORrsquoS DECLARATION
I Mr Jahangir Khan C No 45 Session 2014-2017 hereby stated that my Ph D
dissertation titled ―Household Preferences and Willingness to Pay for Pesticides free
Fruit in Khyber Pakhtunkhwa (KP) Pakistan is my own work and not been submitted
previously by me or anyone else for taking degree from The university of Agriculture
Peshawar or any other University in the country world At any time if any statement
found to be incorrect even after my graduation the university has the right to withdraw
my Ph D Degree
Jahangir khan
Date
101
CERTIFICATE OF APPROVAL
It is certified that the research work presented in the Ph D dissertation of Mr Jahangir
Khan C No 45 University Registration No 2006 -Agr-U-13234 Session 2014-2017
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar under the titled ―HOUSEHOLD
PREFRENCES AND WILLINGNESS TO PAY FOR PESTICIDES FREE FRUIT IN
KHYBER PAKHTUNKHAWA (KP) PAKISTAN was conducted under the
supervision of Dr Abbas Ullah Jan
No part of this dissertation has been submitted anywhere else for any degree The
dissertation is submitted for the award of degree of Doctor of Philosophy in the
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar
Ph D Scholar Jahangir Khan
APPROVED BY
1 External Examiner _________________ Lal K Almas Ph D
Associate Dean and Regents
Professor Agricultural Business amp
Economics University of West Texas
AampM USA
2 External Examiner ___________________ Prof Dr Harun Ucak
Alanya Alaadin Keykubat
University Turkey
Major Supervisor ___________________ Dr Abbas Ullah Jan
Head of Department ________________
Dr Ghaffar Ali
HOUSEHOLDrsquoS PREFRENCES AND WILLINGNESS TO PAY
FOR PESTICIDES FREE FRUIT IN KHYBER
PAKHTUNKHAWA (KP) PAKISTAN
BY
JAHANGIR KHAN
A dissertation submitted to The University of Agriculture Peshawar in Partial
fulfillment of the requirement for the Degree of
DOCTOR OF PHILOSOPHY IN AGRICULTURE
(AGRICULTURAL amp APPLIED ECONOMICS)
Approved by
___________________________ Chairman Supervisory Committee
Prof Dr Abbas Ullah Jan
___________________________ Member (Major Field of study)
Dr Ghaffar Ali
___________________________ Member (Minor Field of study)
Prof Dr Mussawar Shah
___________________________ Chairmanamp Convener Board of Studies
Dr Ghaffar Ali
___________________________ Dean Faculty of Rural Social Sciences
Prof Dr Noor P Khan
___________________________ Director Advanced Studies and Research
Dr Shahid Sattar
DEPARTMENT OF AGRICULTURAL amp APPLIED ECONOMICS
FACULTY OF RURAL SOCIAL SCIENCES
THE UNIVERSITY OF AGRICULTURE
PESHAWAR-PAKISTAN
MAY 2018
TABLE OF CONTENTS
S No Title Page No
List of Table i
Acknowledgements ii
Abstract iii
I INTRODUCTION 1
11 Background on Pakistan 2
12 Pesticides-free Food and Products 4
13 Justification of the study 6
14 Purpose and objectives of the study 7
15 Research Questions 8
16 Hypothesis Development 9
161 Hypothesis to be tested 9
17 Contribution of the study 9
18 Organization of thesis 10
II LITERATURE REVIEW 11
21 Illustration of Contingent Valuation Method (CVM) 11
22 Crux of the Double bounded dichotomous choice model premium 13
23 Overview of the Ordered Logit Model 15
24 Factors influencing Householdslsquo Willingness to Pay 19
25 Essence of the Literature Reviewed 27
III MATERIALS AND METHODS 29
31 Khyber Pakhtunkhwa 29
32 Sampling Technique 31
321 Stage 1 _Selection of district Peshawar and Mardan 31
322 Stage 2 _ Selection of Union Councils (UCs) 31
323 Stage 3 _Selection of households from each Union Council 31
33 Allocation of Sample Size for Different Models 32
34 Contingent Valuation Survey Designing 33
35 Householdslsquo Survey 33
36 Conceptual Framework 34
361 Householdlsquos Utility and Willingness to Pay 34
362 WTP and CVM 35
37 Elicitation Techniques 36
371 Bidding Game Approach 37
372 Open-ended Elicitation Method 37
373 Payment Card Approach 37
374 Dichotomous Choice Model 37
38 Empirical Estimation of WTP by Payment Card using Ordered Logit
Model 39
39 Empirical Estimation of WTP using Double Bounded Dichotomous
Choice Model 42
391 Factors which could Influence WTP 43
392 Bids Design 44
310 Empirical Estimation of WTP using Linear Regression Model 44
311 Description of Variables 45
1V RESULTS AND DISCUSSION 46
41 Descriptive Analysis 46
411 Demographic and Socio-economic Characteristics 46
412 Householdlsquos Awareness and Perceptions about Pesticides Application
on Fruit 51
42 Empirical Results of this Research Endeavour 52
421 Distribution of responses on householdslsquo willingness to pay
(WTP) 52
422 Householdlsquos willingness to pay using ordered logit model 53
423 Predicted probabilities and Marginal effects of ordered logit model 56
424 Matrix of Correlation Coefficient 60
43 Householdlsquos willingness to pay using double bounded dichotomous
choice model 63
431 Householdslsquo estimated Mean WTP 65
432 Households Response to First Bid (Amount) 66
44 Post Estimation Diagnostic Test 67
441 Householdslsquo willingness to pay by using linear regression model 68
45 Comparison of elicitation questions formats 70
451 Response rate for zero WTP 71
46 Discussion about Major Findings 72
V SUMMARY CONCLUSION AND RECOMMENDATION 78
51 Summary 78
52 Conclusions 79
53 Recommendations 81
54 Limitation and Suggestion for Future Envisage 82
56 Suggestions 83
LITERATURE CITED 84
Appendix- 1 Questionnaire 96
i
LIST OF TABLE
Table No Title Page No
31 Total population and sampled households from selected UClsquos 32
32 Payment card format 41
33 Bid system for Pesticides free fruits 44
34 Description of explanatory variables 45
41 Age of the householdlsquos head (Years) 47
42 Educational Level of the Householdlsquos Head (Years) 48
43 Householdslsquo size of the Respondents (Member in Number) 48
44 Householdslsquo Income in Pakistanlsquos Rupee (PKR) 49
45 Households expenditure on food (PKR) 50
46 Householdlsquos monthly expenditure share on fresh fruits (PKR) 50
47 Householdlsquos Awareness and Perceptions of Pesticides use on Fruit
Grown 51
48 Factors influencing respondent householdlsquos WTP (Ordered logit model) 55
49 Predicted probabilities and marginal effects from the estimated ordered
logit model 61
410 Matrix of correlation coefficient between explanatory variables 62
411 Factors influencing consumerslsquo WTP (double-bounded dichotomous
choice model) 65
412 Households mean estimated WTP 66
413 Householdslsquo Response to First Bid (Amount) 67
414 Diagnostic test results 68
415 Estimated parameters using liner regression model 70
416 Mean willingness to pay comparison from CV question format 71
417 Comparison of response rates by CV question format 71
ii
ACKNOWLEDGEMENTS
I am grateful to Almighty Allah for blessing me with the potential of seeking
the light of knowledge the taste of gaining knowledge courage and for all the blessings
which enabled me to complete a stage of education
Doing a research is not an individual work Itlsquos indeed the result of efforts by
many people I would like to thanks all people who helped and supported me to
complete this research successfully
My whole hearted and profound thanks to my advisor Dr Abbas Ullah Jan
Department of agricultural amp Applied Economics for his support critical review
valuable suggestions and inspiration to make this research success
My most special thanks to Assistant Prof Dr Syed Attaullah Shah Department
of agricultural amp Applied Economics for his cooperation and valuable suggestions
providing me all facilities during the course of this research
My sincere thanks to Dr Ghaffar Dr Dawood Jan and all faculty members
Department of agricultural amp Applied Economics for their cooperation advices and
back-up to achieve my goals and their encouragement and instrumental support during
the research practical work
I would like to submit my admirations to my friends and foreign research expert
Dr Kar Ho Lim and Dr Aditya Khanal Department of Agricultural amp Environmental
Sciences College of Agriculture Tennessee State University USA for their help
especially in thesis write-up and paper publication
At last but the not least I wish to put across my deep admiration to my parents
friends relatives and family members who support me during my study
Jahangir Khan
iii
HOUSEHOLDrsquoS PREFRENCES AND WILLINGNESS TO PAY
FOR PESTICIDES FREE FRUIT IN KHYBER
PAKHTUNKHAWA PAKISTAN
Jahangir Khan and Abbas Ullah Jan
Department of Agricultural amp Applied Economics
Faculty of Rural Social Sciences
The University of Agriculture
Peshawar-Pakistan
May 2018
ABSTRACT
The over use of fertilizers and pesticides in agriculture are degrading natural ecosystem
and human health The substantial association of health risk with pesticide residues and
its adverse impact on environment has fetched attention of researchers across the globe
In this alarming scenario pesticide free farming is deemed as panacea to
environmental human and animal health friendly production system Pesticide free
fruit are considered to be superior in quality as compared to fruit produced
conventionally and helps in preventing several health and environmental hazards
Therefore the demand for pesticide free fruit is increasing throughout the world Given
this increasing demand for pesticide free fruit this study is designed to measure what
price premium household would be willing to pay (WTP) for fruit free from pesticides
such as apple peach and mango This study also aims to identify factors influencing
householdslsquo WTP decision of pesticide free fruit in Khyber Pakhtunkhwa (KP)
Pakistan The primary data was gleaned from 1000 sampled respondents through face
to face interview from two selected districts namely Peshawar and Mardan KP
Pakistan To elicit householdlsquos WTP information Contingent Valuation Method
(CVM) was employed Contingent valuation is a survey based method used for eliciting
willingness to pay of the householdslsquo for environmental and natural resources
Different elicitation techniques are used to design CV question scenario such as
payment card question double dichotomous choice question and open ended question
Consequently this study used the entire three payment format to elicit householdlsquos
WTP for pesticide free fruit The ordered logit model was employed to appraise the
payment card method However linear regression model was adopted to identify
factors influencing householdlsquos willingness to pay for pesticides free fruit
Nevertheless the double bounded dichotomous choice model was performed to
measure dichotomous choice questions The major results demonstrate that 935 percent
households were willing to pay higher prices for fruit pesticides free in the study area
Estimates remarkably reveal that around 35 percent households were willing to pay 16
to 20 percent higher prices and 24 percent households were willing to pay 6 to 10
percent higher prices for pesticides free fruit than the prevailing prices of conventional
produce It is reported by 61 percent of the households that local farmers use irrational
pesticides on fruit Major findings have also corroborated that 881 percent sampled
household have perceived health concerns over pesticides residues in food Similarly
911 percent of the households have supported the idea that farmer should be engaged
in environmental benign agricultural production practices which have a minimum
adverse impact on health and the environment Socio economic and demographic traits
have confirmed positive significant effects on householdlsquos willingness to pay The
iv
results of householdlsquos head awareness on WTP are according to the prior expectations
that awareness of householdlsquos head has significant contribution in willingness to pay
for pesticides free fruit While householdlsquos size has a significant but inverse effect on
willingness to pay for pesticides free fruit Furthermore householdlsquos perception
regarding health and environment concern has a propensity to positively influence the
willingness to pay for pesticides free fruit It is also depicted by the results that mean
WTP by using double dichotomous payment card and open ended elicitation format
validates consumer demand for pesticide free fruit in the study area Three separate
mean WTP were computed for each double dichotomous choice payment card and
open ended format which were figured as Rs2576 1632 and 1437 respectively
These results reveal market potential for pesticides free fruit in the study area This
research study is expected to contribute in the three different aspects Firstly this study
has figured out the potential for pesticides free markets in Pakistan This study has also
abridged the research gap regarding consumerlsquos preferences and willingness to pay for
pesticides free fruit which can be generalized and replicated to other areas In addition
results have provided insight to fruit producers helping them to strategize production
system decisions Based on the findings from this research government non-
government organization and other stakeholders should formulate policies and would
promote and encourage the production of pesticides free fruit in Pakistan
1
I INTRODUCTION
Pesticides are agrochemical formulated to cope with the severe problems diseases
caused by insects fungi virus and self-grown weeds The term pesticide can be defined
as any chemical or natural substance applied with the objective to repel destroy or
control pests and regulate plant growth (FAO 2002) In modern agriculture arena
pesticides are intensively used on crops before and after harvest The application of
pesticides surged with the passage of time due to an increase in the demand for
agricultural commodities by the burgeoning population of the world The overall
pesticidelsquos consumption across the globe is observed as about 2 million tons per year
While this massive pesticides consumption demonstrates that about 69 percent is used
by European countries and the remaining 31 percent is utilized by the rest of the world
as mentioned by Abhilash and Singh (2009) The more alarming situation is that the
aforementioned magnitude of pesticides consumption is increasing with the every
passing year as reported by FAO (2002)
The green revolution as well as a huge increase in the application of pesticides in the
agriculture realm had enhanced food and non-food crop production Resultantly the
significant surge in the economic growth of several agricultural based economies was
reported over the last few decades as demonstrated by Carvalho (2006) Despite the
substantial contribution of pesticides to diminish the food insecurity societies around
the world are cognizant and concerned about the food sanitation safety and
environmental externalities owing to irrational use of pesticides and other croplsquos input
(Wilson 2000) More categorically the food safety realization in developed countries
has been led to organic agriculture Whereas in many developing countries which
include but not limited to Pakistan the pesticides-free and organic food markets
remained underdeveloped due to several reasons One of the obvious reasons is the
uncertainty among consumerlsquos preference that led to their concern if an organic market
can be self-sustained Similarly a dearth of proper market structures and institutional
support failed to provide environment-friendly agriculture practices in developing
countries (Rehber and Turhan 2002) The current scenario of agriculture sector in
developing countries has raised several considerable questions to acquire the
anticipated implications for this sector However the most relevant query drifted that
2
―Is there sufficient consumerlsquos willingness to pay (WTP) available in a developing
country for grass-roots development of pesticide-free agriculture
11 Background of the Research Endeavor
Agriculture sector is the mainstay of Pakistanlsquos economy which significantly
contributes as 192 percent to overall Gross Domestic Product (GDP) of its economy
(GOP 2016-17) Despite many efforts and policy reforms still this sector is entangled
with insignificant growth momentum
Since the inception of this country in 1947 there wasnlsquot any notable crop and plant
protection policy adopted by concerned policy makers over a long span of time It is
evident from past timeline that ―Grow More slogan was initiated by the government of
Pakistan back in 1970s to address the escalating foodlsquos demand of rapidly increasing
population of Pakistan Subsequently Grow More policy resulted in ever increasing
pest problem which couldnlsquot be controlled with conventional crop management
practices Therefore the government started to provide the direct subsidy to Pesticides
Industry to provide panacea to croplsquos pest problem But unfortunately the colossal
surge in pesticides utilization had not only destroyed the pests but was also found lethal
for the environment benign organisms that include predators birds etc This irrational
use of pesticides and other crop inputs has caused huge economic loses and health
issues among the farming community
Pakistanlsquos agriculture is endowed with 11 (Eleven) different agro-ecological zones
providing the country an incredible exciting arena for experimentation and state of the
art for agriculture as reported by Altaf (2010) This diversified nature of ecological
zones can be utilized in a lucrative way to attain an optimal output The driving forces
of this sector are striving hard to curtail the gaps by ensuring the adequate production
and supplying the food to meet the demand of rapid growing population of the country
However the emerging challenges such as irrational use of croplsquos input and complying
with world trade organization (WTO) obligations are insisting the concerned policy
makers to focus on paradigm shift for significant contribution of agriculture towards
livelihood welfare and prosperity
3
These different agro ecological conditions provide the encouraging and conducive
environment for the production of cereal crops fruits vegetables and even for non-food
crops Fruits and vegetables grown in Pakistan have a wide domestic demand and have
also attracted the international consumer by exporting these edibles in the international
market Pakistan exports mango apple dates oranges guava and dry fruits like pine
nuts to different countries which include but not limited to Afghanistan UAE Saudi
Arabia and Europe (GOP 2014-15)
The relative importance of agricultural sector can be gauged with high growth rate of
exports of fruits and vegetables from Pakistan to different countries mainly South East
and the Middle East (Khalid Mustafa 2003) where low Sanitary and Phytosanitary
(SPS) standards are comply with Yet several more fruit grown in Pakistan have
enormous potential to be exported in the international market Specifically insect pest
infestation during pre- and post- harvest of fruit and vegetables is a significant problem
To protect from those many kinds of pesticides and agro-chemicals are widely used in
Pakistan These include different types of agro-chemicals which consist more than 100
types of insecticides almost 30 types of fungicides and approximately 39 different
types of herbicides (Zia et al 2009Anwar et al 2011) In 1960 the consumption of
chemical pesticides in Pakistan was 7000 tons per year which has risen to 78 232 tons
per year in 2003 (Syed and Malik 2011)With the development of pest resistance to
those chemicals over years each year new chemical compounds in large amount are
used to protect crops Overuse of these agro-chemicals has caused many adverse health
and environmental effects
However significant variation in consumer behavior in the developed countries has
excelled the demand of high quality food which had encouraged the organic
agriculture Thatlsquos why developing countries who have still adopted obsolete strategies
for pest control are out of race for agriculture export and are at venture to be considered
as ―dirty producer in an international market Similarly in Pakistan massive increase
in the pesticidelsquos use has escorted to two major harms to Pakistanlsquos economy Firstly
Pakistan imports a large quantity of pesticides incurring billions of costs on it and
second overuse of pesticides on agricultural commodities has created many health and
environmental hazards in the farming community of Pakistan Several research
endeavors such as Ahmad et al (2004) Rizwan et al (2005) Parveen and Masud
4
(2001) had divulged that individuals working in field under pesticides exposed
environment specifically women who worked long time in the cotton croplsquos field
sustained more health hazards These health hazard underscored skin irritation
headache nausea and gastroenteritis It is also evident that the hazardous chemical
residues of organo-chlorines organophosphate and synthetic pyrethroids pesticides
were found in 85 percent of the blood samples drawn from 75 sampled individuals
(male and female) in Pakistan
12 Pesticides free Food and Products
Pesticides free fruit and vegetable are those edibles that are grown without the use of
pesticides and can be deemed as major component of an organic farming Due to
awareness among people about advantages of Pesticides free fruit and vegetable which
upshot in food safety and benefit environment as well the production and consumption
of such food products is being highly valued With the consumption of food produced
without the use of pesticides can be helpful in the prevention of some of the health
hazards related with the consumption of conventional food (Nouhoheflin et al 2004)
The term ―Pesticides free was introduced for the first time in a book ―Look to the
Land in 1939 by Lord Northbourne The author narrates pesticides free farm as an
organization that making use of environment balance technique by adopting zero
pesticides In early 20th
century pesticides free food ideology was brought forward
while correspondingly there was an immense use of chemical in food products as well
Householdslsquo were having great concern about their health as well as soil condition and
they began to grow such food which was free from chemical residuals In the era of
70s a noteworthy change was reported in escalating the demand of pesticides free food
and pesticides free farming Therefore in year 1972 ―International Federation of
Pesticide free Agriculture Movement was formed In the same era the producers who
were producing pesticides free food individually commenced the certification process
The obvious aim of the process was to develop rules and to underpin the standards of
pesticides free production
In this modern era where food consumers are highly concerned about their health safety
and environment benign practices they prefer to buy pesticides free food products
This is because of their knowledge about the relationships between the production
practices and quality of food produced Consumers are becoming more conscious as
5
they are aware of the harmful effects of food produced with irrational pesticides use on
their health Many research endeavors have corroborated that fresh fruit and vegetables
confers health related benefits and provide protection against the risk associated with
different types of diseases like diabetes stroke and cancer(Van and Pivonka 2000 Stan
Kar Stoner Singh 2008) Likewise the world health organization (WHO) has
revealed in their research carried out in 2002 that the fruits and vegetables
contaminated with pesticides can cause about 31 percent of diseases related to heart and
11 percent stroke in all over the world However if best quality of fruit and vegetable
consumption is adequately increased it is projected that about 27 million of lives can
be protected each year Pesticides free food contains higher level of antioxidants which
fight against various diseases and provide different essential vitamins More
importantly pesticides free food products also aimed to prevent from some allergies
and diseases common in human being It is corroborated by other research studies that
chemical fertilizer free food are beneficial for human health as well as for the animals
wildlife and for the ecosystem To encourage such agricultural management techniques
in developing countries in general and Pakistan in particular still there is long way to
go but such research studies can provide the paved way to open new avenues for the
concerned policy makers and stakeholder in the realm of Agriculture
In addition locally grown pesticide free produce tends to fetch higher prices due to
sanitation concerns of the consumer and improved quality of the product Subsequently
such produce are preferred by the household and they are agree to pay a price premium
for such food produced free from pesticides compared to prevailing regular market
price of conventional food products Thus it is important to measure householdlsquos
willingness to pay for locally produced pesticide free fruit To acquire a good or
service consumerslsquo wants to sacrifice an extra amount of money which show their
willingness to pay Willingness to pay can also be defined more categorically as the
extra amount of money that an individual wants to pay for best quality of food (Lusk
and Hudson 2004) The commonly used model for eliciting householdlsquos willingness to
pay information is Contingent Valuation Method (CVM) Contingent valuation (CV) is
a survey-based method which is used to elicit householdlsquos willingness to pay for
environmental and natural resources
6
12 Justification of the Study
With the every passing year the demand for agriculture products is hiking due to rapid
increase in the worldlsquos population Pakistan being an agrarian country is striving hard
to fulfill the domestic and international demand for agricultural food To overcome the
escalating demand for agricultural product farmers mainly depend on chemical
technologies to manage pests and to provide enough food Besides their benefits now it
is clear that pesticides are negatively influencing human health and also the natural
environment The food that we are eating has gained more discussion in all over the
world including developing countries like Pakistan that whether this food is safer for
human health and for natural environment Consumers are facing with problemslsquo which
food is safe to eat and which is not safe Which food processing is beneficial for human
and environment and which is worse (Bold et al 2015 Chiew Shi Wee et al 2014
Sirieix 2011 and Butt et al 2015) Most of people are turning towards the production
and consumption of pesticides free food to resolve these issues
In developed countries consumers are highly concerned about the excessive use of
chemicals on food and its negative impact on health and natural environment thatlsquos
why the production of food produced without the use of pesticides Large numbers of
studies are conducted on consumerslsquo perception regarding pesticides- free food in
developed countries like Europe Australia United State and New Zealand but in
developing countries very little is known about consumerslsquo perception regarding
pesticides-free food
Despite the fact that food production without pesticides and other chemicals are safe for
health and environment its production and consumption is very low In Pakistan only
few farmers are using chemicals free technology for food production It has only 28
farms producing pesticides-free food which they just growing for their own
consumption not for commercial purpose In Pakistan there is high gape of information
about consumerlsquos perception and awareness regarding pesticides-free food and
consumerslsquo willingness to pay for pesticides-free food (Panhwar 2004)
Keeping in view the human health hazards and environmental vulnerability owing to
irrational use of pesticides alternative farming systems such as pesticides free farming
integrated pest management (IPM) and organic farming is becoming progressively
7
more popular in the global context However in the country like Pakistan where costly
input and lower output agriculture was a historic focus Following the Green
Revolution in 1960s adoption of certified organic production is expected to be fairly
low Nevertheless aforementioned agriculture practices could be an alternative system
in convincing farmers towards safe and sustainable agriculture and to comply with the
strict regulations and mandates of certified organic system and WTO Moreover due to
conducive and diversified weather and climatic condition of the country and relatively
cheaper labor force availability production of such safer food seems feasible
Pesticides free food is supposed to be having high prices however it is important to
examine whether households are willing to pay a higher price for these pesticides free
fruit According to the research study conducted in different countries of the world on
pesticides free food this study also focus to investigate a price premium that
households are willing to pay for pesticides-free fruit and factors influencing their
decision For this purpose Khyber Pakhtunkhwa (KP) is selected as a research area
Khyber Pakhtunkhwa (KP) is blessed with fertile soil and plenty of water for irrigation
and is famous for production of delicious fruit such as peach apple guava plum
mango Pear apricot date and citrus Fruit farming has been an important business of
Khyber Pakhtunkhwa and the total fruit production during 2015-16 was 411448 tons
from 44737 hectare (GOKP 2015-16) Given that the region is one of the important
fruit growing regions with relatively readily available agricultural labor growers has
the potential to produce pesticides free fruit in this region In this direction more
research work is required to estimate a price premium householdslsquo willing to pay for
fruit free of chemicals and pesticides Thatlsquos why this study is designed to measure
what price premium households would be willing to pay for pesticides free fruit and
improvement in apple peach and mango quality produced by farmers
14 Purpose and objectives of the Study
The irrational and overuse of pesticides in agricultural food production causes severe
damages to human as well as animal health and to the environment too Thus a new
production and new system is needed to overcome these problems and to limiting the
use of these hazardous chemicals during production process The risk of harmful effects
on health and environment are generally reduced with pesticides free farming compared
8
to conventional farming methods Hence pesticides-free farming has the potential to
provide a healthy and safer environment The purpose of conducting this study is to
understand the factors that influence householdlsquos behavior in purchasing pesticide free
food and their willingness to pay for such food The main theme to carry out this study
is to discuss on the variables which determines householdlsquos behavior in the buying
pattern of pesticide free food Besides this research also aims to increase the
understanding on householdlsquos awareness attitude and perceptions towards pesticide
free products
The general objective of this study was to investigate what price premium householdslsquo
are willing to pay for pesticides free fruit produced locally
The specific objectives of this research study are mentioned as below
To study socio-economic characteristics of household and their expenditure on
fruit
To investigate householdlsquos perception towards the use of pesticides on fruit
production
To identify factors influencing householdlsquos willingness to pay (WTP) for
pesticides free fruit
To compare householdlsquos willingness to pay across urban and rural regions of
the study area
To examine the effect of different contingent valuation elicitation format on
householdlsquos WTP
15 Research Questions
1 Do householdlsquos willingness to pay a price premium for pesticide free fruit
produced locally is affected by their socio-economic characteristics
2 Do householdslsquo willingness to pay price premium for pesticide free fruit
produced locally are different in rural and urban regions
3 Do householdslsquo willingness to pay price premium for pesticide free fruit
produced locally are affected by WTP question format
9
16 Hypotheses
Hypothesis is a proper statement that shows the expected association between an
exogenous and endogenous variable (Creswell 1994) Hypothesis is mainly of two
types the null (Ho) and the alternative (H1) hypothesis The null hypothesis is a
statement about the relationship between the dependent and independent variables
while the alternative hypothesis is tested for the acceptance or for the rejection of null
hypothesis through using different test-statistics and usually opposite to the null
hypothesis
161 Hypotheses to be tested
Hypothesis 1
H1 Socioeconomic characteristics have significant effect on householdlsquos WTP
for pesticides free fruit produced locally
Hypothesis 2
H1 Rural and urban locations have significant effect on householdlsquos WTP for
pesticides free fruit produced locally
Hypothesis 3
H1 WTP question format have significant effect on householdlsquos WTP for
pesticides free fruit produced locally
17 Contribution of the Study
The major findings of this research endeavor could be lucrative to pesticides-free food
industry players in designing and implementing programs relating to the production
marketing and consumer behavior regarding fruit and vegetable The study is providing
information regarding householdlsquos willingness to pay an extra amount for pesticides
free fruit at market place The identification of factors influencing purchase of
pesticides free food provides valuable information in formulating short and long term
marketing programs Also the outcomes of the study provide benefits to Government
in their policy making towards pesticides-free farming and pesticides free products
Pesticides free fruit could contribute significantly to wealth formation poverty
lessening and can assess to export market Pesticides free fruit provide healthy food and
natural environment to the society
10
18 Organization of thesis
This study is organized into five chapters In the first chapter background of the study
research questions study hypothesis research justification and contribution of this
study is discussed Chapter two is consist of review of literature related to consumerslsquo
perception market potential and market prospects empirical research studies on
consumerlsquos willingness to pay and consumer knowledge about pesticides free food
socio-demographic variables and their effects on willingness to pay price premium are
discussed Chapter three discuss in detail the study area conceptual and empirical
framework on consumerslsquo willingness to pay and contingent valuation methods are
discussed Chapter four presents descriptive analysis and results obtained from
empirical findings and Chapter five provide summary conclusion and recommendation
and future suggestions on the basis of research findings
11
II LITERATURE REVIEW
Literature review is a synthesis of previous study in the content of a thesis In this
chapter different past investigation are reviewed Mostly this chapter concern on the
methods adopted by different researchers while measuring willingness to pay It also
figure-out various explanatory variables which have been found influencing
householdslsquo willingness to pay an extra amount of money for pesticides-free food
Previous researches on perception questions are also discussed
21 Illustration of Contingent Valuation Method (CVM)
A number of research studies are undertaken across globe to investigate about
consumerslsquo WTP for safer foods such as organically produced pesticides free or
naturally grown Most of the WTP studies use contingent valuation methods where
hypothetical market scenario is developed and subjects are asked to name their WTP
price as compared to existing market price Different techniquesquestionnaires are
used in contingent valuation method where respondents are directly asked to state their
maximum amount of money they are willing to pay for specified improvements in
environmental or health quality The methods used in CVM includes personnel
interview mail and survey that elicit consumerlsquos WTP for those goods yet not available
in the market Survey questions include single bounded double bounded dichotomous
choice and open ended or closed ended (Lusk and Hudson 2004)
Misra et al (1991) studied consumer preferences and their willingness to pay for
pesticides free fresh produce by applying contingent valuation method An ordered
probit model was adopted to know householdlsquos stated willingness to pay for products
free from pesticides residual The study also aimed to know the factors affecting the
probability of householdslsquo WTP for a number of alternative price premiums The
results indicated that householdlsquos willingness to pay was different across different
factors The study concluded that testing and certification was the recommendation of
the households Results also showed that consumers in the study area opposed higher
prices for certified-FPR fresh produce
In another study Gil et al (2000) adopted contingent valuation method and studied
consumerslsquo willingness to pay for pesticides free fruit in Spanish regions Results
showed that consumerslsquo concern over health and environment was increased Results
12
also suggested that due to the adverse impact of conventional food on health and
environment demand for pesticides-free food has raised Results of the study also
showed that consumerslsquo were willing to pay more prices for fruits vegetables and
meats which were free of pesticides
Boccaletti and Nardella (2000) used contingent valuation method to assess householdlsquos
willingness to pay for pesticides free fresh fruit and vegetables To know the impacts of
explanatory variables on the probability of householdslsquo willingness to pay different
price premium an ordered logit model was used and results were reported A
significant and positive effect of income on householdlsquos willingness to pay was
observed Results of the study also suggest that householdlsquos education and associated
risk concern has an inverse relation with households WTP
In another study Millock et al (2002) conducted a research study by using contingent
valuation technique to estimate willingness to pay for pesticides free products through
panel data The information collected was based on weekly report of householdslsquo
purchases of 2000 Danish families Questionnaires were sent to households and asked
them to differentiate different food attributes The food product attributes were included
environmental issues animal welfare and food safety The result showed that
household had given high value to food free from pesticideslsquo residues
Similarly in a relevant study Cranfield and Magnussan (2003) studied willingness to
pay of the Canadian householdlsquos for those products which were free from pesticides
residuals by applying an Ordered Probit Analysis model A contingent valuation (CV)
study was attempted to know that if Canadian households would pay a price premium
for pesticides free food products About sixty five (65) percent of the householdlsquos were
willing to pay a 1 to 10 percent extra amount of compared to those products
contaminated with pesticides residuals About five percent of the total respondents were
willing to pay more than 20 percent price premium The main determinants that switch
over the households to pay higher premiums for pesticides free products were
householdslsquo health concern and environmental concern
In a relevant study John and Eric (2004) developed a survey based research to find out
householdlsquos choice of paying an extra amount for fresh and pesticides free products by
using a contingent valuation technique According to their research 65 percent of
13
households were willing to pay one to ten percent extra prices for pesticides-free
products as compare to conventionally produce one five percent respondents willing
to pay more than twenty percent Health and natural environmental issues youth and
grocery stores were the important factors influencing consumers to pay higher prices
Masias et al (2012) carried out a research study in Spain to analyze the level of
knowledge consumption and consumerlsquos willingness to pay for organic vegetables
such as organic tomatoes By using contingent valuation method three distinct
consumerslsquo groups were identified The results showed consumerlsquos lack of knowledge
regarding organic vegetable Result of the study revealed a clear relationship between
level of knowledge and organic food consumption and consumerslsquo potential willingness
to pay
Boys et al (2014) conduct a research study in Dominica to assess willingness of the
consumerslsquo and their opinion for organic or locally grown produce By adopting
contingent valuation method (CVM) maximum likelihood estimation (MLE) procedure
was applied Findings from the study reported that respondents in Dominica were
willing to pay 175 percent for organic and 12 percent price premium for locally
produced food Results of the study showed that consumer response towards
willingness to pay was different across socio-demographic characteristics family health
status and experience regarding adoption of organic food products
22 Crux of the Double bounded dichotomous choice model
Many recent research studies deployed double bounded dichotomous choice model to
study consumerslsquo willingness to pay for pesticides free organic and related food
Owusu (2010) studied and analyzed market possibility for new pesticides free lettuce
and water melon by using a double bounded dichotomous choice contingent valuation
technique in the city of Kumasi in Ghana The information of the respondents was
collected By applying a Tobit model householdslsquo willingness to pay was assessed
More than 50 percent price premium were paid by 71 percent of the respondents for
natural vegetables and 82 were willing to pay 1 to 50 percent higher premiums for
natural fruits Results showed that human capital food qualities and householdlsquos
recognition impact householdlsquos willingness to pay for pesticide free commodities The
14
evaluated market possibility for pesticide free fruits were (GHcent32117113 US$
26453433) for every annum and for naturally produced vegetable was GHcent1991224
(US$1640083) per year suggested an immense market possibility for naturally
produced fruits in Ghana
sum
(
)
(
)
Where
are binary valued (0 or 1) indicators and the formulas
for the corresponding response probabilities are given above The model was estimated
through maximum likelihood estimation method and the results were used to find out
the mean and individual WTP (s) for pesticides free fruits
Where ƒ(WTP) is a function X is a set of socio-economic characteristics are
coefficients and is error term
In another study Cerda et al (2012) investigated different markets regarding
respondentlsquos preferences and willingness pay a price premium for products free from
pesticide in Chile Conjoint analysis was also used to estimate the marginal willingness
to pay of the consumer for pesticide-free apple A total of 400 individuals were
interviewed to know householdlsquos willingness to pay and to determine different
attributes that consumer search when purchasing apple by using a logistic probability
function and single-bound dichotomous elicitation format The output showed sweet
apple lowest price and pesticides free production attributes were preferred by
households Results of the study revealed that consumers in the study area were willing
to pay about 130 Chilean pesos kilogram for pesticide free apple
By using double bounded dichotomous choice approach Minh et al (2013) conducted
a research study on consumption and willingness to pay a price premium for pesticides
free vegetables in Vietnam Under contingent valuation method 185 respondents were
surveyed and analyzed Results showed that about 15 percent of the consumers had
already used pesticides free vegetables and 88 percent sought to try and purchase such
products if available in the market Result revealed that consumerslsquo were willing to pay
15
on average 70 percent more amount for pesticides free vegetable than the convention
price Findings also showed that respondents with more concerned about pesticides free
food and high purchasing power were more likely to pay extra amount of money
Findings of the study showed most of the consumers were still worrying about safe
food because of chemical residues in vegetables Results suggest that control of
pesticides level was difficult for state agencies because of insufficient capabilities
Some recommendations were suggested based on findings of the study such as the
consumers should be informed regarding organic vegetables and information should be
publicized to consumers and to expand organic market share in the future new shops
should be open
Hai et al (2013) conducted a research study on consumption of organic vegetables and
consumer WTP for vegetables produced without the use of pesticides in Vietnam They
reported in their study that most of the consumers were still worrying about safe food
because of chemical residues in vegetables Control of pesticides level was difficult for
state agencies because of insufficient capabilities By using double bounded
dichotomous choice approach under contingent valuation method 185 respondents
were surveyed and analyzed The results showed that about 15 percent of the
consumers had already used pesticides-free vegetables and 88 percent of the total
respondents desired to try and purchase if such pesticides free products were available
in the market On average consumers were willing to pay 70 percent more price than
the convention price Findings of the study also showed that respondents with high
income and more concerned about pesticides-free food were more likely to pay price
premium
23 Overview of the Ordered Logit Model
Regarding discrete nature and ordinal ranking of the WTP variables in payment card
method an ordered logistic regression was applied in many research studies Ordered
logistic regression is the most appropriate choice in studying these issues (Green
2007) Under latent variable framework the willingness to pay model can be written as
follows
16
Where is an unobserved latent variable reflecting the WTP for pesticides-free fruits
for household i expressed in terms of utility to switch from the traditionally grown
fruits consumption to pesticide free fruits is a parameterlsquos vector reflecting the
relationship between WTP captures a set of socioeconomic and demographic
variables influencing WTP and is the unobserved disturbance term reflecting
stochastic differences between households not controlled for The relationship between
the unobserved and the observed outcome for household ( =0 1 2hellipj) can
be summarized as follows
It is presumed that ɛ is normally distributed across observation
With regards to ordered logistic model Valchovska S (2004) investigated Dutch
householdlsquos attitudes and behavioral intentions to purchase pesticides-free olive oil By
applying CVM to assess consumer willingness to pay a price premium for pesticides
free olive oil on the Dutch consumer an ordered logit regression model was used
Results suggested that willingness to pay did not depend on socio-demographic factors
but rather on consumers awareness and experience with the product Results also
showed that experience regarding the product was significantly related to purchase
intention and willingness to pay Most of the consumers considered pesticide-free olive
oil to be too expensive Results suggested high prices appeared the biggest constraint
on consumption Results clearly verified that consumerslsquo familiarity with pesticide-free
olive oil in the Netherlands was low at present This situation may however be
changed by a possible increased availability of the product in the supermarkets
17
Rodriguez et al (2008) carried out a research study to measure consumers WTP for the
available pesticides free products in Argentina domestic market The data was collected
through a survey from the consumers of Buenos Aires city For the analysis of data a
binomial multiple logistic regression model was applied Five different organic
products such as regular milk leafy vegetables whole wheat flour and fresh chicken
and aromatic herbs were selected for the research The method of contingent valuation
(CVM) was adopted to estimate consumerslsquo stated willingness to pay The result
revealed that pesticide free agriculture has undergone momentous expansion and
consumers in the study area were willing to pay a higher amount of money for such
organic products Research results suggest that along with price that play a significant
rule while consuming organic products non availability of stores for organic products
and a reliable regulatory system limits the consumption of pesticides free organic
products in the study area
According to Kalogeras et al (2009) carried out a research study that concentrates on
the identification of Dutch householdslsquo willingness to pay (WTP) for natural olive oil
The study was carried out in 5 biggest Dutch cities in Netherland To evaluate the
impact of explanatory variables on householdslsquo willingness to pay a price premium for
natural produced olive oil an ordered logit regression model was constructed Results
suggest that experience awareness and consumerslsquo personnel satisfaction were the
variables influencing consumerslsquo WTP for natural olive oil
Travis et al (2009) conduct a research on consumer purchasing behavior for pesticides
free fruits and vegetables To identify the impact of socio-economic and socio-
demographic characteristics on the probability of consumers belonging to certain
groups like devoted casual or nonuser an ordered logistic model was used Results
showed that factors like price and income were influencing householdlsquos willingness to
purchase pesticides-free fruits and vegetables to some extent The results also showed
that respondents with a college degree children aged more than six years and aged
above than fifty years were willing to purchase pesticides-free fruits and vegetables
Zeki and Zia (2009) carried out a research study to investigate consumerslsquo stated WTP
for tomatoes produced free from pesticides residues The study also aimed to measure
the impacts of socio-demographic and hazard variables on WTP Ordered Probit model
18
was used to figure out the likelihood of WTP for pesticide free tomatoes The
information was acquired from 666 respondents by survey method in Ankara and Tokat
regions at same occasion The study results revealed that 3423 percent of Turkish
households were not willing to pay 7702 percent willing to pay a 30 percent higher
amount of money and 22 97 percent would be willing to pay more than 30 percent
premium According to the results Turkish households were paying a little price
premium for tomatoes produced free from pesticides Furthermore the important
factors significantly influencing willingness to pay for pesticides free tomatoes were
gender education statue of mother recognizes for ecologic agriculture solid
sustenance and risk
Oyawole et al (2016) conducted a study in Nigeria to asseslsquo consumer awareness
benefits and willingness to pay for organic vegetables Descriptive statistics and logit
model was used for the analysis of data According to the research findings about 70
percent of consumers were aware of the benefits of organic agriculture and hence they
were willing to pay price premium Results showed that factors influencing willingness
to pay positively were higher education and consumer awareness regarding organic
food while age income and gender had no significant influence on consumer
willingness to pay
Hayati et al (2017) conducted a research study in Marand city to identify factors
effecting consumerslsquo WTP for pesticides-free fruits and vegetables To assess
respondentlsquos willingness to pay an ordered logistic regression model was applied By
using Contingent valuation method data was collected from 394 respondents The
results revealed that 33 of the respondents were willing to pay 20 more price
premium 64 showed 5 to 20 more price premium while only a small portion 3
of the total sample of the consumers were not willing to pay more price for pesticides
free fruits and vegetables Findings of the study also revealed that factors such as
income of the respondent environmental and health concern and consumerlsquos
knowledge regarding pesticides free fruits and vegetables were significantly affecting
respondentslsquo willingness to pay for vegetables and fruits free from pesticides residues
19
24 Factors influencing Householdsrsquo Willingness to Pay
Based on the literature review factors influencing households WTP a price premium
are discussed below
WTPj = β0 +β1Agej + β2Genj + β3Eduj+ β4Hsizej + β5Incj + β6Locj + β7Healthconj+
β8Envirconcernj +
Where
WTP = Willingness to pay for pesticides free fruit = Householdslsquo head age in years
= Gender status of the householdslsquo head = Education level of householdslsquo head in
years = Householdslsquo size = Income of the household = Householdslsquo
location = Health concerned = Environment concerned micro=Error term
Govindasamy and Italia (1991) investigated households in different grocery retail
markets in New Jersy to know their different opinion regarding pesticides free
products The main theme of the research study was to know demographic
characteristics that caused the household to pay a price premium for products free from
pesticides residues than the price prevailing in the market The result showed the
influencing factors that caused the individual to pay more price premium for pesticides
free products were demographics characteristics such as females those having higher
income and young individuals The result also showed that number of member in
households had an inverse relation with willingness to pay More individual in a house
were not willing to pay higher prices for pesticides free products
Piyasiri and Ariyawardana (2002) conduct a research study to identify market potential
and consumerslsquo expectations for pesticides free food in Kandy Sri Lanka The study
also aimed to identify factors influencing consumerslsquo willingness to pay price premium
for pesticides-free food Results revealed that most of consumers in the study area were
aware of the use of pesticides free food and this awareness influenced their
consumption of organic food and willingness to pay more for organic food Results
showed that socio-demographic characteristics like income education of the
respondents beside environment knowledge were the important factors influencing
consumerslsquo WTP for pesticides-free food Study suggested that market for organic food
could be enhanced by availability of organic food in easily accessible shops and market
20
should also direct awareness in consumer regarding demand and consumption of
organic food
Qingbin and Junjie (2003) conduct a study to identify market potential for pesticides
free apple and milk by adopting a conjoint analysis technique in Vermont State of
USA Results found that there was a significant niche market for pesticides free apple
and milk The results also suggested that especially those consumers who were
regularly purchased pesticides free products were willing to pay price premium for
apple and milk produced without the use of chemicals and certified by NOFA
Heo and Kim (2004) investigated green marketing strategies and willingness to pay for
environment-friendly agricultural products in the Metropolitan area The results
revealed consumerlsquos WTP for grain vegetables fruit and processed foodstuffs were
206 percent 202 percent 193 percent and 172 percent respectively higher than
agricultural products produced by conventional farming method
Gracia and Magistris (2007) conduct a research study to know consumerslsquo purchasing
behavior regarding pesticide-free food and also factors influencing food purchasing in
Iran A multivariate limited dependent variable model was used Results showed that
households purchasing pattern was more for pesticides free products and they
purchased such safer products in large quantity Findings of the study showed that
purchase of pesticide free products depends on householdlsquos behavior and information
regarding the product Moreover householdlsquos behavior regarding health concern and
environment concerns given by pesticides-free products were the factors that explained
both intension and final decision to purchase pesticide free products Income and
information about pesticide free products had a significant positive influence on the
decision of the consumer to purchase pesticides free products
Kamal et al (2009) studied householdlsquos willingness to pay a higher price for
pesticides-free products in Kathmandu valley About 180 respondents were interviewed
by using well designed questionnaires to find out their perception for pesticide-free
food commodities and asses their willingness to pay The study revealed that almost all
the respondents were willing to pay a higher price for such food but the level of
acceptability varied Up to 58 of the respondents were willing to pay 6- 20 more
price while 13 were willing to pay half premium The average price premium was
21
noted about 30 Over 39 of the respondents suggest the extra price is reasonable for
pesticide-free food while 27 suggest it a really higher price However results showed
that the consumption of pesticide free food had increased
Morteza et al (2009) conducted a study to examine consumerslsquo willingness to pay for
pesticides free fruits and vegetables The results showed that variables such as socio-
demographic characteristics and perception of the respondents regarding environment
and health concern were influencing consumerslsquo WTP for pesticides free food
Environment concern was the important factor of consumer willingness to pay but
results from this study showed that respondents in New Brunswick gave more priority
to health as compare to environment Results also indicated a positive influence of
income and health concern on consumer willingness to pay for organic food
Ghorbani and Harnraz (2009) carried out a research study on factors influencing
consumer WTP for pesticides free products in Iran By applying Tobit model the
results showed that physical look and information of consumerslsquo were the influencing
factors affecting willingness to pay higher price Consumerlsquos concern of chemicals
residues in diets were also positively affecting willingness to pay In demographic
characteristics such as education of the respondents had negative effect on WTP The
study suggested that farmers and consumers should be encouraged to produce and
consume pesticides-free food Study also suggests that marketing strategies should be
encouraged for the marketing of such organic food products
Akgungor et al (2010) carried out a research study to estimate consumerslsquo perception
regarding safe food and the trade-off that urban Turkish consumer made between good
quality and chemicallsquos free fresh fruits and vegetables The date was gathered from a
representative sample of urban consumers The results suggested higher income and
more educated respondents were highly interested and they had more knowledge
regarding organic products Results showed suggested reason for choosing organic
products was consumerslsquo perception regarding organic products of low health risk and
higher nutritional value Results showed 36 percent higher price premium consumers
were willing to pay for organic food that suggests urban Turkish consumerslsquo demand
for organic products
22
Oraman and Unakitan (2010) analyzed factors influencing Turkish consumerslsquo
purchasing decisions for fruits and vegetables The survey conducted in Istanbul by
applying logistic model Results of the survey showed that health and safety concern
were the important factors influencing consumerslsquo preferences regarding organic food
Findings of the study would help organic food producer in targeting factors that were
influencing consumerslsquo decisions to purchase organic food products
Bektas et al (2011) conducted a research study to determine level of consumerslsquo
awareness regarding food safety in Izmir Turkey by applying Probit model Results
revealed that consumerslsquo with high income and more education were more aware
regarding safer food Outcome of the study also identified aged respondents had more
probability for healthy and safe food products Results suggested that awareness for
safer food should be passed through informative campaign targeting especially low and
middle income groups as well as low education level population
Coulibaly et al (2011) studied the health risk caused by using large quantity of
chemicals and pesticides on vegetables By using a hedonic pricing model they
identified the determinants of the householdlsquos WTP for pesticide free products
Information was collected through a well designed questionnaire on householdlsquos
perception awareness and consumerslsquo willingness to pay for pesticide free vegetables
The perception of householdlsquos for good quality vegetables included color freshness no
external damage and firmness The most important factor effecting householdlsquos choice
to pay more for pesticide-free vegetables were awareness about the health hazards
caused by those chemical Households were willing to pay more than fifty percent for
those products free of such pesticides and chemicals
Joyce et al (2011) conduct a survey to examine consumerslsquo perceptions and to assess
their willingness to pay for pesticides-free product They surveyed 100 households in
Morogoro municipal The results presented showed that 78 of the respondents were
willing to pay a higher price for pesticides-free food The results revealed that
environment and health concern were the most important factors effecting householdlsquos
willingness to pay for organic food Results from the survey suggested that
consumption of pesticides free food were increasing but need certification labeling
processing and packaging to boost up the demand
23
Sangkumchaliang and Huang (2012) conducted a survey on consumerslsquo perception and
attitude towards organic food products Results showed that consumers were
purchasing organic food products because of the expectations that organic food is
healthier and safer to the environment Results also revealed that respondents with old
aged and more educated were more willing to purchase organic food products The
study suggested that consumerlsquos information needed to purchases organic food
Owusua and Anifori (2013) analyzed the willingness of householdlsquos to pay an extra
amount of money to watermelon and lettuce produced naturally or free from pesticides
by applying a (CV) contingent valuation information starting with urban Kumasi in
Ghana The impacts of the determinants of the householdlsquos willingness to pay a higher
price were examined with a Bivariate Tobit model Results showed socioeconomic
characteristics as well as freshness and cleanness of products had a great influence on
householdlsquos choice to pay a higher price than they pay for conventional products
While householdslsquo size has a negative impact on consumerslsquo willingness on paying
premium to natural lettuce The estimated mean householdlsquos willingness to pay for
pesticide free watermelon was Ghcent05554 (US$ 0 4575) and for natural lettuce was
GHcent12579 (US$1 0361)
Haghjou (2013) investigated that the demand for those products that was grown without
the use of pesticides has increased amazingly in the recent years The study was carried
out to assess the factors effecting householdlsquos willingness to pay a higher price for
organic products accessible in the Argentinean provincial market The output of the
study reveals that 95 of the respondents were willing to pay a higher price while 10
of the householdlsquos were like to pay about 35 percent higher price than the market
existed price for naturally grown products The results suggested that householdslsquo
income family size ecological problems including respondentslsquo knowledge has
enhanced their desire to pay higher price for pesticide-free products than the
conventional one The result also showed that female as well as house wives were
agreed to pay more price premium
HUI et al (2013) conduct a survey on householdslsquo WTP a price premium for
pesticides-free products in Klang valley The study was based on householdlsquos
purchases by 2012 on their demographic and social-economic characteristics To study
the householdlsquos perception and WTP for pesticide free products 500 households were
24
interviewed by using well designed questionnaires The data collected were analyzed to
find what determined the presence of pesticide-free products The main theme of the
research study was to know the determinants that playing rule in willingness to pay for
products free from pesticides residues The result revealed that majority of the
households were agreed to pay a higher price premium for pesticide free products
Different factors like environment psychology food free from pesticide residuals and
health conscious were related to explain household willingness to pay for organic
products However the result also showed that social demographic and level of
knowledge did not explain the WTP for products free from pesticide
Syed et al (2014) studied different level of pesticides in different vegetables and fruits
in Pakistan The results obtained showed that more than half of the collected samples
were contaminated with organophosphate pyrethroids and more organochlorines
pesticides Numerous research studies found that tomato apple melon mango grapes
and plum among fruits and vegetables has crossed the maximum residual levels of
FAO and World Health Organization (WHO) The comparison with other areas showed
that in 50 of the sample the residual level was above than the stated level but was in
agreement with neighboring countries like china and Bangladesh Higher hazard risk
index (HRI) values were calculated for dieldrin methamidophos op-DDT diazinon
and pp-DDT in apple mango banana melon potato and onion
Vidogbena et al (2015) carried out a research study in major cities in Benin to asseslsquo
consumer perceptions about cabbage produced by a physical barriers method to protect
cabbage from pesticides Results showed that consumers were aware of the impacts of
pesticides on health and environment but they were not able to differentiate between
cabbage produced conventionally and through this net method Results of the study
revealed that consumer were willing to pay higher price for cabbage produced with
minimum application of pesticides as compared to one produced with pesticides
application Consumers were willing to pay 38 more price than the existed market
price Results indicated that females more educated and aged respondents were willing
to pay more prices for better quality cabbage
Safdar et al (2015) studied pesticide free food consumption and consumerslsquo WTP in
the United Arab Emirates To recognize major determinants of respondentlsquos willing to
pay more price for products free from pesticides residues a regression model was used
25
Around 300 hundred respondents were interviewed and information was collected The
results showed that the consumption of such food was increased in the study area This
increment was due to high per person price premium more knowledge about nourished
food products and different household population Consumers were paid price premium
for the food free from pesticides residuals Results showed that majority of the
respondents respond when inquired as to whether they were willing to pay more for
pesticide-free products Age nationality instruction family size and salary were main
factors influencing consumerslsquo to pay higher price for the pesticides-free food products
Hiren et al (2016) carried out a survey in Tennessee State USA The data were
collected on a random sample from grocery shoppers to assess consumer general
knowledge about pesticides-free food and to know their willingness to pay For this
study binary logistic regression model was used The survey showed that most of the
consumer had a fair knowledge about pesticides free food Results indicated that
number of those respondents who had never been used organic food was higher than
those who usually used The results showed that income and environmental concern
were the factors that effectively determine to pay more for pesticides-free food
Aguiar et al (2016) studied factors influencing consumerslsquo purchasing behavior
regarding organic food in Brazil by using structural equation modeling (SEM)
approach Results revealed that most of the consumerslsquo were willing to buy organic
food Respondents were willing to pay 25 percent price premium for organic food as
compared to food produced conventionally Results suggest the main determinants of
consumerslsquo willingness to pay were their beliefs of positive effects of organic food on
health and environment
Mangan et al (2016) studied level of awareness and willingness to pay for organic
vegetables in Sindh province of Pakistan Result of the study reported that majority of
the respondents had knowledge about the beneficial effect of organic vegetables while
less than half of the respondents had never heard about organic vegetables Results also
showed that most of the respondents (82) were not aware of the benefits of organic
vegetables to the environment Majority of the respondents were willing to pay price
for organic vegetables
26
Nandi et al (2016) studied consumer willingness to pay for organic fruits and
vegetables and also factors influencing consumerslsquo WTP in India For the estimation of
respondentlsquos willingness to pay contingent valuation method (CVM) was used For the
data analysis 250 respondents were selected A binomial regression model was used to
know respondents willingness to pay and the factors influencing on WTP Results
revealed that most of the respondents were confronted with environment problem
health related issues and safe environment and food The respondents were increasingly
desired to have more healthier and environmental friendly food To acquire better
quality of fruits and vegetables about 90 percent of consumers were willing to pay a
price premium ranging from 5 percent to 100 percent Factors like income of
respondents householdlsquos size gender and other opinion variables such as pesticides
residues in food taste and environmental concern were significantly influencing
consumer willingness to pay a price premium
Slamet et al (2016) conducted a research study to identify factors influencing
consumerslsquo willingness to purchase pesticides free vegetables in Jabodetabek region
(Jakarta) Data was obtained through a householdlsquos survey Three methods binary logit
model descriptive analysis and factor analysis were used for analysis of data The
results showed that respondents with more income minimum householdlsquos size and
price tolerant were more likely to purchase pesticides-free vegetables The study also
indicated other factors determining consumerlsquos willingness to purchase for pesticides-
free vegetables were positive attitude health concern environment concern as well as
positive belief in pesticides-free vegetables
Gumber and Joyti (2017) conduct a research study in national capital region of India to
find out price premium and factors effecting consumerslsquo WTP for pesticides free food
Results of the study showed that consumerlsquo demographic characteristics like education
income of the respondents environmental concern and health related issues were the
important factors influencing consumers to pay higher price for organic food Besides
other variables like taste physical look certification packaging and promotion were
found to have no influence on consumer willingness to pay for pesticides-free food
Results suggested organic food producer to design communication strategies and
suitable pricing strategies in the study area
27
25 Essence of the Literature Reviewed
The above literature reported that several studies have been conducted on
consumerhouseholds willingness to pay for pesticides-free fruits with contingent
valuation method (Govindasamy and Italia 1999 Krystallis and Chryssohoidis 2005
Quagrainie 2006 Kimenju and De Groote 2008) In this type of models a
hypothetical market scenario is developed in which consumer are asked about their
stated WTP a price premium Misra et al (1991) and Boccaletti and Nardella (2000)
used contingent valuation method and analyzed household willingness to pay for
organic products in Italy and USA Gil et al (2000) also used the contingent valuation
model in Spain and reported that respondents in that study area were willing to pay a
price premium for pesticide-free fruits
Regarding the socio-demographic profile of pesticides-free products the above
underline research study showed that mostly female respondents were willing to pay
price premium more frequently than male respondents Age factors also played an
important role with older consumers observed more WTP due to their health concern
On the other hand income played a vital role while buying safer food Literature also
supported that more educated respondents are willing to pay more price premium for
healthier and environmental friendly food products
The preceding review presents valuable information on contingent valuation method
and consumer willingness to pay price premium for organic foods and environment
resources Since most of the work had done on consumer willingness to pay for
pesticide-free fruits in developed countries but not a few studied paid much attention to
conduct research on householdslsquo willingness to pay for pesticides-free fruits in
developing countries like Pakistan
A few facts emerge the literature review One the coverage of consumerslsquo WTP for
organic and pesticide-free food is rather thin in the literature The lack of this
information could inhibit governmental and developmental agencieslsquo decision Second
the consumer WTP is a factor demographics and consumerslsquo perception This study
uses CVM to explore Pakistani consumer WTP for pesticide-free fruit We found socio-
demographic factors such as age education income householdlsquos size householdlsquos
head education and perception significantly influencing householdslsquo WTP Findings of
28
WTP
Environmental
concern
Socio-demoghr
aphic characte
risitcs
consumer knowledge of PFF
Health
concern
this study almost showed 26 percent price premium that suggest a strong indication of
consumerslsquo demand for pesticide-free fruit This is a convincing message for
agriculture policymakers to encourage and educate farmers for production of pesticide-
free fruits Thus this study is timely relevant and provided additional information on
understanding consumerlsquos attitudinal behavior choice and factors effecting willingness
to pay for pesticide free fruits in Khyber Pakhtunkhwa (Pakistan)
Review of literature highlighted different influencing factors that affect the consumers
willingness to pay for pesticides-free food are shown in figure 1 It shows that
perception of consumers regarding human health and environment and socio-economic
and socio-demographic characteristics have an influential affect on consumer
willingness to pay
Figure 1 Factors effecting consumerrsquos WTP for pesticides free fruits
29
III MATERIALS AND METHODS
This chapter consists of two sections The first section describes the study area while
the second section presents the conceptual frame of the study The second section
provides a detailed discussion about the methodology being employed for the research
In the beginning of this section a brief debates provided on Contingent Valuation
Method (CVM) used to analyze householdslsquo willingness to pay (WTP) and later on
elaborate specification of the empirical models used for capturing the factors
influencing householdlsquos willingness to pay for pesticides-free fruit and vegetables is
given followed by a discussion on how the data was collected in the study area
31 Khyber Pakhtunkhwa
Khyber Pakhtunkhwa (KP) occupies a north-west position in Pakistan with a total area
of about 74521 square km Gilgit-Baltistan is situated on its northeast Punjab on the
southeast and Azad Kashmir on the east A long and narrow piece of land belongs to
the Federally Administered Tribal Areas (FATA) borders situated to its south and
Baluchistan directly below it On its west Federally Administered Tribal Areas are
situated and Afghanistan is situated on its northwest According to census report 1998
the total population of KP was 177 million According to the 2011 Census Bureau of
Pakistan house listing operation the population of KP was estimated to be more
than 268 million There are a total of 26 districts in KP Naturally KP has been
endowed with abundant cultural and tourism friendly environment It has the capability
to become a charming area for the tourist in the world Due to its beautiful and
attractive scenery geographical location climate and God gifted natural resources KP
is exceptionally abundant in terms of multitudes of tourist attraction The core of this
charm is clear from the striking natural picturesque consisting of beautiful rivers
attractive and splendid waterfalls spiral lakes mostly in the hilly areas and ever green
valleylsquos in most parts of the province TCKP (Tourism Corporation Khyber
Pakhtunkhwa(2015)Districts of KP is shown in figure31
30
Figure 31 District Peshawar and Mardan of Khyber Pakhtunkhwa
31
32 Sampling Technique
Three stage stratified sampling technique was used for the collection of data
from study area
321 Stage 1 _Selection of district Peshawar and Mardan
In the first stage as KP is comprised of 26 districts Peshawar and Mardan was
purposively selected The purpose behind this selection was huge population in these
two districts
322 Stage 2 _ Selection of Union Councils (UCs)
In the second stage from each selected district one urban and one rural union
council were randomly selected Thus a total of 4 union councils were taken as a
sample location from both districts
323 Stage 3 _Selection of households from each Union Council
In the third and final stage a list of households was obtained from local union
councillsquos health department (BHU) The following Yamanelsquos (1967) formula was
used to decide sample size of households
Where
- r is the sample size for households
- N is the total households in selected UCs and
- e is the minimum probability of error
The value of ―e was selected at e = 003 with the intension to keep the error at lowest
possible level and select a best representative sample from the given population of
10020 households
The Yamanelsquos formula suggests a sample size of 1000 households from two districts
After deciding sample size households was taken from selected union councils (UCs)
using proportional allocation sampling technique The allocation is said to be
32
proportional when the total sample size n is distributed among the different union
councils in proportion to the size of strata
=
____________________ (2)
Where
- = no of sampled respondents in each stratum
- Ni =population size of ith UCs
- N = the total number of households in selected UCs
- n = total number of households
The number of sampled households selected through proportional allocation method is
given in table 31
Table 31 Total population and sampled households from selected UCrsquos
District Union councils Total households Sampled
households
Mardan Urban 3090 309
Rural 1910 191
Peshawar Urban 3000 300
Rural 2020 202
Total 4UClsquos 10020 1000
Source Local Basic Health Unit (BHU) Peshawar and Mardan
33 Allocation of Sample Size for Different Models
A total of 1000 sampled respondents were selected for this research study from urban
and rural areas of the two districts namely Peshawar and Mardan of Khyber
Pakhtunkhwa Pakistan A sample of 600 respondents was reserved for double
bounded dichotomous choice model For the best estimation of parameters double
bounded model requires large sample size compared to open ended and payment card
model (Calia and Strazzera 2000) Out of total respondents a sample of 400
households were allocated for linear regression model and ordered logit model 200
for each model
33
34Contingent Valuation Survey Designing
CVM produces values contingent upon the description of the resource and the method
of payment The accurate measurement of any resource requires a detailed description
of the resource (Loomis et al 2000) The survey designed for this study started with the
description of the conventional food commodities and uses of different varieties of
chemical pesticides on fruit and vegetables before and after harvest After the
description of pesticides its harmful effects on human being as well as on environment
then pesticide free fruits were discussed with the households After describing the
benefits of pesticides free fruit respondents were asked to rank the relative importance
of each benefit The main reason for asking this question was to reveal householdlsquos
preferences their non-monetary value for use and nonuse benefits and to compare
them with their stated WTP response
Results in CVM are sensitive to the valuation question format and payment mechanism
(Carson and Hanemann 2005) The National Oceanic and Atmospheric Administration
(NOAA) Blue Ribbon Panel recommended the use of single bounded dichotomous
choice CV questions with mandatory payment vehicles (Arrow et al 1993) However
recent studies show that the single bounded dichotomous choice method provides
limited information about householdlsquos WTP and produces higher WTP compared to
open-ended question and payment card method (Zhongmin et al 2006) The single
question dichotomous choice method requires a large number of respondents to obtain
an accurate estimate of WTP (Carson and Hanemann 2005) People in the study area
were not familiar with CV Survey The use of an open-ended question format may
generate high zero WTP responses Consequently this study used the entire three
payment format to elicit householdlsquos WTP for pesticides-free products
35 Householdsrsquo Survey
This research mainly based on primary data The primary data was amassed through
interview schedule On the basis of objectives of the study a well-defined questionnaire
was prepared and was pre-tested in the field A small Pre-test was conducted before the
final data collection About 1000 households from Peshawar and Mardan were face to
face interviewed In contingent valuation studies face to face interview is more reliable
(Carson 2000) Socio-demographic characteristics attitudinal and behavioral
34
information of the households were collected Through this survey the data was
gathered both from rural and urban areas of the selected districts District Peshawar and
urban areas were taken equal to one and district Mardan and rural areas were taken
equal to zero Before asking the respondents for their willingness to pay a price
premium they were briefed about the differences among the conventional and
pesticides free fruit The attitudes of the consumers and knowledge about the minimum
use of pesticides on fruit were also gathered to better know how the respondents relate
different aspects of pesticides free fruit These attitudinal behavior questions were
posed using a modified Likert scale response (where a one equals agree and zero equals
disagree) Different values were assigned to each response according to a well-defined
method in the literature (Cranfield and Magnusson 2003)
36 Conceptual Framework
This section is devoted to the conceptual framework of the study Households utility
and willingness to pay willingness to pay and contingent valuation method and the
estimation of mean WTP are discussed The empirical discussion on the factors
influencing householdlsquos willingness to pay a price premium is also discussed
361 Householdrsquos Utility and Willingness to Pay
Willingness to pay could be analyzed as a householdlsquos choice problem Following
Canfield et al 2003 the study assumes that a household who buys and consumes a
conventionally produced food products encounters the same food products but in
pesticide free form on the market The household who decides to purchase pesticide-
free fruits instead of the conventional one does so because it is assumed that hisher
utility is higher for the pesticide-free food (Magnusson et al 2005) If the utility does
not change then a rational household will not be willing to pay as an increase in the
price results in a lower level of utility compared to the base level of utility Also if the
utility increases then the household may be willing to pay more for pesticides-free
food on the basis that the price increase does not lower the utility beyond the base level
(Cranfield et al 2003) The householdlsquos willingness to pay is therefore a function of
the change in utility arising from the consumption of pesticides-free food Thus
35
Where ∆U is the change in utility
Since the choice of one product over another is a discrete one it is convenient to look at
householdlsquos choice problem in a random utility setting Random utility models have
been used extensively in the valuation literature in the analysis of householdlsquos food
safety valuation and assessment of householdlsquos response to new (or different) products
(Eom 1994 Veeman and Adamowicz 2000 Kuperis et al 1999 Quagrainie et al
1998) Following the random utility framework proposed by Cranfield et al (2003) it
is assumed that a household faces a choice between buying either the conventional or
pesticides-free food variety of the same product The utility derived from consuming a
given product by a household is given as
Where
Where is the utility arising from choosing the ith alternative is the deterministic
component of the utility function is a vector of observable alternative specific
factors that influence utility is a vector of parameters and is the stochastic
component The households choose alternative if and only if for all (or
that without loss of generality
The utility of the household is however not observable What is observed is whether or
not the household chooses to pay a premium for the pesticide free product
362 WTP and CVM
On the basis of stated preferences consumer willingness to pay can be measured by
several methods To extensively elicit consumer preferences for food labels on different
attributes economist and market researchers have used contingent valuation (CV)
choice experiment (CE) and experimental auction (EA) or combination of all the three
methods (Fox et al 1994 Fox 1995 Huffman et al 1996 Hossain et al 2003
Loureiro and Umberger2003 2005) To estimate willingness to pay (WTP) economist
must turn to hypothetical due to unavailability of markets for the good or service
Historically Contingent Valuation Method (CVM) has been used for the evaluation of
consumerlsquos preferences for those goods not available in the market
36
Contingent Valuation Method is a survey based method where respondents are
presented with a hypothetical payment scenario for pesticide free products in this study
pesticides-free fruits Methods used in contingent valuation include face to face
interview surveys and mail to elicit consumerlsquos willingness to pay for organic and
pesticide-free food Contingent valuation method based on a survey approach was
presented by SVCiariacy-Wantrup (1947) however contingent valuation method was
first time empirically used by Davis (1963) Due to its proficiency most of the
researchers and policy makers used this technique to elicit consumerlsquos valuation for
those goods which are not available in the market such as research concerns to
environment health and recreation (Jakobsson ampDragun 1996)
The classification of framework to measure WTP based on the data collection methods
are as presented in Figure 32 We employed contingent valuation method (CVM) to
measure householdslsquo willingness to pay for pesticides-free fruits among the different
available alternative methods in the literature CVM was the most widely used
approach (Hanemann 1984)
Figure 32 Classification framework of methods to measure willingness-to-pay
Source (Breidert Hahsler ampReutterer 2006)
37 Elicitation Techniques
According to Portney(1994)to draw out the value of good and service different
elicitation techniques are used to design CV question scenario It is the important part
37
of any CVM study The elicitation used in contingent valuation methods are of various
types The most popular ones are bidding game approach open ended payment card
and dichotomous choice approach
371 Bidding Game Approach
In this approach a bid is randomly assigned to each respondent from a list of
predetermined bids The assigned bid may be a lower bid or higher bid Respondents
are to answer the bid and the process is continuous until the highest positive response is
recorded (Randall et al 1974 as cited in Venkatachalam 2004) Since this approach
provides market like situation and the respondents can research their preferences so the
results obtained through this approach are quite better
372 Open-ended Elicitation Method
In open ended questions format respondents are asked to identify a single amount
without suggesting them any value Respondents are asked to give their opinion on
―How much they willing to pay for a certain attribute Mitchell and Carson (1989)
found certain drawbacks in using this question format They reported that this method
provides maximum no response no answer and outliers In this method respondents do
not know what value heshe has to select
373 Payment Card Approach
Another technique in contingent valuation method is the payment card approach In this
question format respondents are asked to select an amount in willingness to pay from a
checklist given in absolute value or in percentage of prices (Boccaletti ampNardella
2000 Lacaze Rodriguez and Lupin 2009)This approach is used for small sample
size However it has been noted that the respondents could easily be confused if the
survey is not carefully designed (Wang and Whittington 2005)
374 Dichotomous Choice Model
In this format two choices are provided to respondents ―Yes or ―No This format
resembles the market choice behavior It included single bounded double bounded and
multiple bounded questions format
38
A Single Bounded Method
The single bounded format was first used by (Bishop and Heberlein 1979) The
consumers are asked whether they would be willing to pay a single amount for a certain
goods having an extra quality attribute The answer expected might be ―yes or ―no to
the given amount This format is easy to use but it provides limited information for
willingness to pay amount and the bidding game stop after a single information
provided
Most of the research work done on willingness to pay has suggested that respondents in
contingent valuation methods do not have a single value of price but they might have a
range of economic values in their mind (Cameron ampQiggim 1994 Dobourg Jones-lee
and Loomes 1994)
B Double Bounded Method
In double-bounded questions format respondents are presented with follow-up
questions after asking the first question For example if respondentlsquos answered to the
first question is ―yes willingness to pay a $X the next question might be whether
respondents willing to pay $Y (typically $Y gt $X) On the other hand if respondents
say ―No the first question than heshe might ask whether the respondents willing to
pay $Z (typically $Z lt $X) This questionlsquos approach is also called doubled-bounded
referendum approach (Cameron ampQiggim 1994) In comparison with single bounded
model more statistical efficiency can be seen by estimating doubled-bounded
willingness to pay data with the help of interval based econometric model (Heinemann
et al 1991) Figure 33 shows double bounded choice format
This study used all the three question scenarios to elicit WTP for pesticide free fruits
39
WTP
Yes
wtp
1st bid
yes
wtp 2nd
higher bid
yes No
No
wtp 2nd lower bid
yes No
No
Figure 33 Double Bounded Choice formats
38 Empirical Estimation of WTP by Payment Card using Ordered Logit Model
Regarding discrete nature and ordinal ranking of the WTP variables in payment card
method an ordered logistic regression was applied as the most appropriate choice in
studying these issues (Green 2007) The WTP model can be written under latent
variable framework as follows
Where is an unobserved latent variable reflecting the WTP for pesticides-free fruits
for household i expressed in terms of utility to switch from the traditionally grown
fruits consumption to pesticide free fruits is a vector of parameters reflecting the
relationship between WTP captures a set of socioeconomic and
demographicvariables influencing WTP and is the unobserved disturbance term
reflecting stochastic differences between households not controlled for The
40
relationship between the unobserved and the observedoutcome for household
( =0 12hellipj) can be summarized as follows
It is presumed that ɛ is normally distributed across observation By normalizing the
mean and variance of ɛ to zero and one the following probabilities can be calculated
Where F () indicates distribution function and microlsquos are unknown parameters to be
estimated with β
A natural question arises that when a variable influencing outcome changes than how
this variable influences the probabilities of different outcome For example if age is a
factor which influence consumer willingness to pay different choices then how would a
personlsquos probability of being WTP different choices be effected if heshe was a year
older Aldrich and Nelson stated that the estimated coefficients only determine the
direction of the effect but not the magnitude The magnitude of ordered logit cannot be
simply interpreted but signs and statistical significance agree with linear regression
(Wooldridge 2001) To answer the above question and take the idea marginal effects
can be calculated The marginal effects show that how a change in explanatory
variables affects the probability of willingness to pay that consumers are willing to pay
for different WTP classes In this model the coefficients are not equal to the marginal
41
effects of explanatory variables on probabilities Since the marginal effects can be
calculated by the following equation
There are two broad Cumulative density function (CDF) choices Logistic density
function and standard normal density function The model is said to be ordered logit if
the distribution is cumulative standard logistic (F) and the model is said to be ordered
Probit if the distribution is cumulative standard normal (Φ) Results obtained from
both of these models are same only the difference is in the tail The logistic distribution
has heavier tail than the standard normal distribution As Green (2000) reported ―It is
difficult to justify choice of one distribution over other on theoretical grounds in most
applications it seems not much difference The results obtained from both models
may be quite similar because of the similar distribution However an ordered logit
model is applied in this study
Empirically we estimated ordered logit model where WTPj is an ordered dependent
variable with ten WTP price premium categories
Table 32 Payment card format
Price premium classes (PKR)
WTP
= 0
WTP
1-5
WTP
6-10
WTP
11-15
WTP
16-20
WTP
21-25
WTP
26-30
WTP
31-35
WTP
36-40
Above
40
Source Pre- tested field survey (2017)
42
39 Empirical Estimation of WTP using Double Bounded Dichotomous Choice
Model
For Dichotomous choice question Following Chen et al (2002) and Kimenju et al
(2005) a double bounded dichotomous choice model was used in this study to assess
householdslsquo willingness to pay and the influence of explanatory variables on
householdlsquos WTP a price premium for pesticides-free fruits This model was used
because the dependent variable was double dichotomous whether the respondents
would be willing to pay or not so they provide answer with ―yes or ―no Many
researchers used double-bounded dichotomous choice method in their research such as
(Ara 2002 Rodriguez et al 2007 Abdullah and Jeanty 2011 and Claudy et al
2011)
The double-bounded method confronts each respondent with two dichotomous choice
WTP questions (bids) The 2nd
bid value is contingent on the respondentlsquos reply to 1st
bid If the respondent responds in ―yes to the first bid (B) than the second bid (Bu) is
some amount higher than the first bid (Bu
gt B) If the respondent says ―no to the first
bid the second bid (Bd) is then some lower amount (B
d lt B) Thus there are the
following four possible outcomes for the double-bounded WTP question ―yes-yes
―yes-no ―no-yes and ―no-no
According to Hanemann et al (1991) the probability of answering ―yes-yes (Pryy) is
= )
Where Pryy is the probability of answering ―yes-yes WTP is the respondentlsquos
willingness to pay for the product and F is the cumulative distribution function with
parameter vector Similarly the probability for each of the other three outcome
responses is
]
43
Where and are the probabilities for saying ―yes-no ―no-yes and ―no-
no to the double-bounded question respectively Thus the log-likelihood function for
the ith
respondent can be written as
sum
(
)
(
)
Where
are binary valued (0 or 1) indicators and the formulas
for the corresponding response probabilities are given above The model was estimated
through maximum likelihood estimation method and the results were used to find out
the mean and individual WTP (s) for pesticides free fruits
Where ƒ(WTP) is a function X is a set of socio-economic characteristics are
coefficients and is error term The models were estimated using maximum
likelihood estimation method
391 Factors which could Influence WTP
As Kimenju et al (2005) has indicated WTP is influenced by householdlsquos knowledge
and perception in addition to price and socio-economic factors Moreover
householdlsquos WTP may be influenced by individuals tastes and preferences income
and perceptions on the products in addition to household and socio-economic
characteristics (Cranfield and Magnusson 2003)
A number of different explanatory variables were included in the WTP model These
include demographic variables regional variables and perceptional variables The
variables that are included may depend on the manner by which the data is gathered
(ie contingent valuation surveys experimental methods etc) Factors which
influence householdlsquos willingness to pay for pesticides-free fruits are formally specified
as
44
392 Bids Design
In this study hypothetical prices (bids) for double-bounded dichotomous choice model
were designed based on the prices available for conventional fruit in the market On
average (Rs100kg) To minimize starting bids bias bidding system was used in table
31 Respondents were asked different bid
Table33 Bid system for Pesticides free fruits
First bid High bid Low bid
10 20 5
20 30 10
30 40 20
40 Above 30
Source Field Survey (2017)
310Empirical Estimation of WTP using Linear Regression Model
For open ended questions data a linear WTP model was used to estimate WTP and
identified its determinants
sum
Where
= is the WTP of the jth household for Pesticides-free fruits
= Set of socioeconomic characteristics of the jth household
Factors effecting consumerslsquo willingness to pay for pesticides free fruits can be written
as
Willingness to pay is actually represents the demand of the household The difference
in both is only the consumer surplus If we suppose zero consumerslsquo surplus than the
two identities are the same Therefore willingness to pay in the above model showed
percentage of expenditure on pesticides free fruit of the total food expenditure The
explanatory variables included were age gender education householdlsquos size income
45
location health concern environment concern and awareness Since the dependant
variable in the model is continuous so the appropriate method of estimation was
ordinary least square (OLS)
311Description of Variables
Table 34 presents a list of explanatory variables used in estimation of willingness to
pay a price premium for pesticides-free fruits
Table34 Description of explanatory variables
Respondents willingness to pay
WTP ( Price Premium)
0= Not willing to pay
1= Willingness to pay 1-5
2= Willingness to pay 6-10
3= willingness to pay 11-15
4= willingness to pay 16-20
5= willingness to pay 21-25
6= willingness to pay 26-30
7= willingness to pay 31-35
8= willingness to pay 36-40
9= willingness to pay above
Age of the householdlsquos head
Age Age of the householdlsquos head measured in years
Gender of respondents (Dummy variable)
Gender 0= Female
1= Male
Householdlsquos head education
Education Education of the householdlsquos head in years
Member in each household
Householdslsquo Size In number including all family members
Households location 0 = Rural households
1= Urban households
Awareness Household knowledge regarding pesticides uses on fruits
where 1 shows aware respondents and 0 shows unaware
respondents
Income Income of the households in Pakistani rupees
Consumer attitude towards impact of pesticides on health
Health concern 1 if respondents concern to health 0 if not concerned
Consumer attitude towards impact of pesticides on environment
Environment concern 1 if respondents concern to environment 0 if not
concerned
46
1V RESULTS AND DISCUSSION
This chapter illustrates the major finding of this research endeavor These findings are
computed in the light of major objectives and hypotheses constructed for this research
The collected primary data was punched into the computer and was estimated
encompassing double bounded dichotomous choice model ordered logit model and
linear regression model in the STATA econometric software This chapter is further
bifurcated into three sections In the first section a descriptive statistics is computed to
elaborate the respondentlsquos traits of the study area that includes socio-economic and
demographic aspects as well Followed by the analysis of major attributes such as
attitudinal behavior perception about pesticides free fruit and householdlsquos consumption
behavior that has attain the specific objectives of this study The empirical results on
willingness to pay are underscored in section two Moreover the three different
questionnaires ie dichotomous choice open ended and payment card are adopted and
their results are discussed and compared with each other in section three
41 Descriptive Analysis
Descriptive analysis is a statistical tool that is used to summarize the collected data in
tabulated form The range of data mean value median standard error and variance
coefficients are highlighted via statistical analysis This helps the researcher and readers
to get understanding about the pattern of data This section consists of the descriptive
part of the analysis Socio-demographic characteristics such as age gender education
and other attributes of the respondents are shown in the tabulated form Moreover
socio-economic portfolio that includes income consumption and certain perception
along their attitudinal trend regarding organic and conventional fruits are given and
discussed
411 Demographic and Socio-economic Characteristics
This section demonstrates the demographic and socio-economic characteristics of the
respondents The information was gathered from 1000 household of the study area
47
Age of the householdrsquos head
Householdslsquo age is an essential demographic characteristic and an important factor that
can influence householdslsquo willingness to pay An average age of the household in
district Peshawar and Mardan is computed and given in Table 41 The computation
depicts that an average age of the respondents in Peshawar is reported around 40 years
while in Mardan an average age is observed as 54 years Result reveals a significant
difference in the mean age of rural and urban location of Peshawar with a probability of
(0001) Whereas no significant difference was found in householdlsquos age in urban and
rural region of district Mardan
Table 41 Age of the householdrsquos head (Years)
District Age of the Respondents
Mean Rural Urban T-test
Peshawar 3997 35382 42333 7217
(0000)
Mardan 5402 53188 55870 1104
(0136)
All 46995 47310 46659
Source Authorrsquos calculation based on Survey Data 2016-17
Educational Level of the Householdrsquos Head
An individual entails modern education about developments in technology science and
an array of other managerial skills that drives consumerlsquos behavior Education can also
play a pivotal role in consumerlsquos awareness while choosing improved quality of food
Therefore education can be considered as an imperative factor influencing consumerlsquos
decision to pay higher price for pesticides free fruit Several research studies carried out
across the globe have corroborated that an educated households with higher
qualification are more conscious while making purchasing decision and prefer to
choose pesticides free fruit
Keeping in view an education as a substantial factor persuading consumer behavior the
householdlsquos head education level was analyzed and is presented in Table 42The
descriptive statistics divulged that the mean educational level was observed as 978 and
1138 years of schooling of the household head in Mardan and Peshawar respectively
Estimates of t-test further depicts a significant difference in educational level in rural
48
and urban region of both districts with a p-value of (0001) and (0000) for Mardan and
Peshawar respectively These findings suggest a higher level of education in urban
households compared to rural households These results are in line with Shah et al
(2016)
Table 42 Educational Level of the Householdrsquos Head (Years)
Districts Educational Level
Mean Rural Urban T-test
Mardan 978 8782 12012 3780
(0001)
Peshawar 1138 7735 13257 8016
(0000)
All 1058 8436 12855
Source Authorrsquos calculation based on Survey Data 2016-17
Households Size in the Study Area
Householdslsquo size is an important demographic characteristic which shape households
purchasing behavior Large householdslsquo size increases the consumption without taking
quality in consideration The probability of choosing an improved version of fruit
quality decreases with an increase a member in a household Small size households are
more concerned about good quality of fruit
An estimation of household size data illustrates that an average household size in
district Peshawar and district Mardan was reported as 06 and 09 members respectively
The results shown in Table 43 have suggested no significant difference in householdslsquo
size in urban and rural areas of both districts The average householdlsquos size was
computed as 715 members These results are consistent with Shah et al (2016) who
depicted similar findings for household size in KP
Table 43 Householdsrsquo size of the Respondents (Member in Number)
District
Mean Rural Urban T-test
Mardan 863 8666 8548 0965
(0400)
Peshawar 567 6029 5484 -2122
(0018)
All 715 7796 6463
Source Authorrsquos calculation based on Survey Data 2016-17
49
Income of the Households
The household income level is one of the driving aspects that manipulate the
consumption and saving behavior of an individual Those societies where individuals
earn high income are usually deemed as food secured societies across the globe
however low income group of the poor societies are generally reported as food
insecure It is worth-mentioning that surge in an income can subsequently leads to
choose high quality food (that includes cereals fruits vegetables pulses and their
byproducts) by individuals Likewise householdlsquos income has considered as an
important determinant of willingness to pay for quality attributes such as pesticides
free
An income status of the households in the study area is outlined in Table 44 The mean
income of the Household was calculated as Rs62130 and 42430 in district Mardan and
Peshawar respectively There was a significant difference in the mean income of
respondents from urban and rural areas of both the districts The T-value of Mardan
region was signified as 6018 and had a probability of (0000) while in Peshawar region
was 950 with P-value of (0000)
Table 44 Householdsrsquo Income in Pakistanrsquos Rupee (PKR)
District
Mean Rural Urban T-test
Mardan 63130 5489855 8145161 6018
(0000)
Peshawar 42430 2923529 4922727 9504
(0000)
All 52780 4642718 5952577
Source Authorrsquos calculation based on Survey Data 2016-17
Householdrsquos Expenditure on Food
Food consumption expenditure is the monetary expense incurred by household to
purchase food items Such food expenditure is the key component of current
expenditure to buy consumable goods The data regarding householdlsquos expenditure on
food is estimated and is shown in Table 45 The mean expenditure incurred on food by
the household in Mardan and Peshawar was determined as Rs 49280 and 34860
respectively A significant difference in rural and urban householdlsquos food expenditure
has been reported The computed t-value observed as 425 and 743 with a p-value
0000 which implies that householdlsquos expenditure in urban region was higher as
compared to rural households
50
Table 45 Households expenditure on food (PKR)
District
Mean Rural Urban T-test
Mardan 49280 4511594 5854839 4256
(0000)
Peshawar 34860 2544118 3971212 7435
(0000)
Total 42070 3862136 4573196
Source Authorrsquos calculation based on Survey Data 2016-17
Note Values in parenthesis is P-Value
Householdrsquos Monthly Expenditure Share on Fresh Fruit
Expenditure share is an amount of income that is incurred by an individual on certain
goods out of total spending Households in the study area have allocated their income
share to make an expense for fresh fruits which is shown in Table 46 It has been
observed that in districts Mardan an average spending for fresh fruit was computed as
4172 (PKR) per month by the household Whereas expenditure share for fresh fruit by
Peshawarlsquos household was 3800 (PKR) which was less as compared to Mardan The
given t-values of the estimates confirm a significant difference in expenditure share
incurred for fresh fruits by rural and urban region households of both the districts This
significant difference implies that householdlsquos expenditure share for fresh fruit in urban
area is higher as compared to rural households
Table 46 Householdrsquos monthly expenditure share on fresh fruits (PKR)
Respondents
Mean Rural Urban T-test
Mardan 4172 3798551 5003226 3055
(0000)
Peshawar 3800 2411765 4515152 5103
(0000)
All 3986 3340777 4671134
Source Authorrsquos calculation based on Survey Data 2016-17
51
412 Householdrsquos Awareness and Perceptions about Pesticides Application on
Fruit
This research endeavor was mainly designed to assess the consumer willingness to pay
for pesticides free fruit Therefore it was pertain to glean data about their awareness
about pesticide use on locally produced fruit in the study area These fruit include
Apple Peach and Mango Due to irrational use of pesticides environmental hazards are
also reported by previous research studies therefore there respondents were asked about
their perception about environmental hazards Major findings about the aforementioned
aspects are underscored in Table 47 which reveals that 61 percent of respondents have
a perception that there is an irrational and intensive use of pesticides on fruit by the
local fruitlsquos farmers Around 88 percent of the respondents perceived environmental
and health concerns over pesticides residues in food Similarly 91 percent of the
respondents believed that farmer should engage in environmental friendly agricultural
production practices which have a minimum adverse impact on health and the
environment
However the overall results indicate that sampled households were not entirely
cognizant about an intensive use of pesticide on local fruits however they were
correctly perceived over the impacts of pesticides on human health and environment
Table 47 Householdrsquos Awareness and Perceptions of Pesticides use on Fruit
Grown
Statements Agreed Disagreed
Local farmers are intensively using pesticides on
Apple Peach and Mango fruits
61 39
I feel the use of pesticides in agriculture has
negative effect on the environment
881
119
I am concerned about pesticide residue in our
food supply
876 124
I believe farmer should engage in environmental
friendly agricultural production practices with
minimum impact on human health
901
99
Source Authorrsquos calculation based on Survey Data 2016-17
52
42 Empirical Results of this Research Endeavour
The empirical analysis of the gleaned data was made to achieve the major objectives
and to address the research questions of this research endeavor Major estimates on
―willingness to pay for pesticide free fruits have been made and conferred in this
section Different elicitation techniques were employed to assess householdlsquos
willingness to pay price premium These estimation techniques encompassed double
bounded dichotomous choice model ordered logit model and linear regression model to
appraise dichotomous choice payment card and open ended question
421 Distribution of responses on householdsrsquo willingness to pay
(WTP)
Householdlsquos preferences to pay higher prices for pesticides free fruit were investigated
and highlighted in Figure 41 which demonstrates the distribution of response about
WTP price premium for pesticide free fruit in the survey area The households were
asked whether and how much they were willing to pay higher prices for pesticide free
fruit than conventional produced fruit The primary data estimates confirm that about
935 percent of respondents are willing to pay a higher price premium for pesticide free
fruit in the sampled districts These results are similar with the previous research study
undertaken by Hayati et al(2017) in Iran by using contingent valuation method
Furthermore an ordered logistic regression model was employed which depicts that out
of 394 respondents who were interviewed 97 percent of respondents were willing to
pay price premium for pesticides free fruits and vegetables These results are supported
by Nandi et al(2017) who conducted a study in India by using contingent valuation
method and applying binomial logistic regression model Data was obtained from 250
respondents and reported that more than 90 percent of the respondents were willing to
pay higher price for better quality fruits and vegetables Decomposing the responses 35
percent of the households are willing to pay 16 to 20 percent higher prices for
pesticides free fruits than the conventional 24 percent willing to pay 6 to 10 percent
higher price and 65 are not willing to pay higher price A plausible reason for higher
WTP for significant portion of the population is due to awareness As most of the
respondents in the study area were aware they may have some knowledge about
adverse effects of chemical pesticides Therefore they were willing to pay higher prices
for pesticide free fruits if available
53
NotWTP
1_5 6_10 11_15 16_20 21_25 26_30 31_35 36_40 Above40
650 4
24
9
35
6 550 150
550 3
Figure 41 Distribution of willingness to pay responses (Rskg)
422 Householdrsquos willingness to pay using ordered logit model
Estimated parameters and coefficients of ordered logit model are presented in table 48
Model is specified on the bases of R2 estimated from restricted and unrestricted
likelihood function The likelihood ratio test is used to test the null hypothesis that the
overall effect of coefficients is zero The p-value is 0000 shows that the model is
statistically significant at 95 level of significance The estimated model with a scaled
R2
about 022 which is in consist with the generally R2 value mostly observed in cross
sectional data In cross sectional data like the one used for this study the value of
Pseudo R2 is typically low The conventionally computed R
2 is of limited value in those
models having qualitative nature In most cases this value is low and use of coefficient
of determination as a summary statistics should be avoided in those cases where the
response variables are qualitative (Gujrati 1995)This pseudo R2 cannot be interpreted
separately or across the dataset but could be used when evaluating multiple models
which predict the same results on the same set of data It has only meaningful when
compared to some other pseudo R2 in the same data on the same type and predicting
the same results In this case pseudo R2 indicates which model better predict the results
(Bruin J 2006)This value pointed out overall ability of the model for the correct
prediction of willingness to pay of the consumer based on explanatory variables The
null hypothesis that the joint influence of explanatory variables was zero on the bases
of chi-squire value null hypothesis was rejected
Predicted probabilities and marginal effects are calculated separately because of the
non-linear behavior of logit model Most of the coefficients are statistically significant
54
The variables like householdlsquos age education level of the respondents awareness
income and health concern variables and household size are significant at five percent
The negative sign showed that as the size of numbers in a family increased the log
odds for willingness to pay decreased The same was reported in a relevant study by
Govindasamy and Italia 1999 carried out a research study in New Jearsy to provide
opinion on organic produce Objective of the study was to evaluate demographic
characteristics caused consumers to pay higher prices to obtained organic food
products Findings of the study showed female respondents consumer with higher
annual income and younger individual were more likely to pay higher premiums for
organic produce Our finding shows variables gender was not significant because most
of the respondents in the study area were male
Positive sign on income showed that consumer with higher income were more likely be
willing to pay higher prices for pesticides free fruit It has been also noted that with
increased in income purchasing power of the respondents increased that changed the
purchasing pattern of the respondents This was also confirmed by Roitner-
Schobesberger et al(2008) They conduct a study on consumerslsquo perception regarding
organic food in Bangkok and found that more than a third of the 848 respondents
reported having purchased organic fruits or vegetables and the main reason for buying
organic food was the expectation of the consumers that the food are healthier and
environmentally friendly The respondents who purchased organic vegetables were
those having more aged higher income and more education
Findings of our study also showed that respondents with friendly attitude regarding
environment would be willing to pay higher price for such fruit These results were in
line with Haghjou et al (2013) carried out a research study on factors effecting
consumerlsquos potential willingness to pay for organic food in Tabriz Iran By adapting an
ordered logistic regression model results showed that factors like income of the
respondent family dimension environmental concern and wholesome diet besides
consumerslsquo awareness were significantly increases consumerslsquo willingness to pay for
organic food Results revealed that consumers with higher care about their health were
more likely to be willing a higher price for such pesticides free fruit
55
Table 48 Factors influencing respondent householdrsquos WTP (Ordered logit
model)
Variables Estimated
Coefficient
Std Error Z-ratio P-value
Age 00698807 00147356 474 0000
Gender -02469171 08432503 -029 0770
Education 00821316 00223365 368 0000
Household size -00975395 00502583 -194 0052
Location
Urban
02783974 02961745 094 0347
Income 00000277 000000502 551 0000
Health concern 2600153 05346547 486 0000
Environment
concern
03993532 0574947 069 0487
Awareness 09595126 02836742 338 0001
Source Authorrsquos calculation based on Survey Data 2016-17
Log likelihood = -29863 Pseudo R-squared = 020 LR chi2 (9) = 15849
Number of observation = 200 Probability gt chi2 = 0000
Note indicate statistical significance at 5
56
423 Predicted probabilities and Marginal effects of ordered logit
model
Predicted probabilities and marginal effects of explanatory variables are underscored in
Table 49 These predicted probabilities indicate a strong likelihood that the average
respondent is willing to pay more prices for pesticides free fruit Producers usually
expect high price for their production so if they sought high premiums than marketing
efforts would be diverted to such fraction of consumer where they would probably
willing to pay high price than the conventional price Alone these predicted
probabilities are not too much informative what is more informative is the impact of a
change in predictors on the predicted probabilities (ie marginal effects)
Due to the non-linear behavior of ordered logit model to measure the impact of a
change in particular independent variable on householdslsquo willingness to pay marginal
effects of explanatory variables are calculated Marginal effects show the change in
predicted probabilities for different class of willingness to pay regarding an average
household concerning the particular variable For qualitative choice model estimated
coefficients affect marginal probabilities These marginal probabilities (probability
derivatives) were calculated from the estimated model They measure the change in the
probabilities of each willingness to pay outcome with respect to change in each
explanatory variable The sum of marginal probability is zero in each row because an
increase of the probability in one category must be set off a decrease in the other
category or categories
For continuous variables the interpretation is simple and straight forward Keeping all
other variables fixed a unit change in explanatory variable will results an increase or
decrease in the predicted probability equal to the degree of marginal effect of the stated
variable However in case of binary variable marginal effects shows change in
predicted probabilities based on whether the respondents falls in that category or not
Our results suggest some meaningful insight into the role of socio-economic and
demographic variables on householdlsquos WTP for pesticides-free fruit
Age has a positive and significant influence on householdlsquos WTP for pesticides free
fruit The results show that with an increase in age WTP also increases This finding is
consistent with other researchers who reported that WTP of organic and healthy food
57
increases with age beyond 30-40 years (Hayati et al 2017 Boccaletti and Nardella
2000 and Zellner and Denger 1989)With increase in age people are more concerned
about their health as they may perceive that they are prompt to low immunity and
higher risk for diseases With realization of aging they are more likely to pay higher
price premium for safer foods Our result suggests that the marginal effects of age is
negative for first three WTP classes (ie Not willing to pay WTP 1-5 percent WTP 6-
10 percent and WTP11-15 percent) while positive for the rest of the four classes in
upper tailsmdashindicating that higher age is associated with higher likelihood of paying
premium on upper tails The highest marginal effect of age 0007 is found for category
16-20 percent higher premium This indicates that an increase in age by one year is
associated with 07 percentage point increase in likelihood of paying 16-20 percent
higher premium for pesticides free fruits over conventional These results are in
contrast with Cranfield and Magnusson (2003) conducted a research study on
consumerlsquos willingness to pay for pesticides free food products in Canada by using
contingent valuation method and reported that younger consumers have the strongest
marginal effects (those consumers had an age less than 35 years younger) followed by
those consumers had an age less than 50 years Results showed younger consumers pay
more for healthy foods as compared to older in case of Canadian consumers However
our results are in consistent with several other studies (Hayati et al 2017 Zellner and
Denger 1989) finding a positive influence of age on consumerlsquos WTP for organic and
healthy foods In another study Boccaletti and Nardella (2000) conducted a study on
consumer willingness to pay for organic produce in Northern Italy By adapting an
ordered logit model the impacts of relevant explanatory variables were reported
Results suggests a positive impact of consumerlsquos age on WTP a price premium
The marginal effects for gender indicate female respondents are less likely to be willing
to pay more prices or likely to pay less amount for pesticides free fruit Female
respondents like to pay a price premium but less as compared to male respondents (no
premium or 1 to 5 percent premium) One can observe that most of the respondents in
the study area were male which support our findings These results are in contrast with
Cranfield and Magnusson (2003) The probability of marginal willingness to pay
decreased by (-0001 percent) for higher amount
58
Another significant variable affecting WTP in our study is the years of education of the
householdlsquos head Our result suggests a positive relationship of education on WTP for
pesticides free fruit Households with more formal education have better understanding
of the adverse effect of consuming fruit contaminated with pesticides So they may
better understand the benefits of pesticides free fruit Marginal effects of education are
positive as WTP progresses for higher classes (categories) beyond 16-20 percent (table
49) Among these the highest effect of education 0020 is shown for WTP category
36-40 percent which implies that an additional year of schooling of the household head
increases likelihood of paying 36-40 percent higher price premium for pesticides free
fruit over conventional by around 2 percentage These results are in line with the
findings of Haghjou et al (2013) who found a positive effect of education on WTP for
organic food products in Iran However these results are in contrast with Boccaletti and
Nardella (2000) who reported an inverse relation of consumer education with WTP a
price premium
We also found a significant effect of the household size and household income on WTP
for pesticides free fruit The effect of household size is negative Marginal effect in
table 49 shows that the highest negative effect of 012 is shown for 16-20 WTP
categories which indicate that an additional household member decreases the likelihood
of paying 16-20 percent higher premium for pesticides free fruits by 12 percent One of
the convincing reasons for this negative effect of household size can be the householdlsquos
budget constraint Budget constraint limits the extent to which consumer pay higher
prices for food products (Cranfield and Magnusson 2003) Our findings are consistent
with previous studies Ariyawardana et al (2009) conduct a study on consumerslsquo
willingness to pay for organic ethnic specialty produce in USA reported that marginal
effect of price premium decreases with an increase in householdslsquo member
In regards to income households with higher income are more willing to pay higher
premiums for pesticides free fruit Income always played a significant role in changing
consumerlsquos behavior to change hisher decision from not willing to pay or less willing
to pay to higher willing to pay for organic products Households in highest income
class showed a strong propensity to pay more prices Marginal effects of income for the
first four classes emerged negative Our results suggest a strong propensity to pay
higher prices as household income increases Our marginal effects of income show a
59
monotonic increase in the income effect as WTP premium level progresses beyond 16-
20 percent It implies that at low level of income households are unwilling to pay more
but with rise in income households are ready to pay higher premium for pesticides free
fruit a significantly higher magnitude is shown for the highest category (010 income
coefficient for more than 40 percent premium) Overall it clearly suggests that
household with higher level of income would pay more prices for pesticides free fruit
These results are in line with Hayati et al (2017) and Cranfield and Magnusson (2003)
who found that an increase in income increases purchasing power of consumer which
results a change in purchasing pattern Boccaletti and Nardella (2000) conducted a
study on consumerslsquo willingness to pay for pesticides free fresh fruits and vegetables in
Italy and found that willingness to pay is significantly and positively related to income
We also included variables indicating health and environmental concern of the
respondent Results indicated that the more the households were concerned about the
impact of pesticides in fruits on health and environment the more the probability of
willingness to pay The marginal effects for health concern is negative for first three
willingness to pay classes (ie not willingness to pay willingness to pay 1_5 wiliness
to pay 6_10 percent) and for environment concern it is negative for first four classes
while for the remaining WTP classes it is positive Strikingly the highest magnitude of
marginal effects up to 041 among all variables is found from the health concern
variable On one hand a significantly positive effect suggests that the health concerned
householdslsquo are more likely to pay higher premium for WTP than those not concerned
A magnitude of higher scale on marginal effect on the other hand strongly supports
the distinct difference in WTP between health concerned and non-concerned
individuals Overall this also highlights the importance of this variable on modeling
WTP for pesticides free fruits For example a 041 marginal effect of health concern
variable on 16-20 premium category of WTP suggest that health concerned individual
are 41 percent more likely to pay 16 to 20 percent higher premium for pesticides free
fruit as compared to non-concerned households The effect of health concern on WTP
is consistent and distinctly higher in magnitude from previous similar studies in other
countries For example Hayati et al (2017) found that health concerned individual were
26 percent more likely to pay 16 to 20 percent in Iran This indicates that health
concern factor is an important motivation to premium price for pesticides free fruits in
Pakistan
60
Finally we found a significant effect of awareness variable Recall that our awareness
variable is represented by dummies Our result suggests that the households in the study
area were aware of the fact that farmers are intensively using pesticides on fruits so
they were willing to pay more price premium for pesticides free fruits Marginal effects
show a negative signs for modest price premiums on WTP categories 1-5 and 6-10
while positive signs for all higher categories 16-20 21-25 26-30 31-35 36-40 and
above 40 This may indicate that households are more aware of the adverse impact of
pesticides on health and environment Probably awareness comes from education as our
results shows that the average years of education is higher in the study area
424 Matrix of Correlation Coefficient
Income is generally related with age and education of the households in the study area
(table 410) This result may indicate that more aged households have higher income
and advanced education Households in high income and more educated class shows
high propensity of willingness to pay for pesticides free fruit As the results indicated
that more aged people do care more about their health and high class income
respondents have more discretionary income to spend on fruit Overall the results show
that explanatory variables are not highly correlated hence no problem of
Multicollinearity was diagnosed in the data
61
Table 49 Predicted probabilities and marginal effects from the estimated ordered logit model
Not WTP
()
WTP 1-5
()
WTP 6-
10 ()
WTP 11-
15 ()
WTP 16-
20 ()
WTP 21-
25 ()
WTP 26-
30 ()
WTP 31-
35 ()
WTP 36-
40 ()
WTP
Above 40
()
Predicted Probabilities
00122 00179 02616 01183 04434 00620 00510 00110 00201 00026
Marginal effects
Age -0000 -0001 -0011 -0002 0007 0003 0003 0006 0001 0001
Gender 00039 00054 00623 0015 -0033 -0019 -0019 -0004 -0008 -0001
Education -0000 -0001 -0013 -0002 0010 0003 0003 0010 0020 0002
Household size 0002 0002 0012 0004 -0012 -0004 -0004 -0001 -0020 -0002
Urban rural -0003 -0004 -0049 -0009 0031 0013 0013 0002 0005 0001
Income -0003 -0004 -0004 -0010 0003 0001 0001 0002 0005 0010
Health concern -0103 -0113 -0372 0030 0410 0100 0100 0014 0030 0003
Environment
concern
-0005 -0007 -0072 -0010 0052 0017 0015 0003 0006 0008
Awareness -0014 -0020 -0120 -0030 0122 0045 0041 0010 0020 0002
Source Authorrsquos calculation based on Survey Data 2016-17
62
Table 410 Matrix of correlation coefficient between explanatory variables
Source Authorrsquos calculation based on Survey Data 2016-17
Variables Age Gender Education Location Households
size
Income Health
Concern
Environment
Concern
Age 10000
Gender -00193 10000
Education 00872 -00147 10000
Location 00725 00689 01047 10000
Households size -00294 00277 -00161 -01704 10000
Income 04123 -00690 02133 - 00405 01583 10000
Health Concern 01604 00224 02229 00660 - 00422 02102 10000
Environment Concern -00786 00944 -00245 00570 -00059 -00350 00118 10000
63
43 Householdrsquos willingness to pay using double bounded dichotomous
choice model
The double bounded dichotomous choice model was used to find out how much
households are willing to pay a price premium for pesticides free fruit The model has
been proved useful for the determination of the contribution of independent variables in
householdslsquo willingness to pay for pesticides free fruit Mainly those factors that
influenced the householdslsquo willingness to pay are age of the householdlsquos head
householdlsquos size gender awareness income head education and their perceptions
The Likelihood Ratio test statistic the Wald Chi2 value is 27228 with a p-value of lt
0001 confirmed that the model with all the explanatory variables has good prediction
power of householdslsquo choice and WTP for pesticides free fruit (table 411) The
estimated coefficients for most of the explanatory variables are statistically significant
and have signs consistent with prior expectations Headslsquo characteristics such as age
education level and awareness of pesticides use on fruits perception of health and
environmental concerns of pesticides are the most import determinants of the
householdlsquos WTP for pesticides free fruit Householdlsquos income and number of
individuals have significant effect on their price premium for fruits free of pesticide
residue
The coefficient for Age is positive and its value is 0294 which reveals that a one year
increase in headlsquos age would increase householdlsquos willingness to pay a price premium
of 0294 rupees for pesticides free fruit at constant level of other variables This
generally implies that household headed by an old individual has strong preferences
and high WTP for pesticides free fruits as compared to others These results are
supported by Vidogbena et al 2015 reported a positive significant effect of consumerslsquo
age WTP in Benin for minimized pesticides residues Results suggest older households
are more concerned about health benefits associated with fresh pesticides free food
This positive correlation of householdslsquo age and Willingness to pay a high price
premium for pesticides freeorganic food is also in agreement with findings of (Anifori
2013 Haghiri et al 2009 Misra et al 1991) However these findings are in contrast
with (Govindasamy and Italia 1999) carried out a research study on consumerslsquo
willingness to pay for organically produced fresh produce in New Jersey to find
64
opinion on organic produce and found that all the three age category younger people
like to pay a high price premium
Headlsquos education level has a positive significant association with householdlsquos
willingness to pay a price premium for pesticides free fruit A likely explanation is that
education increases consumerslsquo awareness regarding the adverse effect of pesticides on
human health and natural environment Consumerslsquo with a high level of education can
better understand the benefits attached to the consumption of food produced without the
use of pesticides These results are also in line with Vidogbena et al (2015) studied
consumerslsquo willingness to pay for cabbage with minimized pesticides residues in
Southern Benin and reported that consumers with high level of education were
positively affected WTP In some other related studies Darby et al (2008)Liu et al
(2009) and Misra et al(1991) also confirmed positive association of consumerlsquos
education and willingness to pay price premium for pesticides free organic fruits
Headlsquos awareness of pesticides use on local fruits production and their health and
environmental concerns over pesticides use are also the most important determinants of
householdlsquos willingness to pay for pesticides free fruits As discussed in the previous
section householdlsquos awareness and perception of pesticides use on fruits and their
education level are connected and have significant influence for creating market for
pesticides free organic fruits
Householdlsquos demand for best quality fruit is expected to rise with increase in their
income level The estimated coefficient for householdlsquos income is positive which
implies direct association with their price premium for pesticides free fruits and is
consistent with general theory and our prior expectations In future with economic
growth increased in per capita income is expected and this increase in per-capita
income will increase the demand for pesticides free fruits
We found a negative significant effect of the householdlsquos size on WTP for pesticides-
free fruit As the number of members increases household become less likely to pay a
price premium for pesticides free fruit More mouths to feed reduces budget for best
quality fruits as noted previously by (Oyawole et al 2016 Ghorbani and Harnraz
2009) In another study Govindasamy et al (2001) findings suggests that each
member in a lager household has less discretionary income to spend compared to a
65
smaller household and may consider paying a premium for integrated pest management
a luxury
Table 411 Factors influencing consumersrsquo WTP (double-bounded dichotomous
choice model)
Variables Coefficient Std Error z-statistic Pgt|z|
Constant -8614601 3640408 -237 0018
Age 0294755 00638171 462 0000
Gender -0133885 - 4628428 003 0977
Education 04521878 01574002 287 0004
Income 00001208 00000284 426 0000
Householdlsquos
Size
-06690743 2499154 -268 0007
Health concern 6165207 1882292 328 0001
Environment
concern
6739389
2053786 328 0001
Awareness 8194937 1693789 484 0000
Urban Rural 02295739 1339268 017 0864
Source Authorrsquos calculation based on Survey Data 2016-17
Log likelihood = -61347 Number of observation = 600
Wald chi2 (9) = 27226 Probabilitygt chi2 = 0000
Note indicate statistical significance at 5
431 Householdsrsquo estimated Mean WTP
The estimated model was used to derive each householdlsquos willingness to pay price
premium for pesticides free fruits Table 412 and figure 42 presents the summary
statistics for the estimated price premium The Table shows that householdlsquos estimated
mean willingness to pay price premium is around 26 rupees with a standard deviation
of 106 and the estimated minimum and maximum price premium are 0 and 445
rupees respectively These statistics reveals that householdslsquo on average are willing to
pay 26 percent more price premium for pesticide-free fruits than the existed market
producing pesticide free fruits
66
2
125 115
38
325
35
-5
0
5
10
15
20
25
30
35
40
45
0 1-10 11-20 21-30 31-40 gt40
Fre
qu
en
cy o
f th
e h
ou
seh
old
s
WTP bins
Table 412 Households mean estimated WTP
Mean Std Dev Min Max
WTP 25798 10601 0 44511
Source Authorrsquos calculation based on Survey Data 2016-17
Figure 42 householdsrsquo estimate WTP bids
432 Households Response to First Bid (Amount)
Table 413 and figure 43 shows households response to first bid of the WTP question
The Table clearly show the sensitivity of a householdlsquos yes - no response to the bid
amount As the bid amount goes up the probability of acceptance is expected to
decrease Results show that higher bids reduced the likelihood of acceptance For
example for a bid amount of Rs10 as price premium for pesticides free fruits 8833
percent of the households are willing to pay while it dropped to 222 percent when the
bid amount is increased to Rs40 which is consistent with the standard theory
67
0
01
02
03
04
05
06
10 20 30 40
Table 413 Householdsrsquo Response to First Bid (Amount)
Households
with YesNo
response
First bid amount (PKR)
10 20 30 40
Households
with No
response
21 (1167) 24 (2581) 141 (5732) 63 (7778)
Households
with Yes
response
159 (8833) 69 (7419) 105 (4268) 18 (2222)
Total
Households
180 93 246 81
Source Authorrsquos calculation based on Survey Data 2016-17
Figure 43 Probability of WTP given bids
44 Post Estimation Diagnostic Test
The model was tested against Multicollinearity by using (variance inflating factor
criteria) and for Heteroskedasticty (Breusch-Pagan test) and the results are presented in
table 414 Rule of thumb for VIF is that if the value is ge 10 than the problem of
Multicollinearity is severe According to our findings the mean value of variance
inflating factor is 114 less than the critical value suggests that there is no
Multicollinearity problem in the model Breusch-Pagan test is used for detecting
Heteroskedasticty problem The (χ2) value is 066 and p- value is 041 This p-value
suggests that the probability of rejecting the presence of Heteroskedasticty is 41percent
68
Table 414 Diagnostic test results
Problems Diagnostic Test Mean value P-value
Multicollinearity VIF 112 _
Heteroskedasticty Breusch-Pagan 066 041
Source Authorrsquos calculation based on Survey Data 2016-17
441 Householdsrsquo willingness to pay by using linear regression model Results of householdlsquos willingness to pay for pesticides-free fruits using linear
regression model is shown in table 415 Variables such as age education awareness
income householdslsquo size and consumer perceptions regarding health and friendly
environment are significantly influencing consumerslsquo WTP for pesticide-free fruits
Age has a positive and significant influence on willingness to pay ie the result shows
that with an increase in age willingness to pay also increases This result is slightly
different from few findings of other researchers who reported a high WTP in young and
middle age consumerslsquo (30-40) years Govindasamy and Italia (1999) But there are
some logical reasons behind our findings As young people are not so much health
conscious but with getting older and older the disease of aging caught their minds and
they keep more care about their health Another reason with an increase in age
education and experience increases as a result an increase in WTP for pesticides free
fruits These results are supported by Muhammad et al (2015) found a positive and
significant association between age and consumer willingness to pay Their results was
supported by the fact that young individual health consciousness is a rare phenomena
but as the people get older and older many diseases related to health induce them to
pay more attention towards safe and healthy food such as pesticides free organic food
Education and monthly income are the other factors positively and significantly
influencing householdslsquo WTP Households with more formal education have more
concern and better understanding of the risk associated with consuming food
contaminated with pesticides So they better understand that fruits produced without the
use of chemicals pesticides could be beneficial for health Results show that a one year
increase in formal education householdslsquo WTP increases by rupees 025 for pesticides
free fruit as compared to those having no education In regards to income respondents
with higher income are willing to pay more price premium A one rupee increase in
income will increase householdlsquos WTP by 0001 Muhammad et al (2015) reported a
69
significant effect of income and education on householdslsquo stated willingness to pay for
organic food in Arab Emirates consumer
Householdslsquo size is usually reported as negative influence on WTP Findings of our
study show a negative significant influence on householdlsquos willingness to pay This is
likely due to larger households requiring additional funds to satisfy households demand
for pesticides free fruit which may induce households to buy conventional fruit Other
reason may be as with limited resources feeding more mouths is increasingly difficult
These results are in contrast with Muhammad et al (2015) conducted a study on
factors affecting consumerlsquos willingness to pay for certified organic food products in
United Arab Emirates and reported a positive relationship of willingness to pay and
householdlsquos size Usually householdslsquo size is large in Arab Emirates and hence more
earning resources compared to small households which support their findings Our
finding shows a decrease of 085 rupees by an addition of one member in a household
Other important variables are householdslsquo concern regarding health and environment
Results show that respondentslsquo are highly concerned about residual effect of pesticides
on human health and environment Our results support these findings by positive WTP
Table 415 shows householdslsquo concerned regarding health and environment Results
suggest that households with more concerned for health and environment are willing to
pay Rs582 and Rs020 respectively higher prices for pesticides free fruit compared to
those not concerned
Finally we found variable awareness positively and significantly influencing
householdslsquo WTP for pesticides free fruit in survey area The result shows that more
aware households are willing to pay more price premium compared to unaware
households Awareness usually increases with education and age as can be evidence
from our findings a positive and significant influence of education and income on
householdlsquos WTP When households education level and age increases their awareness
regarding pesticidelsquos negative impact on health increase and hence an increase in WTP
for pesticides free fruit
70
Table 415 Estimated parameters using liner regression model
Variables Coefficient Std Error t-Statistics P-value
Constant -6174109 - 4353038 142 0158
Age 02348861 00467651 502 0000
Gender -2828394 3096026 - 091 0362
Education 0243413 00772618 315 0002
Income 00001237 00000157 790 0000
Householdlsquos
size
-03936806 01755667 -224 0026
Health concern 5567941 1465789 380 0000
Environment
concern
02999708 2023651 015 0882
Awareness 3567843 1001883 356 0000
Urban rural 0587075 1047051 056 0576
Source Authorrsquos calculation based on Survey Data 2016-17
Note indicate statistical significance at 5
No of observation = 200 F (9) = 2859 Probgt F = 0000 R-squired adjusted = 055
45 Comparison of elicitation questions formats Mean WTP by using double dichotomous payment card and open ended elicitation
format are reported in table 416The willingness to pay evaluated using average values
for the explanatory variables are Rs2576 for double bounded 1632 is for payment
card and 1437 for linear regression Results indicated that householdslsquo evaluated
through double dichotomous choice payment card scenario and open ended format are
willing to pay 26 16 and 14 more price for pesticides free fruits in the study area
These results are in line with Ngo et al (2013) conducted a study on consumerslsquo
willingness to pay for organic vegetables in Vietnam and found 70 more price
premium Rodriguez et al (2008) carried out a research study in Argentina on
consumerslsquo willingness to pay for organic food products and reported that consumers
were willing to pay a higher premium of 87 for leafy vegetables Mean willingness to
pay for double dichotomous model was calculated by maximum likelihood estimation
mentioned in the model while for payment card and open ended format logit regression
of response on bid amount was used All mean WTP values are significantly different
71
from zero and are different across the three questions format The probability (Plt
0000) between double bounded open ended and payment card method shows a
significant difference in estimated mean values of all the three questions elicitation
formats A t-value of 1483 250 and 1222 means that the mean values calculated
through different methods are significantly different from each other
Table 416 Mean willingness to pay comparison from CV question format
CV questions format Open ended
Mean WTP (1437)
Payment card
Means WTP (1632)
Payment card
Mean WTP (1632)
MD (194)
t-value (250)
P-value (0006)
--------
Double bounded
Mean WTP (2576)
MD (1143)
t-value (1483)
P-value (0000)
MD (949)
t-value (1222)
P-value (0000) Source Authorrsquos calculation based on Survey Data 2016-17
1MD = Mean difference 1US$=105 PKR in 2017
451 Response rate for zero WTP
Table 417 shows householdlsquos response rate to different elicitation formats The
response rate of payment card format is more than both DC and OE questions formats
Results show that 87 of the respondents respond to the willingness to pay question for
payment card method For dichotomous choice the response rate is 58 and for open
ended respondentslsquo response rate is 46 Taken together these results suggest that the
payment card format is easy for valuation task faced by respondents and lead to
efficiency in data collection
Table 417 Comparison of response rates by CV question format
Percent Response
to WTP question
Double dichotomous
choice
Payment card
method
Open ended
method
Yes 5850 87 4650
No 4150 13 5350
Source Authorrsquos calculation based on Survey Data 2016-17
72
46 Discussion about Major Findings This study was design to explore householdlsquos preferences and willingness to pay for
pesticides free fruit in Khyber Pakhtunkhwa Pakistan For this study a detailed
questionnaire was designed to obtained information from the households on their socio-
demographic characteristics perception regarding pesticides used on conventional fruit
and their willingness to pay a price premium for pesticides free fruit The overall
objective of the study was to know householdslsquo willingness to pay a price premium for
pesticides free fruit such as Apple Peach and Mango In response to willingness to pay
question 93 percent of the households were willing to pay a price premium while a
negligible portion were unwilling to pay any premium for pesticides free fruit Out of
total WTP 35 percent of the households were willing to pay16-20 percent higher
amount for pesticides free fruit
With regards to gender status of the households findings of the research showed most
of the respondents in the study area were male and a minor portion were female
Variable gender was not significant in this study because of the area structure where
male households are the primary purchaser of householdlsquos food items In this research
we found that majority of the respondents were educated most of them were highly
educated while a negligible portion of the respondents had no formal education The
mean education in Mardan and Peshawar was almost 10 and 12 years of schooling
respectively A significant difference was observed in urban and rural householdslsquo
education level in both the districts
Householdslsquo expenditure on food and fresh fruits were also calculated The mean
expenditure on food in district Mardan was PKR- 49280 and in district Peshawar was
PKR- 34860 Based on t-test a significant difference was observed on the consumption
of fresh fruit in urban and rural areas of the two districts Total expenditure on fresh
fruits in Mardan and Peshawar was 3340 and 4671 respectively Based on findings of
the study it could be concluded that respondents in urban region spent more income on
fresh fruit and consume more fresh fruits compared to rural region
Householdslsquo awareness of pesticides use on locally produced fruit such as Apple
Peach and Mango and their health and environmental concerns over pesticides use
were estimated The results revealed that 61 percent of the respondents were agreed that
local farmers use intensive pesticides on fruit Around 88 percent of the respondents
perceived environmental and health concerns over pesticides residues in food
Similarly 91 percent of the respondents believed that farmer should engage in
73
environmental friendly agricultural production practices which have a minimum
adverse impact on health and the environment These results induced households to pay
higher prices for such pesticides free fruit if available in the market The overall results
indicated that sampled households were not fully aware of the intensive pesticides use
on local fruit however they were correctly perceived over the impacts of pesticides on
human health and environment
The empirical findings of the study revealed socio-demographic characteristics had a
significant influence on householdslsquo willingness to pay a price premium for pesticides
free fruit Results showed more aged householdslsquo head were willing to pay more price
premium This is supported by the fact that older people are more health concern
compared to young individual Householdslsquo head education level also played a positive
and significant role with high education consumers seems slightly more willing to pay
These results are in line with Haghjou et al (2013) Householdlsquos size was negatively
influencing householdlsquos WTP and accord with the expectation Due to income
constraint with increase a member in a household will decrease WTP for pesticides-
free fruit because feeding more mouths with limited resources would be difficult These
results are in line with Oyawole et al 2016 Many Conflicting results are also reported
regarding household size Some studies indicated the presence of more children
positively influencing WTP for organic food while some results reported an inverse
relationship between WTP and householdslsquo size Findings of our research revealed a
negative significant influence on householdslsquo willingness to pay for pesticides free
fruits These results were also according to our expectation With an increase in family
size the households do not care much about quality but mostly quantity
Income of the householdslsquo head was taken as continuous variable in this research study
In most cases especially in willingness to pay research studies a positive association of
income and households WTP was observed Any increase in householdslsquo income leads
to rise in their willingness to pay for safer healthier and pesticides free fruit Despite
high prices for pesticides free food products householdslsquo with high income showed
likelihood to pay a price premium Our findings also showed a positive effect of
income on householdslsquo WTP for pesticides free fruit An increase in income changes
householdslsquo purchasing behavior and choose better quality of food So with an increase
in income households were willing to pay more price premium Same results were
reported by Cranfield and Magnusson 2003
74
Variable awareness played a significant role while consuming better quality of food
Findings of our study also showed a positive and significant influence of variable
awareness on householdslsquo WTP for pesticides free fruit More than half of the
respondents were aware of the intensive use of pesticides on fruit Majority of the
households knew about the risk attached with fruits produced with agrochemicals The
more aware households were willing to pay more price premium for pesticides free
fruit compared to unaware households These results are also supported by Oyawole et
al2016
Moreover results of this study are also consistent with previous studies that health and
environmental concern are the important factors in householdlsquos preferences for
pesticides free food and reduced input food products We also found a positive
significant influence of health concern and environment concern on WTP These results
suggest that respondents in the study area are more conscious about health and
environment They are willing to pay more prices for such fruit free from pesticides
residues Based on above results most of socio-demographic characteristics have
positive influence on householdlsquos willingness to pay for pesticides-free fruit in the
study area On the basis of these findings we reject the null hypothesis and accept the
alternative hypothesis by concluding that socio-demographic characteristics have
influencing behavior on householdslsquo WTP
Willingness to pay across urban and rural regions shows no significant difference The
P-value of 0864 showed that WTP of households in urban regions were not statistically
different from those in rural regions Although we had expected a positive and
significant difference among urban and rural households willingness to pay for
pesticides free fruit and the difference in householdslsquo income education and
expenditure across urban and rural households support our expectation One of the
reasons for no significant difference is the selection of rural union councils which are
nearby urban union councils If the study is spread to more rural union councils than an
expected difference in urban and rural households may be observed Based on these
results the null hypothesis of no significant difference between urban and rural
households is accepted and can be concluded that no significant difference was found
in willingness to pay amount across rural and urban households
75
A Payment Card Approach
In this approach respondents are asked to select their WTP from a payment card given
in absolute value or in percentage of prices (Boccaletti amp Nardella 2000 Lacaze
Rodriguez and Lupin 2009) Payment card requires smaller sample sizes for the
efficient estimation of parameters than the double bounded model A recent research
found that payment card is to be free of range and centering biases when the
willingness to pay values on the payment card is sufficiently large and the respondents
are not constrained (Rowe et al 1996) However choosing an amount from payment
card may be more cognitively burdensome on the respondents and difficult than simply
yes or no response
B Open Ended Approach
In open ended question respondents are asked to state their WTP for a certain attribute
without suggesting them any value This technique does not require an interviewer and
does not result in any starting bias This approach is easy for the respondents to answer
Due to non provision of any value respondents find it difficult to answer and results
large non- response rate
C Double Bounded Approach
The dichotomous choice contingent valuation method is an important method in
contingent valuation surveys Due to simplicity this method is popular and widely used
for data collection Two questions formats are used in this method single bound and
double bounded questions are asked from the respondents For single bound question
format the respondentlsquos only reply in yes or no while in double bounded approach
second question contingent on the first response is asked
Hanemann et al (1991) recommended double bounded dichotomous choice model for
eliciting householdslsquo WTP In the double bounded formate each respondent is
presented with two bids The level of the second bid is contingent upon the response to
the first bid If an individual responds in ― yes to the first bid Bi the second bid (Bu) is
some amount greater than the first bid (Bi lt Bu) is askedIf the respondent responds
―no to the first bid the second bid (Bl) is some amount smaller than the first bid (B
llt
Bi) is asked
76
Henemann et al (1991) and Leon (1995) confirmed that double bounded model is more
effcient than single bound model For the correction of poor choice of the initial vector
double bounded model was suggested Researchers also found that double bounded
method produce more precise point estimates of parameters Double bounded model
requires more sample size due to the statistical inefficiency imposed by the data
compared to payment card and open ended model If sample size is large enough
double bounded model estimates accurate results
Due to its potttential inconsistency with response to the first binary question and larger
scope for biased results double bounded model is contravartial Bateman et al (2001)
concluded that the respondents feel fury and guilt when the second question is asked
making the response of the double bounded internally inconsistence One of the main
disadvantage of double bounded model is that response of the respondents may be
influenced by the first offered amount which is generally called starting point bias
(Flachaire and Hollard 2005)
There are few notable patterens while studying consumerlsquos willingness to pay by using
different elicitation formats Estimated willingess to pay based on double bounded
format and payment card format tend to be large compared to open ended questins
format Furthermore estimated willingness to pay from double bounded model would
be larger than payment card format
Not surprisingly as shown in table 416 the estimated mean willingness to pay for
pesticides free fruit based on the models were significantly different across the three
elicitation format Estimated WTP for double bounded format payment card format
and open ended was 25 percent 16 percent and 14 percent respectively The estimated
mean WTP for double dichotomous model is higher than twice the estimated mean
willingness to pay based on payment card and open ended data
When comparing response rate of households to the willingness to pay questions
format was different across the three elicitation methods In double bounded method
the question was whether the households were willing to pay a specific amount in
payment card method households were asked to select the amount from a specified
values provided on a card whereas in open ended question households were asked to
say how much extra they were willing to pay for pesticides free fruits The difference in
questions leads us to expect that more individual would respond positively to
willingness to pay question in payment card method because in this elicitation format
consumers had to select from payment level The response rate of payment card format
77
is more than both DC and OE questions formats Results show that 87 of the
respondents respond to the willingness to pay question for payment card method For
dichotomous choice the response rate is 58 and for open ended respondentslsquo response
rate is 46 Taken together these results suggest that the payment card format is easy
for valuation task faced by respondents and lead to efficiency in data collection
It has been remained an unresolved issue that which CV questions format is best to use
While the NOAA panel (Federal Register 1993) recommended using double bounded
dichotomous choice model due to its easy use and resemblances in day to day decision
making In this study we found that the response rate in double dichotomous choice
model is lower than payment card format and higher mean willingness to pay than both
open ended and payment card format In contrast payment card format has desirable
response properties
One elicitation format is not clearly better than the others on priority ground The
appropriateness of any elicitation format depends upon the circumstances of the study
For example payment card elicitation format better suits if the sample size is small If
the sample size is large enough double bounded elicitation format is preferred
78
V SUMMARY CONCLUSION AND RECOMMENDATION
This chapter presents findings of the research study as well as policy recommendations
This chapter also outlined limitation in this research and suggestion for further research
in future
51 Summary
Conventional agriculture has gained the power of providing food to majority of the
world population but at the cost of damaging the environment and human health While
pesticides free farming on the other side is environmental and human health friendly
farming that avoids the use of such hazardous chemicals which are harmful for human
plants and animal planet Pesticides free farming system is increasingly becoming
popular in producers as well as in consumer The term pesticides free denote production
of fruit without the use of pesticides and play a vital rule in future agriculture
commodities production It has been observed that fruit produced without the use of
chemicals pesticides are generally higher in prices than the conventional fruit
production in most part of the world However pesticides free farming and pesticides
free food is a relatively new phenomenon and very few people especially in developing
countries are aware about the beneficial impacts of such food on health and
environment Willingness to pay for pesticides free fruit is different from fruits
produced through the use of chemicals pesticides because pesticides free fruits are
relatively expansive
The main theme of this study was to investigate householdslsquo awareness and willingness
to pay for pesticides free fruit and to determine socio-economic and socio-demographic
characteristics in relation to their impact on willingness to pay a price premium This
study was carried out in two districts of Khyber Pakhtunkhwa (Pakistan) namely
Peshawar and Mardan The household level data employed in this study were obtained
from 1000 households through face to face interview by employing pretested
questionnaires Householdslsquo perception and attitude about pesticides free fruit were
also analyzed Three questionnaire elicitation formats ie dichotomous choice payment
card and open ended were used in this study For the estimation of dichotomous choice
data double bounded dichotomous choice model was used An ordered logit model was
used for the estimation of payment card type data and for the estimation of open ended
79
questionnaires linear regression model was used to estimate householdslsquo willingness to
pay price premium for pesticides free fruits
52 Conclusions
Adoption of technological advancement in agriculture has attracted considerable
attention in many developing countries because majority of population in less
developed countries derives its likelihood from agricultural production New
technologies provide farmers an opportunity to increase production and enhance
economic growth (Carvalho 2006) Although the green revolution spread across
developing countries in Asia and resultant in increased food production by adopting
technological inputs like fertilizer and pesticides However the high usage of these
chemicals to bring this spectacular growth in agriculture production is not without its
problems In most countries it has been observed that using commercial agricultural
practices causes many problems like environmental degradation and human health
effects (Wilson 2000) Coordinated efforts are needed to increase food production
with a view to enhance food safety and quality Although chemicals free agriculture is
gaining more and more support for safer food but still not providing enough food to
support need of the population in developing countries
Demand and markets for pesticides free fruit has gained a significant and valuable
interest of research scientist in all over the world Several research studies have been
identified price premium that consumers are willing to pay for pesticides free fruit and
also showed some socio-demographic factors influencing their decision to pay more
price premiums Different approaches are adopted in these studies depending on their
objectives These research studies mainly focused on attitudes and perception towards
these foods and not their actual purchase According to our knowledge studies on
householdlsquos willingness to pay and the most relevant factors influencing their decision
to pay more price premium are limited in developing countries such as Pakistan
The general objective of this survey was to study the socio-demographic and socio-
economic characteristics of the householdslsquo and to investigate factors influencing their
willingness to pay for pesticides free fruit A variety of factors including respondentlsquos
age gender householdlsquos size respondentlsquos income householdlsquos head education
awareness and certain attitudinal questions like health concern and environment
concern appear to influence householdlsquos willingness to pay a price premium Findings
80
of the study suggest health concern and environment concern has significant influence
on householdslsquo willingness to pay Hence it can be concluded that households in the
study area are more concern about their health and surrounding environment Results of
the study also indicated no significant difference in willingness to pay across rural and
urban regions of the study area
Study concluded that the most relevant explanatory variables positively influencing
householdslsquo willingness to pay for pesticides free fruit are age of the householdlsquo head
income of the household headlsquos education householdslsquo awareness health concern and
environmental concern while householdlsquos size is negatively significant which usually
reported that householdslsquo with more members do not care much about quality but more
quantity because feeding more people with limited resources are difficult Majority of
the households are willing to pay price premium for pesticides free fruit especially
those with high level of income household leads to high degree of willingness to pay
Education level also became an important factor in willingness to pay higher price for
pesticides free fruit More aged people have always been concern about their health As
the people get aged more and more the diseases of aging caught their minds so they
like to pay more for safer food While when it become to pay more price variable
gender shows insignificant affect due to the limited availability of female respondents
in the sample data
Results of the households awareness regarding pesticides used on conventional fruit
and its impact on health and natural environment are positive Most of the households
are highly concern about health and environment Results suggest that more than half of
the households are aware of the adverse impact of pesticides on health and
environment Survey suggested that more than half of the households are strongly
agreed that farmers should produce such an agricultural food product which has
minimum adverse impact on human health and natural environment Results of the
study are consistent with other findings conducted on consumerslsquo willingness to pay for
organic food and pesticides free food and reported that health and environmental
concern were the most important factors
Health and environmental concern is an important factor constituted a significant
influence which inclined households towards willingness to pay for pesticides free fruit
Krisoff (1998) reported that consumers perceived pesticides free food as healthier safer
and environmental friendly as compare to food produced by conventional method
81
From this study it is observed that households perceived pesticides free food as
healthier they are willing to pay more price premium
Results obtained from this study concluded that 93 percent of the households are
willing to pay more prices for pesticides free fruit Out of this proportion 35 percent of
households are willing to pay 16 to 20 percent more price above the regular price while
24 percent are willing to pay 6 to 10 percent higher price for pesticides free fruit
Households are willing to pay above than 20 percent comprised of 215 percent of the
sample data Results show that out of total willingness to pay 4 percent of the
households are willing to pay 1 to 5 percent price premium and 9 percent are willing to
pay 11 to 15 percent more price premium Results also show that only a minor portion
65 percent of the sampled respondents is unwilling to pay any more
Householdslsquo willingness to pay was also assessed The study revealed that on average
the respondents are willing to pay 26 percent higher price for pesticides free fruit than
the regular price which concluded that households in the study area are responsive
towards safer food and they like to pay higher premium for such fruit
53 Recommendations
This study is one of the first analytical attempts to measure householdslsquo willingness to
pay for pesticides free fruit in Pakistan Since not much research work is done on
pesticides free fruit in Pakistan so this study would contribute a little for future
researchers Findings of the survey suggest some recommendations for consumers and
producers Researchers may consider this study as basis for further research
An important task is to provide more information to consumers regarding
pesticides free fruit and the perceived benefits by consuming these fruit This
research study also provides information to consumers that how pesticides free
fruit is differ from fruit produced conventionally The sampled studied shows
that there is a potential for market growth of pesticides free fruit To identify
these potential consumers knowledge about their socio-demographic and socio-
economic characteristics is important
With potential demand and high price premium pesticides free fruit production
could be one of the lucrative strategies for producers to earn higher net margin
from their production so like other new technologies management practices
and production system pesticides free fruit production also needs government
82
assistance such as advertisement consumers awareness campaigns financial
aids as well as green subsides and loans to the producers to develop well
established market and efficient supply chain in Pakistan
By adopting new agricultural practices and comply with standards of World
Trade Organization (WTO) this will not only abridge the supply demand gap
for pesticide free fruit sat domestic level but also will boost the economy of the
country due to increase in fruit and vegetables exports
Contribution in the field of pesticides free fruit production from academics
research workers extension graduates scientist and other professionals are
necessary to brief producers as well as consumers about the negative impact of
pesticides due to incorrectly use of these hazardous chemicals on human and
animals health as well as effect on natural environment
Based on the findings from this research government non-government
organization and other stakeholders should formulate policies and would
promote and encourage the production of pesticides free fruit in Pakistan
Demonstration centers should be established within the agriculturist community
for the awareness of farmers regarding the production of pesticides free food
As the results identified householdlsquos willingness to pay is effected by
explanatory variables so more independent variables should be included in the
model to further explain willingness to pay for pesticides free fruit
In addition the area of sampling could be more spread and not be limited to only
two districts of Khyber Pakhtunkhwa If data are collected from different
provinces and districts all over Pakistan the results obtained might be a better
representation of the whole population
As this research study conducted only at few fruit such as Apple Peach and
Mango future research should focus on more fruit as well as on vegetables
54 Limitation and Suggestion for Future Envisage
A couple of limitations were encountered during this research study
This research study has investigated willingness to pay for fruit only due to
time and budget constraint In future a large scale research study should be
carried out both on fruit and vegetable
83
Second since only two districts of Khyber Pakhtunkhwa were examined in
the future such studies should be replicated to other districts and provinces of
Pakistan to determine householdslsquo willingness to pay for pesticides free fruit
Third some variables employed in this study were not statistically significant
presumably due to small sample size To overcome this problem in future
study large sample size should be taken into consideration in order to enhance
the degree of freedom
56 Suggestions
The future of pesticides free agriculture production is very bright To lead a healthy life
human being needs pure food and pollution free environment It has been proved that
pesticides free agriculture is the only solution to provide safe and healthy food to the
world population Chemicals free agricultural system is a natural phenomena and
human being can feel its importance By adopting pesticides free farming soil fertility
can also be maintained Farmers can provide healthy and safer environment by
strengthening the sustainable and pesticides free agriculture Now a daylsquos demand for
pesticides free food is increasing very fast and in the future it would be necessary to get
rid of food produced by using chemical fertilizer and pesticides
To inform consumers long term investment in promotion and education campaigns
would help to develop individual concern regarding the risk associated with pesticides
on food products This concern will translate individual willingness to pay towards a
positive price premium
84
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Anwar TI Ahmad and S Tahir 2011 Determination of pesticide residues in fruits of
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85
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Calia P and Strazzera E 2000 Bias and efficiency of single versus double bound
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96
Appendix- 1 Questionnaire
Q1Socio-economic characteristics
1 Location
o Rural
o Urban
2 Name ____________________
3 Age ____________________(years)
4 Gender
o Male
o Female
5 Educational status ______________ Years
6 Household Size_________________ No
7 Monthly income _______________________________Rs
8 Monthly consumption expenditure _________________Rs
9 How much you spend on Fresh Fruits Rs __________month
10 How much you consume the following fruits
Fruits Quantity
Apple
Mango
Peaches
11 Local farmers are intensively using pesticides on Apple Peach and Mango fruits
o Aware
o Not aware
97
12 Attitudinal question responses
Householdrsquos Awareness Perceptions of Pesticides use
Questions Agreed Disagreed
Local farmers are intensively using pesticides on
Apple Peach and Mango fruits
I feel the use of pesticides in agriculture has negative
effect on the environment
I am concerned about pesticide residue in our food
supply
I believe farmer should engage in environmental
friendly agricultural production practices with
minimum impact on human health
The effect of pesticides residues on human health
The use of pesticides can badly affect the agro-ecological system as well as human
health Human health related problems may vary with the composition of chemicals
The most common problems are skin flue and headache while severe health hazards
include paralysis cancer etc Studies show that globally around 30 lakh people are
poisoned annually from consumption of pesticides contaminated food and 2 lakh of
them die from different heath problems caused by pesticides residues Most of the
pesticides used on agricultural crops are banned by the WHO
13 Householdrsquos willingness to pay for pesticide free fruit
Wording for Dichotomous choice question
Suppose your favorite fruit such as apple mango and peach regularly cost on average
Rs 100kg Assuming no difference in taste and nutritional content would you pay Rs
X more to consume pesticide free version of the same fruits
Yes No
Wording for open ended question
Suppose your favorite fruit such as apple mango and peach regularly cost on average
Rs 100kg Assuming no difference in taste and nutritional content how much would
you pay for pesticides-free version of the same fruits
Rs _________
98
Wording for payment card question
Suppose your favorite fruit such as apple mango and peaches regularly costs on
average Rs 100kg you purchase Assuming no difference in taste and nutritional
content would you pay slightly more for a pesticides free version of the same fruits
Yes No
If yes how much would you pay to consume pesticide free version of the same fruit
Select from the given payment card
1 WTP= 0
2 WTP= 1-5
3 WTP= 6-10
4 WTP= 11-15
5 WTP= 16-20
6 WTP= 21-25
7 WTP= 26-30
8 WTP= 31-35
9 WTP= 36-40
10 WTP= Above than 40
If no what are the reasons for not paying price premium for pesticide free
commodities (PFC) Please select the most relevant one
o I canlsquot afford to pay price premium on PFC
o The pesticide have no harmful effect on health
o We do not use fresh fruits
o Other reasons ___________________________
99
PLAGIRIASM UNDERTAKING
It is certified that the research work presented in the Ph D dissertation of Mr Jahangir
Khan C No 45 University Registration No2006-Agr-U-13234 Session 2014-2017
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar under the titled ―HOUSEHOLD
PREFRENCES AND WILLINGNESS TO PAY FOR PESTICIDES FREE FRUIT IN
KHYBER PAKHTUNKHAWA (KP) PAKISTAN was conducted under the
supervision of Dr Abbas Ullah Jan
I understand the zero-tolerance policy of HEC and the University of Agriculture
Peshawar towards plagiarism Therefore I as an author of the above titled research
thesis declared that no portion of my thesis has been plagiarized and the material used
for references is properly cited
I undertake that I found guilty at any time and any statement is found to be incorrect or
plagiarized in the above mentioned titled thesis even after my graduation the
University has the right to withdraw my Ph D degree and the HEC has the right to
publish my name on the HECUniversity website on the list of persons who submitted
plagiarized thesis of guilty under plagiarism policy
Jahangir Khan
100
AUTHORrsquoS DECLARATION
I Mr Jahangir Khan C No 45 Session 2014-2017 hereby stated that my Ph D
dissertation titled ―Household Preferences and Willingness to Pay for Pesticides free
Fruit in Khyber Pakhtunkhwa (KP) Pakistan is my own work and not been submitted
previously by me or anyone else for taking degree from The university of Agriculture
Peshawar or any other University in the country world At any time if any statement
found to be incorrect even after my graduation the university has the right to withdraw
my Ph D Degree
Jahangir khan
Date
101
CERTIFICATE OF APPROVAL
It is certified that the research work presented in the Ph D dissertation of Mr Jahangir
Khan C No 45 University Registration No 2006 -Agr-U-13234 Session 2014-2017
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar under the titled ―HOUSEHOLD
PREFRENCES AND WILLINGNESS TO PAY FOR PESTICIDES FREE FRUIT IN
KHYBER PAKHTUNKHAWA (KP) PAKISTAN was conducted under the
supervision of Dr Abbas Ullah Jan
No part of this dissertation has been submitted anywhere else for any degree The
dissertation is submitted for the award of degree of Doctor of Philosophy in the
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar
Ph D Scholar Jahangir Khan
APPROVED BY
1 External Examiner _________________ Lal K Almas Ph D
Associate Dean and Regents
Professor Agricultural Business amp
Economics University of West Texas
AampM USA
2 External Examiner ___________________ Prof Dr Harun Ucak
Alanya Alaadin Keykubat
University Turkey
Major Supervisor ___________________ Dr Abbas Ullah Jan
Head of Department ________________
Dr Ghaffar Ali
TABLE OF CONTENTS
S No Title Page No
List of Table i
Acknowledgements ii
Abstract iii
I INTRODUCTION 1
11 Background on Pakistan 2
12 Pesticides-free Food and Products 4
13 Justification of the study 6
14 Purpose and objectives of the study 7
15 Research Questions 8
16 Hypothesis Development 9
161 Hypothesis to be tested 9
17 Contribution of the study 9
18 Organization of thesis 10
II LITERATURE REVIEW 11
21 Illustration of Contingent Valuation Method (CVM) 11
22 Crux of the Double bounded dichotomous choice model premium 13
23 Overview of the Ordered Logit Model 15
24 Factors influencing Householdslsquo Willingness to Pay 19
25 Essence of the Literature Reviewed 27
III MATERIALS AND METHODS 29
31 Khyber Pakhtunkhwa 29
32 Sampling Technique 31
321 Stage 1 _Selection of district Peshawar and Mardan 31
322 Stage 2 _ Selection of Union Councils (UCs) 31
323 Stage 3 _Selection of households from each Union Council 31
33 Allocation of Sample Size for Different Models 32
34 Contingent Valuation Survey Designing 33
35 Householdslsquo Survey 33
36 Conceptual Framework 34
361 Householdlsquos Utility and Willingness to Pay 34
362 WTP and CVM 35
37 Elicitation Techniques 36
371 Bidding Game Approach 37
372 Open-ended Elicitation Method 37
373 Payment Card Approach 37
374 Dichotomous Choice Model 37
38 Empirical Estimation of WTP by Payment Card using Ordered Logit
Model 39
39 Empirical Estimation of WTP using Double Bounded Dichotomous
Choice Model 42
391 Factors which could Influence WTP 43
392 Bids Design 44
310 Empirical Estimation of WTP using Linear Regression Model 44
311 Description of Variables 45
1V RESULTS AND DISCUSSION 46
41 Descriptive Analysis 46
411 Demographic and Socio-economic Characteristics 46
412 Householdlsquos Awareness and Perceptions about Pesticides Application
on Fruit 51
42 Empirical Results of this Research Endeavour 52
421 Distribution of responses on householdslsquo willingness to pay
(WTP) 52
422 Householdlsquos willingness to pay using ordered logit model 53
423 Predicted probabilities and Marginal effects of ordered logit model 56
424 Matrix of Correlation Coefficient 60
43 Householdlsquos willingness to pay using double bounded dichotomous
choice model 63
431 Householdslsquo estimated Mean WTP 65
432 Households Response to First Bid (Amount) 66
44 Post Estimation Diagnostic Test 67
441 Householdslsquo willingness to pay by using linear regression model 68
45 Comparison of elicitation questions formats 70
451 Response rate for zero WTP 71
46 Discussion about Major Findings 72
V SUMMARY CONCLUSION AND RECOMMENDATION 78
51 Summary 78
52 Conclusions 79
53 Recommendations 81
54 Limitation and Suggestion for Future Envisage 82
56 Suggestions 83
LITERATURE CITED 84
Appendix- 1 Questionnaire 96
i
LIST OF TABLE
Table No Title Page No
31 Total population and sampled households from selected UClsquos 32
32 Payment card format 41
33 Bid system for Pesticides free fruits 44
34 Description of explanatory variables 45
41 Age of the householdlsquos head (Years) 47
42 Educational Level of the Householdlsquos Head (Years) 48
43 Householdslsquo size of the Respondents (Member in Number) 48
44 Householdslsquo Income in Pakistanlsquos Rupee (PKR) 49
45 Households expenditure on food (PKR) 50
46 Householdlsquos monthly expenditure share on fresh fruits (PKR) 50
47 Householdlsquos Awareness and Perceptions of Pesticides use on Fruit
Grown 51
48 Factors influencing respondent householdlsquos WTP (Ordered logit model) 55
49 Predicted probabilities and marginal effects from the estimated ordered
logit model 61
410 Matrix of correlation coefficient between explanatory variables 62
411 Factors influencing consumerslsquo WTP (double-bounded dichotomous
choice model) 65
412 Households mean estimated WTP 66
413 Householdslsquo Response to First Bid (Amount) 67
414 Diagnostic test results 68
415 Estimated parameters using liner regression model 70
416 Mean willingness to pay comparison from CV question format 71
417 Comparison of response rates by CV question format 71
ii
ACKNOWLEDGEMENTS
I am grateful to Almighty Allah for blessing me with the potential of seeking
the light of knowledge the taste of gaining knowledge courage and for all the blessings
which enabled me to complete a stage of education
Doing a research is not an individual work Itlsquos indeed the result of efforts by
many people I would like to thanks all people who helped and supported me to
complete this research successfully
My whole hearted and profound thanks to my advisor Dr Abbas Ullah Jan
Department of agricultural amp Applied Economics for his support critical review
valuable suggestions and inspiration to make this research success
My most special thanks to Assistant Prof Dr Syed Attaullah Shah Department
of agricultural amp Applied Economics for his cooperation and valuable suggestions
providing me all facilities during the course of this research
My sincere thanks to Dr Ghaffar Dr Dawood Jan and all faculty members
Department of agricultural amp Applied Economics for their cooperation advices and
back-up to achieve my goals and their encouragement and instrumental support during
the research practical work
I would like to submit my admirations to my friends and foreign research expert
Dr Kar Ho Lim and Dr Aditya Khanal Department of Agricultural amp Environmental
Sciences College of Agriculture Tennessee State University USA for their help
especially in thesis write-up and paper publication
At last but the not least I wish to put across my deep admiration to my parents
friends relatives and family members who support me during my study
Jahangir Khan
iii
HOUSEHOLDrsquoS PREFRENCES AND WILLINGNESS TO PAY
FOR PESTICIDES FREE FRUIT IN KHYBER
PAKHTUNKHAWA PAKISTAN
Jahangir Khan and Abbas Ullah Jan
Department of Agricultural amp Applied Economics
Faculty of Rural Social Sciences
The University of Agriculture
Peshawar-Pakistan
May 2018
ABSTRACT
The over use of fertilizers and pesticides in agriculture are degrading natural ecosystem
and human health The substantial association of health risk with pesticide residues and
its adverse impact on environment has fetched attention of researchers across the globe
In this alarming scenario pesticide free farming is deemed as panacea to
environmental human and animal health friendly production system Pesticide free
fruit are considered to be superior in quality as compared to fruit produced
conventionally and helps in preventing several health and environmental hazards
Therefore the demand for pesticide free fruit is increasing throughout the world Given
this increasing demand for pesticide free fruit this study is designed to measure what
price premium household would be willing to pay (WTP) for fruit free from pesticides
such as apple peach and mango This study also aims to identify factors influencing
householdslsquo WTP decision of pesticide free fruit in Khyber Pakhtunkhwa (KP)
Pakistan The primary data was gleaned from 1000 sampled respondents through face
to face interview from two selected districts namely Peshawar and Mardan KP
Pakistan To elicit householdlsquos WTP information Contingent Valuation Method
(CVM) was employed Contingent valuation is a survey based method used for eliciting
willingness to pay of the householdslsquo for environmental and natural resources
Different elicitation techniques are used to design CV question scenario such as
payment card question double dichotomous choice question and open ended question
Consequently this study used the entire three payment format to elicit householdlsquos
WTP for pesticide free fruit The ordered logit model was employed to appraise the
payment card method However linear regression model was adopted to identify
factors influencing householdlsquos willingness to pay for pesticides free fruit
Nevertheless the double bounded dichotomous choice model was performed to
measure dichotomous choice questions The major results demonstrate that 935 percent
households were willing to pay higher prices for fruit pesticides free in the study area
Estimates remarkably reveal that around 35 percent households were willing to pay 16
to 20 percent higher prices and 24 percent households were willing to pay 6 to 10
percent higher prices for pesticides free fruit than the prevailing prices of conventional
produce It is reported by 61 percent of the households that local farmers use irrational
pesticides on fruit Major findings have also corroborated that 881 percent sampled
household have perceived health concerns over pesticides residues in food Similarly
911 percent of the households have supported the idea that farmer should be engaged
in environmental benign agricultural production practices which have a minimum
adverse impact on health and the environment Socio economic and demographic traits
have confirmed positive significant effects on householdlsquos willingness to pay The
iv
results of householdlsquos head awareness on WTP are according to the prior expectations
that awareness of householdlsquos head has significant contribution in willingness to pay
for pesticides free fruit While householdlsquos size has a significant but inverse effect on
willingness to pay for pesticides free fruit Furthermore householdlsquos perception
regarding health and environment concern has a propensity to positively influence the
willingness to pay for pesticides free fruit It is also depicted by the results that mean
WTP by using double dichotomous payment card and open ended elicitation format
validates consumer demand for pesticide free fruit in the study area Three separate
mean WTP were computed for each double dichotomous choice payment card and
open ended format which were figured as Rs2576 1632 and 1437 respectively
These results reveal market potential for pesticides free fruit in the study area This
research study is expected to contribute in the three different aspects Firstly this study
has figured out the potential for pesticides free markets in Pakistan This study has also
abridged the research gap regarding consumerlsquos preferences and willingness to pay for
pesticides free fruit which can be generalized and replicated to other areas In addition
results have provided insight to fruit producers helping them to strategize production
system decisions Based on the findings from this research government non-
government organization and other stakeholders should formulate policies and would
promote and encourage the production of pesticides free fruit in Pakistan
1
I INTRODUCTION
Pesticides are agrochemical formulated to cope with the severe problems diseases
caused by insects fungi virus and self-grown weeds The term pesticide can be defined
as any chemical or natural substance applied with the objective to repel destroy or
control pests and regulate plant growth (FAO 2002) In modern agriculture arena
pesticides are intensively used on crops before and after harvest The application of
pesticides surged with the passage of time due to an increase in the demand for
agricultural commodities by the burgeoning population of the world The overall
pesticidelsquos consumption across the globe is observed as about 2 million tons per year
While this massive pesticides consumption demonstrates that about 69 percent is used
by European countries and the remaining 31 percent is utilized by the rest of the world
as mentioned by Abhilash and Singh (2009) The more alarming situation is that the
aforementioned magnitude of pesticides consumption is increasing with the every
passing year as reported by FAO (2002)
The green revolution as well as a huge increase in the application of pesticides in the
agriculture realm had enhanced food and non-food crop production Resultantly the
significant surge in the economic growth of several agricultural based economies was
reported over the last few decades as demonstrated by Carvalho (2006) Despite the
substantial contribution of pesticides to diminish the food insecurity societies around
the world are cognizant and concerned about the food sanitation safety and
environmental externalities owing to irrational use of pesticides and other croplsquos input
(Wilson 2000) More categorically the food safety realization in developed countries
has been led to organic agriculture Whereas in many developing countries which
include but not limited to Pakistan the pesticides-free and organic food markets
remained underdeveloped due to several reasons One of the obvious reasons is the
uncertainty among consumerlsquos preference that led to their concern if an organic market
can be self-sustained Similarly a dearth of proper market structures and institutional
support failed to provide environment-friendly agriculture practices in developing
countries (Rehber and Turhan 2002) The current scenario of agriculture sector in
developing countries has raised several considerable questions to acquire the
anticipated implications for this sector However the most relevant query drifted that
2
―Is there sufficient consumerlsquos willingness to pay (WTP) available in a developing
country for grass-roots development of pesticide-free agriculture
11 Background of the Research Endeavor
Agriculture sector is the mainstay of Pakistanlsquos economy which significantly
contributes as 192 percent to overall Gross Domestic Product (GDP) of its economy
(GOP 2016-17) Despite many efforts and policy reforms still this sector is entangled
with insignificant growth momentum
Since the inception of this country in 1947 there wasnlsquot any notable crop and plant
protection policy adopted by concerned policy makers over a long span of time It is
evident from past timeline that ―Grow More slogan was initiated by the government of
Pakistan back in 1970s to address the escalating foodlsquos demand of rapidly increasing
population of Pakistan Subsequently Grow More policy resulted in ever increasing
pest problem which couldnlsquot be controlled with conventional crop management
practices Therefore the government started to provide the direct subsidy to Pesticides
Industry to provide panacea to croplsquos pest problem But unfortunately the colossal
surge in pesticides utilization had not only destroyed the pests but was also found lethal
for the environment benign organisms that include predators birds etc This irrational
use of pesticides and other crop inputs has caused huge economic loses and health
issues among the farming community
Pakistanlsquos agriculture is endowed with 11 (Eleven) different agro-ecological zones
providing the country an incredible exciting arena for experimentation and state of the
art for agriculture as reported by Altaf (2010) This diversified nature of ecological
zones can be utilized in a lucrative way to attain an optimal output The driving forces
of this sector are striving hard to curtail the gaps by ensuring the adequate production
and supplying the food to meet the demand of rapid growing population of the country
However the emerging challenges such as irrational use of croplsquos input and complying
with world trade organization (WTO) obligations are insisting the concerned policy
makers to focus on paradigm shift for significant contribution of agriculture towards
livelihood welfare and prosperity
3
These different agro ecological conditions provide the encouraging and conducive
environment for the production of cereal crops fruits vegetables and even for non-food
crops Fruits and vegetables grown in Pakistan have a wide domestic demand and have
also attracted the international consumer by exporting these edibles in the international
market Pakistan exports mango apple dates oranges guava and dry fruits like pine
nuts to different countries which include but not limited to Afghanistan UAE Saudi
Arabia and Europe (GOP 2014-15)
The relative importance of agricultural sector can be gauged with high growth rate of
exports of fruits and vegetables from Pakistan to different countries mainly South East
and the Middle East (Khalid Mustafa 2003) where low Sanitary and Phytosanitary
(SPS) standards are comply with Yet several more fruit grown in Pakistan have
enormous potential to be exported in the international market Specifically insect pest
infestation during pre- and post- harvest of fruit and vegetables is a significant problem
To protect from those many kinds of pesticides and agro-chemicals are widely used in
Pakistan These include different types of agro-chemicals which consist more than 100
types of insecticides almost 30 types of fungicides and approximately 39 different
types of herbicides (Zia et al 2009Anwar et al 2011) In 1960 the consumption of
chemical pesticides in Pakistan was 7000 tons per year which has risen to 78 232 tons
per year in 2003 (Syed and Malik 2011)With the development of pest resistance to
those chemicals over years each year new chemical compounds in large amount are
used to protect crops Overuse of these agro-chemicals has caused many adverse health
and environmental effects
However significant variation in consumer behavior in the developed countries has
excelled the demand of high quality food which had encouraged the organic
agriculture Thatlsquos why developing countries who have still adopted obsolete strategies
for pest control are out of race for agriculture export and are at venture to be considered
as ―dirty producer in an international market Similarly in Pakistan massive increase
in the pesticidelsquos use has escorted to two major harms to Pakistanlsquos economy Firstly
Pakistan imports a large quantity of pesticides incurring billions of costs on it and
second overuse of pesticides on agricultural commodities has created many health and
environmental hazards in the farming community of Pakistan Several research
endeavors such as Ahmad et al (2004) Rizwan et al (2005) Parveen and Masud
4
(2001) had divulged that individuals working in field under pesticides exposed
environment specifically women who worked long time in the cotton croplsquos field
sustained more health hazards These health hazard underscored skin irritation
headache nausea and gastroenteritis It is also evident that the hazardous chemical
residues of organo-chlorines organophosphate and synthetic pyrethroids pesticides
were found in 85 percent of the blood samples drawn from 75 sampled individuals
(male and female) in Pakistan
12 Pesticides free Food and Products
Pesticides free fruit and vegetable are those edibles that are grown without the use of
pesticides and can be deemed as major component of an organic farming Due to
awareness among people about advantages of Pesticides free fruit and vegetable which
upshot in food safety and benefit environment as well the production and consumption
of such food products is being highly valued With the consumption of food produced
without the use of pesticides can be helpful in the prevention of some of the health
hazards related with the consumption of conventional food (Nouhoheflin et al 2004)
The term ―Pesticides free was introduced for the first time in a book ―Look to the
Land in 1939 by Lord Northbourne The author narrates pesticides free farm as an
organization that making use of environment balance technique by adopting zero
pesticides In early 20th
century pesticides free food ideology was brought forward
while correspondingly there was an immense use of chemical in food products as well
Householdslsquo were having great concern about their health as well as soil condition and
they began to grow such food which was free from chemical residuals In the era of
70s a noteworthy change was reported in escalating the demand of pesticides free food
and pesticides free farming Therefore in year 1972 ―International Federation of
Pesticide free Agriculture Movement was formed In the same era the producers who
were producing pesticides free food individually commenced the certification process
The obvious aim of the process was to develop rules and to underpin the standards of
pesticides free production
In this modern era where food consumers are highly concerned about their health safety
and environment benign practices they prefer to buy pesticides free food products
This is because of their knowledge about the relationships between the production
practices and quality of food produced Consumers are becoming more conscious as
5
they are aware of the harmful effects of food produced with irrational pesticides use on
their health Many research endeavors have corroborated that fresh fruit and vegetables
confers health related benefits and provide protection against the risk associated with
different types of diseases like diabetes stroke and cancer(Van and Pivonka 2000 Stan
Kar Stoner Singh 2008) Likewise the world health organization (WHO) has
revealed in their research carried out in 2002 that the fruits and vegetables
contaminated with pesticides can cause about 31 percent of diseases related to heart and
11 percent stroke in all over the world However if best quality of fruit and vegetable
consumption is adequately increased it is projected that about 27 million of lives can
be protected each year Pesticides free food contains higher level of antioxidants which
fight against various diseases and provide different essential vitamins More
importantly pesticides free food products also aimed to prevent from some allergies
and diseases common in human being It is corroborated by other research studies that
chemical fertilizer free food are beneficial for human health as well as for the animals
wildlife and for the ecosystem To encourage such agricultural management techniques
in developing countries in general and Pakistan in particular still there is long way to
go but such research studies can provide the paved way to open new avenues for the
concerned policy makers and stakeholder in the realm of Agriculture
In addition locally grown pesticide free produce tends to fetch higher prices due to
sanitation concerns of the consumer and improved quality of the product Subsequently
such produce are preferred by the household and they are agree to pay a price premium
for such food produced free from pesticides compared to prevailing regular market
price of conventional food products Thus it is important to measure householdlsquos
willingness to pay for locally produced pesticide free fruit To acquire a good or
service consumerslsquo wants to sacrifice an extra amount of money which show their
willingness to pay Willingness to pay can also be defined more categorically as the
extra amount of money that an individual wants to pay for best quality of food (Lusk
and Hudson 2004) The commonly used model for eliciting householdlsquos willingness to
pay information is Contingent Valuation Method (CVM) Contingent valuation (CV) is
a survey-based method which is used to elicit householdlsquos willingness to pay for
environmental and natural resources
6
12 Justification of the Study
With the every passing year the demand for agriculture products is hiking due to rapid
increase in the worldlsquos population Pakistan being an agrarian country is striving hard
to fulfill the domestic and international demand for agricultural food To overcome the
escalating demand for agricultural product farmers mainly depend on chemical
technologies to manage pests and to provide enough food Besides their benefits now it
is clear that pesticides are negatively influencing human health and also the natural
environment The food that we are eating has gained more discussion in all over the
world including developing countries like Pakistan that whether this food is safer for
human health and for natural environment Consumers are facing with problemslsquo which
food is safe to eat and which is not safe Which food processing is beneficial for human
and environment and which is worse (Bold et al 2015 Chiew Shi Wee et al 2014
Sirieix 2011 and Butt et al 2015) Most of people are turning towards the production
and consumption of pesticides free food to resolve these issues
In developed countries consumers are highly concerned about the excessive use of
chemicals on food and its negative impact on health and natural environment thatlsquos
why the production of food produced without the use of pesticides Large numbers of
studies are conducted on consumerslsquo perception regarding pesticides- free food in
developed countries like Europe Australia United State and New Zealand but in
developing countries very little is known about consumerslsquo perception regarding
pesticides-free food
Despite the fact that food production without pesticides and other chemicals are safe for
health and environment its production and consumption is very low In Pakistan only
few farmers are using chemicals free technology for food production It has only 28
farms producing pesticides-free food which they just growing for their own
consumption not for commercial purpose In Pakistan there is high gape of information
about consumerlsquos perception and awareness regarding pesticides-free food and
consumerslsquo willingness to pay for pesticides-free food (Panhwar 2004)
Keeping in view the human health hazards and environmental vulnerability owing to
irrational use of pesticides alternative farming systems such as pesticides free farming
integrated pest management (IPM) and organic farming is becoming progressively
7
more popular in the global context However in the country like Pakistan where costly
input and lower output agriculture was a historic focus Following the Green
Revolution in 1960s adoption of certified organic production is expected to be fairly
low Nevertheless aforementioned agriculture practices could be an alternative system
in convincing farmers towards safe and sustainable agriculture and to comply with the
strict regulations and mandates of certified organic system and WTO Moreover due to
conducive and diversified weather and climatic condition of the country and relatively
cheaper labor force availability production of such safer food seems feasible
Pesticides free food is supposed to be having high prices however it is important to
examine whether households are willing to pay a higher price for these pesticides free
fruit According to the research study conducted in different countries of the world on
pesticides free food this study also focus to investigate a price premium that
households are willing to pay for pesticides-free fruit and factors influencing their
decision For this purpose Khyber Pakhtunkhwa (KP) is selected as a research area
Khyber Pakhtunkhwa (KP) is blessed with fertile soil and plenty of water for irrigation
and is famous for production of delicious fruit such as peach apple guava plum
mango Pear apricot date and citrus Fruit farming has been an important business of
Khyber Pakhtunkhwa and the total fruit production during 2015-16 was 411448 tons
from 44737 hectare (GOKP 2015-16) Given that the region is one of the important
fruit growing regions with relatively readily available agricultural labor growers has
the potential to produce pesticides free fruit in this region In this direction more
research work is required to estimate a price premium householdslsquo willing to pay for
fruit free of chemicals and pesticides Thatlsquos why this study is designed to measure
what price premium households would be willing to pay for pesticides free fruit and
improvement in apple peach and mango quality produced by farmers
14 Purpose and objectives of the Study
The irrational and overuse of pesticides in agricultural food production causes severe
damages to human as well as animal health and to the environment too Thus a new
production and new system is needed to overcome these problems and to limiting the
use of these hazardous chemicals during production process The risk of harmful effects
on health and environment are generally reduced with pesticides free farming compared
8
to conventional farming methods Hence pesticides-free farming has the potential to
provide a healthy and safer environment The purpose of conducting this study is to
understand the factors that influence householdlsquos behavior in purchasing pesticide free
food and their willingness to pay for such food The main theme to carry out this study
is to discuss on the variables which determines householdlsquos behavior in the buying
pattern of pesticide free food Besides this research also aims to increase the
understanding on householdlsquos awareness attitude and perceptions towards pesticide
free products
The general objective of this study was to investigate what price premium householdslsquo
are willing to pay for pesticides free fruit produced locally
The specific objectives of this research study are mentioned as below
To study socio-economic characteristics of household and their expenditure on
fruit
To investigate householdlsquos perception towards the use of pesticides on fruit
production
To identify factors influencing householdlsquos willingness to pay (WTP) for
pesticides free fruit
To compare householdlsquos willingness to pay across urban and rural regions of
the study area
To examine the effect of different contingent valuation elicitation format on
householdlsquos WTP
15 Research Questions
1 Do householdlsquos willingness to pay a price premium for pesticide free fruit
produced locally is affected by their socio-economic characteristics
2 Do householdslsquo willingness to pay price premium for pesticide free fruit
produced locally are different in rural and urban regions
3 Do householdslsquo willingness to pay price premium for pesticide free fruit
produced locally are affected by WTP question format
9
16 Hypotheses
Hypothesis is a proper statement that shows the expected association between an
exogenous and endogenous variable (Creswell 1994) Hypothesis is mainly of two
types the null (Ho) and the alternative (H1) hypothesis The null hypothesis is a
statement about the relationship between the dependent and independent variables
while the alternative hypothesis is tested for the acceptance or for the rejection of null
hypothesis through using different test-statistics and usually opposite to the null
hypothesis
161 Hypotheses to be tested
Hypothesis 1
H1 Socioeconomic characteristics have significant effect on householdlsquos WTP
for pesticides free fruit produced locally
Hypothesis 2
H1 Rural and urban locations have significant effect on householdlsquos WTP for
pesticides free fruit produced locally
Hypothesis 3
H1 WTP question format have significant effect on householdlsquos WTP for
pesticides free fruit produced locally
17 Contribution of the Study
The major findings of this research endeavor could be lucrative to pesticides-free food
industry players in designing and implementing programs relating to the production
marketing and consumer behavior regarding fruit and vegetable The study is providing
information regarding householdlsquos willingness to pay an extra amount for pesticides
free fruit at market place The identification of factors influencing purchase of
pesticides free food provides valuable information in formulating short and long term
marketing programs Also the outcomes of the study provide benefits to Government
in their policy making towards pesticides-free farming and pesticides free products
Pesticides free fruit could contribute significantly to wealth formation poverty
lessening and can assess to export market Pesticides free fruit provide healthy food and
natural environment to the society
10
18 Organization of thesis
This study is organized into five chapters In the first chapter background of the study
research questions study hypothesis research justification and contribution of this
study is discussed Chapter two is consist of review of literature related to consumerslsquo
perception market potential and market prospects empirical research studies on
consumerlsquos willingness to pay and consumer knowledge about pesticides free food
socio-demographic variables and their effects on willingness to pay price premium are
discussed Chapter three discuss in detail the study area conceptual and empirical
framework on consumerslsquo willingness to pay and contingent valuation methods are
discussed Chapter four presents descriptive analysis and results obtained from
empirical findings and Chapter five provide summary conclusion and recommendation
and future suggestions on the basis of research findings
11
II LITERATURE REVIEW
Literature review is a synthesis of previous study in the content of a thesis In this
chapter different past investigation are reviewed Mostly this chapter concern on the
methods adopted by different researchers while measuring willingness to pay It also
figure-out various explanatory variables which have been found influencing
householdslsquo willingness to pay an extra amount of money for pesticides-free food
Previous researches on perception questions are also discussed
21 Illustration of Contingent Valuation Method (CVM)
A number of research studies are undertaken across globe to investigate about
consumerslsquo WTP for safer foods such as organically produced pesticides free or
naturally grown Most of the WTP studies use contingent valuation methods where
hypothetical market scenario is developed and subjects are asked to name their WTP
price as compared to existing market price Different techniquesquestionnaires are
used in contingent valuation method where respondents are directly asked to state their
maximum amount of money they are willing to pay for specified improvements in
environmental or health quality The methods used in CVM includes personnel
interview mail and survey that elicit consumerlsquos WTP for those goods yet not available
in the market Survey questions include single bounded double bounded dichotomous
choice and open ended or closed ended (Lusk and Hudson 2004)
Misra et al (1991) studied consumer preferences and their willingness to pay for
pesticides free fresh produce by applying contingent valuation method An ordered
probit model was adopted to know householdlsquos stated willingness to pay for products
free from pesticides residual The study also aimed to know the factors affecting the
probability of householdslsquo WTP for a number of alternative price premiums The
results indicated that householdlsquos willingness to pay was different across different
factors The study concluded that testing and certification was the recommendation of
the households Results also showed that consumers in the study area opposed higher
prices for certified-FPR fresh produce
In another study Gil et al (2000) adopted contingent valuation method and studied
consumerslsquo willingness to pay for pesticides free fruit in Spanish regions Results
showed that consumerslsquo concern over health and environment was increased Results
12
also suggested that due to the adverse impact of conventional food on health and
environment demand for pesticides-free food has raised Results of the study also
showed that consumerslsquo were willing to pay more prices for fruits vegetables and
meats which were free of pesticides
Boccaletti and Nardella (2000) used contingent valuation method to assess householdlsquos
willingness to pay for pesticides free fresh fruit and vegetables To know the impacts of
explanatory variables on the probability of householdslsquo willingness to pay different
price premium an ordered logit model was used and results were reported A
significant and positive effect of income on householdlsquos willingness to pay was
observed Results of the study also suggest that householdlsquos education and associated
risk concern has an inverse relation with households WTP
In another study Millock et al (2002) conducted a research study by using contingent
valuation technique to estimate willingness to pay for pesticides free products through
panel data The information collected was based on weekly report of householdslsquo
purchases of 2000 Danish families Questionnaires were sent to households and asked
them to differentiate different food attributes The food product attributes were included
environmental issues animal welfare and food safety The result showed that
household had given high value to food free from pesticideslsquo residues
Similarly in a relevant study Cranfield and Magnussan (2003) studied willingness to
pay of the Canadian householdlsquos for those products which were free from pesticides
residuals by applying an Ordered Probit Analysis model A contingent valuation (CV)
study was attempted to know that if Canadian households would pay a price premium
for pesticides free food products About sixty five (65) percent of the householdlsquos were
willing to pay a 1 to 10 percent extra amount of compared to those products
contaminated with pesticides residuals About five percent of the total respondents were
willing to pay more than 20 percent price premium The main determinants that switch
over the households to pay higher premiums for pesticides free products were
householdslsquo health concern and environmental concern
In a relevant study John and Eric (2004) developed a survey based research to find out
householdlsquos choice of paying an extra amount for fresh and pesticides free products by
using a contingent valuation technique According to their research 65 percent of
13
households were willing to pay one to ten percent extra prices for pesticides-free
products as compare to conventionally produce one five percent respondents willing
to pay more than twenty percent Health and natural environmental issues youth and
grocery stores were the important factors influencing consumers to pay higher prices
Masias et al (2012) carried out a research study in Spain to analyze the level of
knowledge consumption and consumerlsquos willingness to pay for organic vegetables
such as organic tomatoes By using contingent valuation method three distinct
consumerslsquo groups were identified The results showed consumerlsquos lack of knowledge
regarding organic vegetable Result of the study revealed a clear relationship between
level of knowledge and organic food consumption and consumerslsquo potential willingness
to pay
Boys et al (2014) conduct a research study in Dominica to assess willingness of the
consumerslsquo and their opinion for organic or locally grown produce By adopting
contingent valuation method (CVM) maximum likelihood estimation (MLE) procedure
was applied Findings from the study reported that respondents in Dominica were
willing to pay 175 percent for organic and 12 percent price premium for locally
produced food Results of the study showed that consumer response towards
willingness to pay was different across socio-demographic characteristics family health
status and experience regarding adoption of organic food products
22 Crux of the Double bounded dichotomous choice model
Many recent research studies deployed double bounded dichotomous choice model to
study consumerslsquo willingness to pay for pesticides free organic and related food
Owusu (2010) studied and analyzed market possibility for new pesticides free lettuce
and water melon by using a double bounded dichotomous choice contingent valuation
technique in the city of Kumasi in Ghana The information of the respondents was
collected By applying a Tobit model householdslsquo willingness to pay was assessed
More than 50 percent price premium were paid by 71 percent of the respondents for
natural vegetables and 82 were willing to pay 1 to 50 percent higher premiums for
natural fruits Results showed that human capital food qualities and householdlsquos
recognition impact householdlsquos willingness to pay for pesticide free commodities The
14
evaluated market possibility for pesticide free fruits were (GHcent32117113 US$
26453433) for every annum and for naturally produced vegetable was GHcent1991224
(US$1640083) per year suggested an immense market possibility for naturally
produced fruits in Ghana
sum
(
)
(
)
Where
are binary valued (0 or 1) indicators and the formulas
for the corresponding response probabilities are given above The model was estimated
through maximum likelihood estimation method and the results were used to find out
the mean and individual WTP (s) for pesticides free fruits
Where ƒ(WTP) is a function X is a set of socio-economic characteristics are
coefficients and is error term
In another study Cerda et al (2012) investigated different markets regarding
respondentlsquos preferences and willingness pay a price premium for products free from
pesticide in Chile Conjoint analysis was also used to estimate the marginal willingness
to pay of the consumer for pesticide-free apple A total of 400 individuals were
interviewed to know householdlsquos willingness to pay and to determine different
attributes that consumer search when purchasing apple by using a logistic probability
function and single-bound dichotomous elicitation format The output showed sweet
apple lowest price and pesticides free production attributes were preferred by
households Results of the study revealed that consumers in the study area were willing
to pay about 130 Chilean pesos kilogram for pesticide free apple
By using double bounded dichotomous choice approach Minh et al (2013) conducted
a research study on consumption and willingness to pay a price premium for pesticides
free vegetables in Vietnam Under contingent valuation method 185 respondents were
surveyed and analyzed Results showed that about 15 percent of the consumers had
already used pesticides free vegetables and 88 percent sought to try and purchase such
products if available in the market Result revealed that consumerslsquo were willing to pay
15
on average 70 percent more amount for pesticides free vegetable than the convention
price Findings also showed that respondents with more concerned about pesticides free
food and high purchasing power were more likely to pay extra amount of money
Findings of the study showed most of the consumers were still worrying about safe
food because of chemical residues in vegetables Results suggest that control of
pesticides level was difficult for state agencies because of insufficient capabilities
Some recommendations were suggested based on findings of the study such as the
consumers should be informed regarding organic vegetables and information should be
publicized to consumers and to expand organic market share in the future new shops
should be open
Hai et al (2013) conducted a research study on consumption of organic vegetables and
consumer WTP for vegetables produced without the use of pesticides in Vietnam They
reported in their study that most of the consumers were still worrying about safe food
because of chemical residues in vegetables Control of pesticides level was difficult for
state agencies because of insufficient capabilities By using double bounded
dichotomous choice approach under contingent valuation method 185 respondents
were surveyed and analyzed The results showed that about 15 percent of the
consumers had already used pesticides-free vegetables and 88 percent of the total
respondents desired to try and purchase if such pesticides free products were available
in the market On average consumers were willing to pay 70 percent more price than
the convention price Findings of the study also showed that respondents with high
income and more concerned about pesticides-free food were more likely to pay price
premium
23 Overview of the Ordered Logit Model
Regarding discrete nature and ordinal ranking of the WTP variables in payment card
method an ordered logistic regression was applied in many research studies Ordered
logistic regression is the most appropriate choice in studying these issues (Green
2007) Under latent variable framework the willingness to pay model can be written as
follows
16
Where is an unobserved latent variable reflecting the WTP for pesticides-free fruits
for household i expressed in terms of utility to switch from the traditionally grown
fruits consumption to pesticide free fruits is a parameterlsquos vector reflecting the
relationship between WTP captures a set of socioeconomic and demographic
variables influencing WTP and is the unobserved disturbance term reflecting
stochastic differences between households not controlled for The relationship between
the unobserved and the observed outcome for household ( =0 1 2hellipj) can
be summarized as follows
It is presumed that ɛ is normally distributed across observation
With regards to ordered logistic model Valchovska S (2004) investigated Dutch
householdlsquos attitudes and behavioral intentions to purchase pesticides-free olive oil By
applying CVM to assess consumer willingness to pay a price premium for pesticides
free olive oil on the Dutch consumer an ordered logit regression model was used
Results suggested that willingness to pay did not depend on socio-demographic factors
but rather on consumers awareness and experience with the product Results also
showed that experience regarding the product was significantly related to purchase
intention and willingness to pay Most of the consumers considered pesticide-free olive
oil to be too expensive Results suggested high prices appeared the biggest constraint
on consumption Results clearly verified that consumerslsquo familiarity with pesticide-free
olive oil in the Netherlands was low at present This situation may however be
changed by a possible increased availability of the product in the supermarkets
17
Rodriguez et al (2008) carried out a research study to measure consumers WTP for the
available pesticides free products in Argentina domestic market The data was collected
through a survey from the consumers of Buenos Aires city For the analysis of data a
binomial multiple logistic regression model was applied Five different organic
products such as regular milk leafy vegetables whole wheat flour and fresh chicken
and aromatic herbs were selected for the research The method of contingent valuation
(CVM) was adopted to estimate consumerslsquo stated willingness to pay The result
revealed that pesticide free agriculture has undergone momentous expansion and
consumers in the study area were willing to pay a higher amount of money for such
organic products Research results suggest that along with price that play a significant
rule while consuming organic products non availability of stores for organic products
and a reliable regulatory system limits the consumption of pesticides free organic
products in the study area
According to Kalogeras et al (2009) carried out a research study that concentrates on
the identification of Dutch householdslsquo willingness to pay (WTP) for natural olive oil
The study was carried out in 5 biggest Dutch cities in Netherland To evaluate the
impact of explanatory variables on householdslsquo willingness to pay a price premium for
natural produced olive oil an ordered logit regression model was constructed Results
suggest that experience awareness and consumerslsquo personnel satisfaction were the
variables influencing consumerslsquo WTP for natural olive oil
Travis et al (2009) conduct a research on consumer purchasing behavior for pesticides
free fruits and vegetables To identify the impact of socio-economic and socio-
demographic characteristics on the probability of consumers belonging to certain
groups like devoted casual or nonuser an ordered logistic model was used Results
showed that factors like price and income were influencing householdlsquos willingness to
purchase pesticides-free fruits and vegetables to some extent The results also showed
that respondents with a college degree children aged more than six years and aged
above than fifty years were willing to purchase pesticides-free fruits and vegetables
Zeki and Zia (2009) carried out a research study to investigate consumerslsquo stated WTP
for tomatoes produced free from pesticides residues The study also aimed to measure
the impacts of socio-demographic and hazard variables on WTP Ordered Probit model
18
was used to figure out the likelihood of WTP for pesticide free tomatoes The
information was acquired from 666 respondents by survey method in Ankara and Tokat
regions at same occasion The study results revealed that 3423 percent of Turkish
households were not willing to pay 7702 percent willing to pay a 30 percent higher
amount of money and 22 97 percent would be willing to pay more than 30 percent
premium According to the results Turkish households were paying a little price
premium for tomatoes produced free from pesticides Furthermore the important
factors significantly influencing willingness to pay for pesticides free tomatoes were
gender education statue of mother recognizes for ecologic agriculture solid
sustenance and risk
Oyawole et al (2016) conducted a study in Nigeria to asseslsquo consumer awareness
benefits and willingness to pay for organic vegetables Descriptive statistics and logit
model was used for the analysis of data According to the research findings about 70
percent of consumers were aware of the benefits of organic agriculture and hence they
were willing to pay price premium Results showed that factors influencing willingness
to pay positively were higher education and consumer awareness regarding organic
food while age income and gender had no significant influence on consumer
willingness to pay
Hayati et al (2017) conducted a research study in Marand city to identify factors
effecting consumerslsquo WTP for pesticides-free fruits and vegetables To assess
respondentlsquos willingness to pay an ordered logistic regression model was applied By
using Contingent valuation method data was collected from 394 respondents The
results revealed that 33 of the respondents were willing to pay 20 more price
premium 64 showed 5 to 20 more price premium while only a small portion 3
of the total sample of the consumers were not willing to pay more price for pesticides
free fruits and vegetables Findings of the study also revealed that factors such as
income of the respondent environmental and health concern and consumerlsquos
knowledge regarding pesticides free fruits and vegetables were significantly affecting
respondentslsquo willingness to pay for vegetables and fruits free from pesticides residues
19
24 Factors influencing Householdsrsquo Willingness to Pay
Based on the literature review factors influencing households WTP a price premium
are discussed below
WTPj = β0 +β1Agej + β2Genj + β3Eduj+ β4Hsizej + β5Incj + β6Locj + β7Healthconj+
β8Envirconcernj +
Where
WTP = Willingness to pay for pesticides free fruit = Householdslsquo head age in years
= Gender status of the householdslsquo head = Education level of householdslsquo head in
years = Householdslsquo size = Income of the household = Householdslsquo
location = Health concerned = Environment concerned micro=Error term
Govindasamy and Italia (1991) investigated households in different grocery retail
markets in New Jersy to know their different opinion regarding pesticides free
products The main theme of the research study was to know demographic
characteristics that caused the household to pay a price premium for products free from
pesticides residues than the price prevailing in the market The result showed the
influencing factors that caused the individual to pay more price premium for pesticides
free products were demographics characteristics such as females those having higher
income and young individuals The result also showed that number of member in
households had an inverse relation with willingness to pay More individual in a house
were not willing to pay higher prices for pesticides free products
Piyasiri and Ariyawardana (2002) conduct a research study to identify market potential
and consumerslsquo expectations for pesticides free food in Kandy Sri Lanka The study
also aimed to identify factors influencing consumerslsquo willingness to pay price premium
for pesticides-free food Results revealed that most of consumers in the study area were
aware of the use of pesticides free food and this awareness influenced their
consumption of organic food and willingness to pay more for organic food Results
showed that socio-demographic characteristics like income education of the
respondents beside environment knowledge were the important factors influencing
consumerslsquo WTP for pesticides-free food Study suggested that market for organic food
could be enhanced by availability of organic food in easily accessible shops and market
20
should also direct awareness in consumer regarding demand and consumption of
organic food
Qingbin and Junjie (2003) conduct a study to identify market potential for pesticides
free apple and milk by adopting a conjoint analysis technique in Vermont State of
USA Results found that there was a significant niche market for pesticides free apple
and milk The results also suggested that especially those consumers who were
regularly purchased pesticides free products were willing to pay price premium for
apple and milk produced without the use of chemicals and certified by NOFA
Heo and Kim (2004) investigated green marketing strategies and willingness to pay for
environment-friendly agricultural products in the Metropolitan area The results
revealed consumerlsquos WTP for grain vegetables fruit and processed foodstuffs were
206 percent 202 percent 193 percent and 172 percent respectively higher than
agricultural products produced by conventional farming method
Gracia and Magistris (2007) conduct a research study to know consumerslsquo purchasing
behavior regarding pesticide-free food and also factors influencing food purchasing in
Iran A multivariate limited dependent variable model was used Results showed that
households purchasing pattern was more for pesticides free products and they
purchased such safer products in large quantity Findings of the study showed that
purchase of pesticide free products depends on householdlsquos behavior and information
regarding the product Moreover householdlsquos behavior regarding health concern and
environment concerns given by pesticides-free products were the factors that explained
both intension and final decision to purchase pesticide free products Income and
information about pesticide free products had a significant positive influence on the
decision of the consumer to purchase pesticides free products
Kamal et al (2009) studied householdlsquos willingness to pay a higher price for
pesticides-free products in Kathmandu valley About 180 respondents were interviewed
by using well designed questionnaires to find out their perception for pesticide-free
food commodities and asses their willingness to pay The study revealed that almost all
the respondents were willing to pay a higher price for such food but the level of
acceptability varied Up to 58 of the respondents were willing to pay 6- 20 more
price while 13 were willing to pay half premium The average price premium was
21
noted about 30 Over 39 of the respondents suggest the extra price is reasonable for
pesticide-free food while 27 suggest it a really higher price However results showed
that the consumption of pesticide free food had increased
Morteza et al (2009) conducted a study to examine consumerslsquo willingness to pay for
pesticides free fruits and vegetables The results showed that variables such as socio-
demographic characteristics and perception of the respondents regarding environment
and health concern were influencing consumerslsquo WTP for pesticides free food
Environment concern was the important factor of consumer willingness to pay but
results from this study showed that respondents in New Brunswick gave more priority
to health as compare to environment Results also indicated a positive influence of
income and health concern on consumer willingness to pay for organic food
Ghorbani and Harnraz (2009) carried out a research study on factors influencing
consumer WTP for pesticides free products in Iran By applying Tobit model the
results showed that physical look and information of consumerslsquo were the influencing
factors affecting willingness to pay higher price Consumerlsquos concern of chemicals
residues in diets were also positively affecting willingness to pay In demographic
characteristics such as education of the respondents had negative effect on WTP The
study suggested that farmers and consumers should be encouraged to produce and
consume pesticides-free food Study also suggests that marketing strategies should be
encouraged for the marketing of such organic food products
Akgungor et al (2010) carried out a research study to estimate consumerslsquo perception
regarding safe food and the trade-off that urban Turkish consumer made between good
quality and chemicallsquos free fresh fruits and vegetables The date was gathered from a
representative sample of urban consumers The results suggested higher income and
more educated respondents were highly interested and they had more knowledge
regarding organic products Results showed suggested reason for choosing organic
products was consumerslsquo perception regarding organic products of low health risk and
higher nutritional value Results showed 36 percent higher price premium consumers
were willing to pay for organic food that suggests urban Turkish consumerslsquo demand
for organic products
22
Oraman and Unakitan (2010) analyzed factors influencing Turkish consumerslsquo
purchasing decisions for fruits and vegetables The survey conducted in Istanbul by
applying logistic model Results of the survey showed that health and safety concern
were the important factors influencing consumerslsquo preferences regarding organic food
Findings of the study would help organic food producer in targeting factors that were
influencing consumerslsquo decisions to purchase organic food products
Bektas et al (2011) conducted a research study to determine level of consumerslsquo
awareness regarding food safety in Izmir Turkey by applying Probit model Results
revealed that consumerslsquo with high income and more education were more aware
regarding safer food Outcome of the study also identified aged respondents had more
probability for healthy and safe food products Results suggested that awareness for
safer food should be passed through informative campaign targeting especially low and
middle income groups as well as low education level population
Coulibaly et al (2011) studied the health risk caused by using large quantity of
chemicals and pesticides on vegetables By using a hedonic pricing model they
identified the determinants of the householdlsquos WTP for pesticide free products
Information was collected through a well designed questionnaire on householdlsquos
perception awareness and consumerslsquo willingness to pay for pesticide free vegetables
The perception of householdlsquos for good quality vegetables included color freshness no
external damage and firmness The most important factor effecting householdlsquos choice
to pay more for pesticide-free vegetables were awareness about the health hazards
caused by those chemical Households were willing to pay more than fifty percent for
those products free of such pesticides and chemicals
Joyce et al (2011) conduct a survey to examine consumerslsquo perceptions and to assess
their willingness to pay for pesticides-free product They surveyed 100 households in
Morogoro municipal The results presented showed that 78 of the respondents were
willing to pay a higher price for pesticides-free food The results revealed that
environment and health concern were the most important factors effecting householdlsquos
willingness to pay for organic food Results from the survey suggested that
consumption of pesticides free food were increasing but need certification labeling
processing and packaging to boost up the demand
23
Sangkumchaliang and Huang (2012) conducted a survey on consumerslsquo perception and
attitude towards organic food products Results showed that consumers were
purchasing organic food products because of the expectations that organic food is
healthier and safer to the environment Results also revealed that respondents with old
aged and more educated were more willing to purchase organic food products The
study suggested that consumerlsquos information needed to purchases organic food
Owusua and Anifori (2013) analyzed the willingness of householdlsquos to pay an extra
amount of money to watermelon and lettuce produced naturally or free from pesticides
by applying a (CV) contingent valuation information starting with urban Kumasi in
Ghana The impacts of the determinants of the householdlsquos willingness to pay a higher
price were examined with a Bivariate Tobit model Results showed socioeconomic
characteristics as well as freshness and cleanness of products had a great influence on
householdlsquos choice to pay a higher price than they pay for conventional products
While householdslsquo size has a negative impact on consumerslsquo willingness on paying
premium to natural lettuce The estimated mean householdlsquos willingness to pay for
pesticide free watermelon was Ghcent05554 (US$ 0 4575) and for natural lettuce was
GHcent12579 (US$1 0361)
Haghjou (2013) investigated that the demand for those products that was grown without
the use of pesticides has increased amazingly in the recent years The study was carried
out to assess the factors effecting householdlsquos willingness to pay a higher price for
organic products accessible in the Argentinean provincial market The output of the
study reveals that 95 of the respondents were willing to pay a higher price while 10
of the householdlsquos were like to pay about 35 percent higher price than the market
existed price for naturally grown products The results suggested that householdslsquo
income family size ecological problems including respondentslsquo knowledge has
enhanced their desire to pay higher price for pesticide-free products than the
conventional one The result also showed that female as well as house wives were
agreed to pay more price premium
HUI et al (2013) conduct a survey on householdslsquo WTP a price premium for
pesticides-free products in Klang valley The study was based on householdlsquos
purchases by 2012 on their demographic and social-economic characteristics To study
the householdlsquos perception and WTP for pesticide free products 500 households were
24
interviewed by using well designed questionnaires The data collected were analyzed to
find what determined the presence of pesticide-free products The main theme of the
research study was to know the determinants that playing rule in willingness to pay for
products free from pesticides residues The result revealed that majority of the
households were agreed to pay a higher price premium for pesticide free products
Different factors like environment psychology food free from pesticide residuals and
health conscious were related to explain household willingness to pay for organic
products However the result also showed that social demographic and level of
knowledge did not explain the WTP for products free from pesticide
Syed et al (2014) studied different level of pesticides in different vegetables and fruits
in Pakistan The results obtained showed that more than half of the collected samples
were contaminated with organophosphate pyrethroids and more organochlorines
pesticides Numerous research studies found that tomato apple melon mango grapes
and plum among fruits and vegetables has crossed the maximum residual levels of
FAO and World Health Organization (WHO) The comparison with other areas showed
that in 50 of the sample the residual level was above than the stated level but was in
agreement with neighboring countries like china and Bangladesh Higher hazard risk
index (HRI) values were calculated for dieldrin methamidophos op-DDT diazinon
and pp-DDT in apple mango banana melon potato and onion
Vidogbena et al (2015) carried out a research study in major cities in Benin to asseslsquo
consumer perceptions about cabbage produced by a physical barriers method to protect
cabbage from pesticides Results showed that consumers were aware of the impacts of
pesticides on health and environment but they were not able to differentiate between
cabbage produced conventionally and through this net method Results of the study
revealed that consumer were willing to pay higher price for cabbage produced with
minimum application of pesticides as compared to one produced with pesticides
application Consumers were willing to pay 38 more price than the existed market
price Results indicated that females more educated and aged respondents were willing
to pay more prices for better quality cabbage
Safdar et al (2015) studied pesticide free food consumption and consumerslsquo WTP in
the United Arab Emirates To recognize major determinants of respondentlsquos willing to
pay more price for products free from pesticides residues a regression model was used
25
Around 300 hundred respondents were interviewed and information was collected The
results showed that the consumption of such food was increased in the study area This
increment was due to high per person price premium more knowledge about nourished
food products and different household population Consumers were paid price premium
for the food free from pesticides residuals Results showed that majority of the
respondents respond when inquired as to whether they were willing to pay more for
pesticide-free products Age nationality instruction family size and salary were main
factors influencing consumerslsquo to pay higher price for the pesticides-free food products
Hiren et al (2016) carried out a survey in Tennessee State USA The data were
collected on a random sample from grocery shoppers to assess consumer general
knowledge about pesticides-free food and to know their willingness to pay For this
study binary logistic regression model was used The survey showed that most of the
consumer had a fair knowledge about pesticides free food Results indicated that
number of those respondents who had never been used organic food was higher than
those who usually used The results showed that income and environmental concern
were the factors that effectively determine to pay more for pesticides-free food
Aguiar et al (2016) studied factors influencing consumerslsquo purchasing behavior
regarding organic food in Brazil by using structural equation modeling (SEM)
approach Results revealed that most of the consumerslsquo were willing to buy organic
food Respondents were willing to pay 25 percent price premium for organic food as
compared to food produced conventionally Results suggest the main determinants of
consumerslsquo willingness to pay were their beliefs of positive effects of organic food on
health and environment
Mangan et al (2016) studied level of awareness and willingness to pay for organic
vegetables in Sindh province of Pakistan Result of the study reported that majority of
the respondents had knowledge about the beneficial effect of organic vegetables while
less than half of the respondents had never heard about organic vegetables Results also
showed that most of the respondents (82) were not aware of the benefits of organic
vegetables to the environment Majority of the respondents were willing to pay price
for organic vegetables
26
Nandi et al (2016) studied consumer willingness to pay for organic fruits and
vegetables and also factors influencing consumerslsquo WTP in India For the estimation of
respondentlsquos willingness to pay contingent valuation method (CVM) was used For the
data analysis 250 respondents were selected A binomial regression model was used to
know respondents willingness to pay and the factors influencing on WTP Results
revealed that most of the respondents were confronted with environment problem
health related issues and safe environment and food The respondents were increasingly
desired to have more healthier and environmental friendly food To acquire better
quality of fruits and vegetables about 90 percent of consumers were willing to pay a
price premium ranging from 5 percent to 100 percent Factors like income of
respondents householdlsquos size gender and other opinion variables such as pesticides
residues in food taste and environmental concern were significantly influencing
consumer willingness to pay a price premium
Slamet et al (2016) conducted a research study to identify factors influencing
consumerslsquo willingness to purchase pesticides free vegetables in Jabodetabek region
(Jakarta) Data was obtained through a householdlsquos survey Three methods binary logit
model descriptive analysis and factor analysis were used for analysis of data The
results showed that respondents with more income minimum householdlsquos size and
price tolerant were more likely to purchase pesticides-free vegetables The study also
indicated other factors determining consumerlsquos willingness to purchase for pesticides-
free vegetables were positive attitude health concern environment concern as well as
positive belief in pesticides-free vegetables
Gumber and Joyti (2017) conduct a research study in national capital region of India to
find out price premium and factors effecting consumerslsquo WTP for pesticides free food
Results of the study showed that consumerlsquo demographic characteristics like education
income of the respondents environmental concern and health related issues were the
important factors influencing consumers to pay higher price for organic food Besides
other variables like taste physical look certification packaging and promotion were
found to have no influence on consumer willingness to pay for pesticides-free food
Results suggested organic food producer to design communication strategies and
suitable pricing strategies in the study area
27
25 Essence of the Literature Reviewed
The above literature reported that several studies have been conducted on
consumerhouseholds willingness to pay for pesticides-free fruits with contingent
valuation method (Govindasamy and Italia 1999 Krystallis and Chryssohoidis 2005
Quagrainie 2006 Kimenju and De Groote 2008) In this type of models a
hypothetical market scenario is developed in which consumer are asked about their
stated WTP a price premium Misra et al (1991) and Boccaletti and Nardella (2000)
used contingent valuation method and analyzed household willingness to pay for
organic products in Italy and USA Gil et al (2000) also used the contingent valuation
model in Spain and reported that respondents in that study area were willing to pay a
price premium for pesticide-free fruits
Regarding the socio-demographic profile of pesticides-free products the above
underline research study showed that mostly female respondents were willing to pay
price premium more frequently than male respondents Age factors also played an
important role with older consumers observed more WTP due to their health concern
On the other hand income played a vital role while buying safer food Literature also
supported that more educated respondents are willing to pay more price premium for
healthier and environmental friendly food products
The preceding review presents valuable information on contingent valuation method
and consumer willingness to pay price premium for organic foods and environment
resources Since most of the work had done on consumer willingness to pay for
pesticide-free fruits in developed countries but not a few studied paid much attention to
conduct research on householdslsquo willingness to pay for pesticides-free fruits in
developing countries like Pakistan
A few facts emerge the literature review One the coverage of consumerslsquo WTP for
organic and pesticide-free food is rather thin in the literature The lack of this
information could inhibit governmental and developmental agencieslsquo decision Second
the consumer WTP is a factor demographics and consumerslsquo perception This study
uses CVM to explore Pakistani consumer WTP for pesticide-free fruit We found socio-
demographic factors such as age education income householdlsquos size householdlsquos
head education and perception significantly influencing householdslsquo WTP Findings of
28
WTP
Environmental
concern
Socio-demoghr
aphic characte
risitcs
consumer knowledge of PFF
Health
concern
this study almost showed 26 percent price premium that suggest a strong indication of
consumerslsquo demand for pesticide-free fruit This is a convincing message for
agriculture policymakers to encourage and educate farmers for production of pesticide-
free fruits Thus this study is timely relevant and provided additional information on
understanding consumerlsquos attitudinal behavior choice and factors effecting willingness
to pay for pesticide free fruits in Khyber Pakhtunkhwa (Pakistan)
Review of literature highlighted different influencing factors that affect the consumers
willingness to pay for pesticides-free food are shown in figure 1 It shows that
perception of consumers regarding human health and environment and socio-economic
and socio-demographic characteristics have an influential affect on consumer
willingness to pay
Figure 1 Factors effecting consumerrsquos WTP for pesticides free fruits
29
III MATERIALS AND METHODS
This chapter consists of two sections The first section describes the study area while
the second section presents the conceptual frame of the study The second section
provides a detailed discussion about the methodology being employed for the research
In the beginning of this section a brief debates provided on Contingent Valuation
Method (CVM) used to analyze householdslsquo willingness to pay (WTP) and later on
elaborate specification of the empirical models used for capturing the factors
influencing householdlsquos willingness to pay for pesticides-free fruit and vegetables is
given followed by a discussion on how the data was collected in the study area
31 Khyber Pakhtunkhwa
Khyber Pakhtunkhwa (KP) occupies a north-west position in Pakistan with a total area
of about 74521 square km Gilgit-Baltistan is situated on its northeast Punjab on the
southeast and Azad Kashmir on the east A long and narrow piece of land belongs to
the Federally Administered Tribal Areas (FATA) borders situated to its south and
Baluchistan directly below it On its west Federally Administered Tribal Areas are
situated and Afghanistan is situated on its northwest According to census report 1998
the total population of KP was 177 million According to the 2011 Census Bureau of
Pakistan house listing operation the population of KP was estimated to be more
than 268 million There are a total of 26 districts in KP Naturally KP has been
endowed with abundant cultural and tourism friendly environment It has the capability
to become a charming area for the tourist in the world Due to its beautiful and
attractive scenery geographical location climate and God gifted natural resources KP
is exceptionally abundant in terms of multitudes of tourist attraction The core of this
charm is clear from the striking natural picturesque consisting of beautiful rivers
attractive and splendid waterfalls spiral lakes mostly in the hilly areas and ever green
valleylsquos in most parts of the province TCKP (Tourism Corporation Khyber
Pakhtunkhwa(2015)Districts of KP is shown in figure31
30
Figure 31 District Peshawar and Mardan of Khyber Pakhtunkhwa
31
32 Sampling Technique
Three stage stratified sampling technique was used for the collection of data
from study area
321 Stage 1 _Selection of district Peshawar and Mardan
In the first stage as KP is comprised of 26 districts Peshawar and Mardan was
purposively selected The purpose behind this selection was huge population in these
two districts
322 Stage 2 _ Selection of Union Councils (UCs)
In the second stage from each selected district one urban and one rural union
council were randomly selected Thus a total of 4 union councils were taken as a
sample location from both districts
323 Stage 3 _Selection of households from each Union Council
In the third and final stage a list of households was obtained from local union
councillsquos health department (BHU) The following Yamanelsquos (1967) formula was
used to decide sample size of households
Where
- r is the sample size for households
- N is the total households in selected UCs and
- e is the minimum probability of error
The value of ―e was selected at e = 003 with the intension to keep the error at lowest
possible level and select a best representative sample from the given population of
10020 households
The Yamanelsquos formula suggests a sample size of 1000 households from two districts
After deciding sample size households was taken from selected union councils (UCs)
using proportional allocation sampling technique The allocation is said to be
32
proportional when the total sample size n is distributed among the different union
councils in proportion to the size of strata
=
____________________ (2)
Where
- = no of sampled respondents in each stratum
- Ni =population size of ith UCs
- N = the total number of households in selected UCs
- n = total number of households
The number of sampled households selected through proportional allocation method is
given in table 31
Table 31 Total population and sampled households from selected UCrsquos
District Union councils Total households Sampled
households
Mardan Urban 3090 309
Rural 1910 191
Peshawar Urban 3000 300
Rural 2020 202
Total 4UClsquos 10020 1000
Source Local Basic Health Unit (BHU) Peshawar and Mardan
33 Allocation of Sample Size for Different Models
A total of 1000 sampled respondents were selected for this research study from urban
and rural areas of the two districts namely Peshawar and Mardan of Khyber
Pakhtunkhwa Pakistan A sample of 600 respondents was reserved for double
bounded dichotomous choice model For the best estimation of parameters double
bounded model requires large sample size compared to open ended and payment card
model (Calia and Strazzera 2000) Out of total respondents a sample of 400
households were allocated for linear regression model and ordered logit model 200
for each model
33
34Contingent Valuation Survey Designing
CVM produces values contingent upon the description of the resource and the method
of payment The accurate measurement of any resource requires a detailed description
of the resource (Loomis et al 2000) The survey designed for this study started with the
description of the conventional food commodities and uses of different varieties of
chemical pesticides on fruit and vegetables before and after harvest After the
description of pesticides its harmful effects on human being as well as on environment
then pesticide free fruits were discussed with the households After describing the
benefits of pesticides free fruit respondents were asked to rank the relative importance
of each benefit The main reason for asking this question was to reveal householdlsquos
preferences their non-monetary value for use and nonuse benefits and to compare
them with their stated WTP response
Results in CVM are sensitive to the valuation question format and payment mechanism
(Carson and Hanemann 2005) The National Oceanic and Atmospheric Administration
(NOAA) Blue Ribbon Panel recommended the use of single bounded dichotomous
choice CV questions with mandatory payment vehicles (Arrow et al 1993) However
recent studies show that the single bounded dichotomous choice method provides
limited information about householdlsquos WTP and produces higher WTP compared to
open-ended question and payment card method (Zhongmin et al 2006) The single
question dichotomous choice method requires a large number of respondents to obtain
an accurate estimate of WTP (Carson and Hanemann 2005) People in the study area
were not familiar with CV Survey The use of an open-ended question format may
generate high zero WTP responses Consequently this study used the entire three
payment format to elicit householdlsquos WTP for pesticides-free products
35 Householdsrsquo Survey
This research mainly based on primary data The primary data was amassed through
interview schedule On the basis of objectives of the study a well-defined questionnaire
was prepared and was pre-tested in the field A small Pre-test was conducted before the
final data collection About 1000 households from Peshawar and Mardan were face to
face interviewed In contingent valuation studies face to face interview is more reliable
(Carson 2000) Socio-demographic characteristics attitudinal and behavioral
34
information of the households were collected Through this survey the data was
gathered both from rural and urban areas of the selected districts District Peshawar and
urban areas were taken equal to one and district Mardan and rural areas were taken
equal to zero Before asking the respondents for their willingness to pay a price
premium they were briefed about the differences among the conventional and
pesticides free fruit The attitudes of the consumers and knowledge about the minimum
use of pesticides on fruit were also gathered to better know how the respondents relate
different aspects of pesticides free fruit These attitudinal behavior questions were
posed using a modified Likert scale response (where a one equals agree and zero equals
disagree) Different values were assigned to each response according to a well-defined
method in the literature (Cranfield and Magnusson 2003)
36 Conceptual Framework
This section is devoted to the conceptual framework of the study Households utility
and willingness to pay willingness to pay and contingent valuation method and the
estimation of mean WTP are discussed The empirical discussion on the factors
influencing householdlsquos willingness to pay a price premium is also discussed
361 Householdrsquos Utility and Willingness to Pay
Willingness to pay could be analyzed as a householdlsquos choice problem Following
Canfield et al 2003 the study assumes that a household who buys and consumes a
conventionally produced food products encounters the same food products but in
pesticide free form on the market The household who decides to purchase pesticide-
free fruits instead of the conventional one does so because it is assumed that hisher
utility is higher for the pesticide-free food (Magnusson et al 2005) If the utility does
not change then a rational household will not be willing to pay as an increase in the
price results in a lower level of utility compared to the base level of utility Also if the
utility increases then the household may be willing to pay more for pesticides-free
food on the basis that the price increase does not lower the utility beyond the base level
(Cranfield et al 2003) The householdlsquos willingness to pay is therefore a function of
the change in utility arising from the consumption of pesticides-free food Thus
35
Where ∆U is the change in utility
Since the choice of one product over another is a discrete one it is convenient to look at
householdlsquos choice problem in a random utility setting Random utility models have
been used extensively in the valuation literature in the analysis of householdlsquos food
safety valuation and assessment of householdlsquos response to new (or different) products
(Eom 1994 Veeman and Adamowicz 2000 Kuperis et al 1999 Quagrainie et al
1998) Following the random utility framework proposed by Cranfield et al (2003) it
is assumed that a household faces a choice between buying either the conventional or
pesticides-free food variety of the same product The utility derived from consuming a
given product by a household is given as
Where
Where is the utility arising from choosing the ith alternative is the deterministic
component of the utility function is a vector of observable alternative specific
factors that influence utility is a vector of parameters and is the stochastic
component The households choose alternative if and only if for all (or
that without loss of generality
The utility of the household is however not observable What is observed is whether or
not the household chooses to pay a premium for the pesticide free product
362 WTP and CVM
On the basis of stated preferences consumer willingness to pay can be measured by
several methods To extensively elicit consumer preferences for food labels on different
attributes economist and market researchers have used contingent valuation (CV)
choice experiment (CE) and experimental auction (EA) or combination of all the three
methods (Fox et al 1994 Fox 1995 Huffman et al 1996 Hossain et al 2003
Loureiro and Umberger2003 2005) To estimate willingness to pay (WTP) economist
must turn to hypothetical due to unavailability of markets for the good or service
Historically Contingent Valuation Method (CVM) has been used for the evaluation of
consumerlsquos preferences for those goods not available in the market
36
Contingent Valuation Method is a survey based method where respondents are
presented with a hypothetical payment scenario for pesticide free products in this study
pesticides-free fruits Methods used in contingent valuation include face to face
interview surveys and mail to elicit consumerlsquos willingness to pay for organic and
pesticide-free food Contingent valuation method based on a survey approach was
presented by SVCiariacy-Wantrup (1947) however contingent valuation method was
first time empirically used by Davis (1963) Due to its proficiency most of the
researchers and policy makers used this technique to elicit consumerlsquos valuation for
those goods which are not available in the market such as research concerns to
environment health and recreation (Jakobsson ampDragun 1996)
The classification of framework to measure WTP based on the data collection methods
are as presented in Figure 32 We employed contingent valuation method (CVM) to
measure householdslsquo willingness to pay for pesticides-free fruits among the different
available alternative methods in the literature CVM was the most widely used
approach (Hanemann 1984)
Figure 32 Classification framework of methods to measure willingness-to-pay
Source (Breidert Hahsler ampReutterer 2006)
37 Elicitation Techniques
According to Portney(1994)to draw out the value of good and service different
elicitation techniques are used to design CV question scenario It is the important part
37
of any CVM study The elicitation used in contingent valuation methods are of various
types The most popular ones are bidding game approach open ended payment card
and dichotomous choice approach
371 Bidding Game Approach
In this approach a bid is randomly assigned to each respondent from a list of
predetermined bids The assigned bid may be a lower bid or higher bid Respondents
are to answer the bid and the process is continuous until the highest positive response is
recorded (Randall et al 1974 as cited in Venkatachalam 2004) Since this approach
provides market like situation and the respondents can research their preferences so the
results obtained through this approach are quite better
372 Open-ended Elicitation Method
In open ended questions format respondents are asked to identify a single amount
without suggesting them any value Respondents are asked to give their opinion on
―How much they willing to pay for a certain attribute Mitchell and Carson (1989)
found certain drawbacks in using this question format They reported that this method
provides maximum no response no answer and outliers In this method respondents do
not know what value heshe has to select
373 Payment Card Approach
Another technique in contingent valuation method is the payment card approach In this
question format respondents are asked to select an amount in willingness to pay from a
checklist given in absolute value or in percentage of prices (Boccaletti ampNardella
2000 Lacaze Rodriguez and Lupin 2009)This approach is used for small sample
size However it has been noted that the respondents could easily be confused if the
survey is not carefully designed (Wang and Whittington 2005)
374 Dichotomous Choice Model
In this format two choices are provided to respondents ―Yes or ―No This format
resembles the market choice behavior It included single bounded double bounded and
multiple bounded questions format
38
A Single Bounded Method
The single bounded format was first used by (Bishop and Heberlein 1979) The
consumers are asked whether they would be willing to pay a single amount for a certain
goods having an extra quality attribute The answer expected might be ―yes or ―no to
the given amount This format is easy to use but it provides limited information for
willingness to pay amount and the bidding game stop after a single information
provided
Most of the research work done on willingness to pay has suggested that respondents in
contingent valuation methods do not have a single value of price but they might have a
range of economic values in their mind (Cameron ampQiggim 1994 Dobourg Jones-lee
and Loomes 1994)
B Double Bounded Method
In double-bounded questions format respondents are presented with follow-up
questions after asking the first question For example if respondentlsquos answered to the
first question is ―yes willingness to pay a $X the next question might be whether
respondents willing to pay $Y (typically $Y gt $X) On the other hand if respondents
say ―No the first question than heshe might ask whether the respondents willing to
pay $Z (typically $Z lt $X) This questionlsquos approach is also called doubled-bounded
referendum approach (Cameron ampQiggim 1994) In comparison with single bounded
model more statistical efficiency can be seen by estimating doubled-bounded
willingness to pay data with the help of interval based econometric model (Heinemann
et al 1991) Figure 33 shows double bounded choice format
This study used all the three question scenarios to elicit WTP for pesticide free fruits
39
WTP
Yes
wtp
1st bid
yes
wtp 2nd
higher bid
yes No
No
wtp 2nd lower bid
yes No
No
Figure 33 Double Bounded Choice formats
38 Empirical Estimation of WTP by Payment Card using Ordered Logit Model
Regarding discrete nature and ordinal ranking of the WTP variables in payment card
method an ordered logistic regression was applied as the most appropriate choice in
studying these issues (Green 2007) The WTP model can be written under latent
variable framework as follows
Where is an unobserved latent variable reflecting the WTP for pesticides-free fruits
for household i expressed in terms of utility to switch from the traditionally grown
fruits consumption to pesticide free fruits is a vector of parameters reflecting the
relationship between WTP captures a set of socioeconomic and
demographicvariables influencing WTP and is the unobserved disturbance term
reflecting stochastic differences between households not controlled for The
40
relationship between the unobserved and the observedoutcome for household
( =0 12hellipj) can be summarized as follows
It is presumed that ɛ is normally distributed across observation By normalizing the
mean and variance of ɛ to zero and one the following probabilities can be calculated
Where F () indicates distribution function and microlsquos are unknown parameters to be
estimated with β
A natural question arises that when a variable influencing outcome changes than how
this variable influences the probabilities of different outcome For example if age is a
factor which influence consumer willingness to pay different choices then how would a
personlsquos probability of being WTP different choices be effected if heshe was a year
older Aldrich and Nelson stated that the estimated coefficients only determine the
direction of the effect but not the magnitude The magnitude of ordered logit cannot be
simply interpreted but signs and statistical significance agree with linear regression
(Wooldridge 2001) To answer the above question and take the idea marginal effects
can be calculated The marginal effects show that how a change in explanatory
variables affects the probability of willingness to pay that consumers are willing to pay
for different WTP classes In this model the coefficients are not equal to the marginal
41
effects of explanatory variables on probabilities Since the marginal effects can be
calculated by the following equation
There are two broad Cumulative density function (CDF) choices Logistic density
function and standard normal density function The model is said to be ordered logit if
the distribution is cumulative standard logistic (F) and the model is said to be ordered
Probit if the distribution is cumulative standard normal (Φ) Results obtained from
both of these models are same only the difference is in the tail The logistic distribution
has heavier tail than the standard normal distribution As Green (2000) reported ―It is
difficult to justify choice of one distribution over other on theoretical grounds in most
applications it seems not much difference The results obtained from both models
may be quite similar because of the similar distribution However an ordered logit
model is applied in this study
Empirically we estimated ordered logit model where WTPj is an ordered dependent
variable with ten WTP price premium categories
Table 32 Payment card format
Price premium classes (PKR)
WTP
= 0
WTP
1-5
WTP
6-10
WTP
11-15
WTP
16-20
WTP
21-25
WTP
26-30
WTP
31-35
WTP
36-40
Above
40
Source Pre- tested field survey (2017)
42
39 Empirical Estimation of WTP using Double Bounded Dichotomous Choice
Model
For Dichotomous choice question Following Chen et al (2002) and Kimenju et al
(2005) a double bounded dichotomous choice model was used in this study to assess
householdslsquo willingness to pay and the influence of explanatory variables on
householdlsquos WTP a price premium for pesticides-free fruits This model was used
because the dependent variable was double dichotomous whether the respondents
would be willing to pay or not so they provide answer with ―yes or ―no Many
researchers used double-bounded dichotomous choice method in their research such as
(Ara 2002 Rodriguez et al 2007 Abdullah and Jeanty 2011 and Claudy et al
2011)
The double-bounded method confronts each respondent with two dichotomous choice
WTP questions (bids) The 2nd
bid value is contingent on the respondentlsquos reply to 1st
bid If the respondent responds in ―yes to the first bid (B) than the second bid (Bu) is
some amount higher than the first bid (Bu
gt B) If the respondent says ―no to the first
bid the second bid (Bd) is then some lower amount (B
d lt B) Thus there are the
following four possible outcomes for the double-bounded WTP question ―yes-yes
―yes-no ―no-yes and ―no-no
According to Hanemann et al (1991) the probability of answering ―yes-yes (Pryy) is
= )
Where Pryy is the probability of answering ―yes-yes WTP is the respondentlsquos
willingness to pay for the product and F is the cumulative distribution function with
parameter vector Similarly the probability for each of the other three outcome
responses is
]
43
Where and are the probabilities for saying ―yes-no ―no-yes and ―no-
no to the double-bounded question respectively Thus the log-likelihood function for
the ith
respondent can be written as
sum
(
)
(
)
Where
are binary valued (0 or 1) indicators and the formulas
for the corresponding response probabilities are given above The model was estimated
through maximum likelihood estimation method and the results were used to find out
the mean and individual WTP (s) for pesticides free fruits
Where ƒ(WTP) is a function X is a set of socio-economic characteristics are
coefficients and is error term The models were estimated using maximum
likelihood estimation method
391 Factors which could Influence WTP
As Kimenju et al (2005) has indicated WTP is influenced by householdlsquos knowledge
and perception in addition to price and socio-economic factors Moreover
householdlsquos WTP may be influenced by individuals tastes and preferences income
and perceptions on the products in addition to household and socio-economic
characteristics (Cranfield and Magnusson 2003)
A number of different explanatory variables were included in the WTP model These
include demographic variables regional variables and perceptional variables The
variables that are included may depend on the manner by which the data is gathered
(ie contingent valuation surveys experimental methods etc) Factors which
influence householdlsquos willingness to pay for pesticides-free fruits are formally specified
as
44
392 Bids Design
In this study hypothetical prices (bids) for double-bounded dichotomous choice model
were designed based on the prices available for conventional fruit in the market On
average (Rs100kg) To minimize starting bids bias bidding system was used in table
31 Respondents were asked different bid
Table33 Bid system for Pesticides free fruits
First bid High bid Low bid
10 20 5
20 30 10
30 40 20
40 Above 30
Source Field Survey (2017)
310Empirical Estimation of WTP using Linear Regression Model
For open ended questions data a linear WTP model was used to estimate WTP and
identified its determinants
sum
Where
= is the WTP of the jth household for Pesticides-free fruits
= Set of socioeconomic characteristics of the jth household
Factors effecting consumerslsquo willingness to pay for pesticides free fruits can be written
as
Willingness to pay is actually represents the demand of the household The difference
in both is only the consumer surplus If we suppose zero consumerslsquo surplus than the
two identities are the same Therefore willingness to pay in the above model showed
percentage of expenditure on pesticides free fruit of the total food expenditure The
explanatory variables included were age gender education householdlsquos size income
45
location health concern environment concern and awareness Since the dependant
variable in the model is continuous so the appropriate method of estimation was
ordinary least square (OLS)
311Description of Variables
Table 34 presents a list of explanatory variables used in estimation of willingness to
pay a price premium for pesticides-free fruits
Table34 Description of explanatory variables
Respondents willingness to pay
WTP ( Price Premium)
0= Not willing to pay
1= Willingness to pay 1-5
2= Willingness to pay 6-10
3= willingness to pay 11-15
4= willingness to pay 16-20
5= willingness to pay 21-25
6= willingness to pay 26-30
7= willingness to pay 31-35
8= willingness to pay 36-40
9= willingness to pay above
Age of the householdlsquos head
Age Age of the householdlsquos head measured in years
Gender of respondents (Dummy variable)
Gender 0= Female
1= Male
Householdlsquos head education
Education Education of the householdlsquos head in years
Member in each household
Householdslsquo Size In number including all family members
Households location 0 = Rural households
1= Urban households
Awareness Household knowledge regarding pesticides uses on fruits
where 1 shows aware respondents and 0 shows unaware
respondents
Income Income of the households in Pakistani rupees
Consumer attitude towards impact of pesticides on health
Health concern 1 if respondents concern to health 0 if not concerned
Consumer attitude towards impact of pesticides on environment
Environment concern 1 if respondents concern to environment 0 if not
concerned
46
1V RESULTS AND DISCUSSION
This chapter illustrates the major finding of this research endeavor These findings are
computed in the light of major objectives and hypotheses constructed for this research
The collected primary data was punched into the computer and was estimated
encompassing double bounded dichotomous choice model ordered logit model and
linear regression model in the STATA econometric software This chapter is further
bifurcated into three sections In the first section a descriptive statistics is computed to
elaborate the respondentlsquos traits of the study area that includes socio-economic and
demographic aspects as well Followed by the analysis of major attributes such as
attitudinal behavior perception about pesticides free fruit and householdlsquos consumption
behavior that has attain the specific objectives of this study The empirical results on
willingness to pay are underscored in section two Moreover the three different
questionnaires ie dichotomous choice open ended and payment card are adopted and
their results are discussed and compared with each other in section three
41 Descriptive Analysis
Descriptive analysis is a statistical tool that is used to summarize the collected data in
tabulated form The range of data mean value median standard error and variance
coefficients are highlighted via statistical analysis This helps the researcher and readers
to get understanding about the pattern of data This section consists of the descriptive
part of the analysis Socio-demographic characteristics such as age gender education
and other attributes of the respondents are shown in the tabulated form Moreover
socio-economic portfolio that includes income consumption and certain perception
along their attitudinal trend regarding organic and conventional fruits are given and
discussed
411 Demographic and Socio-economic Characteristics
This section demonstrates the demographic and socio-economic characteristics of the
respondents The information was gathered from 1000 household of the study area
47
Age of the householdrsquos head
Householdslsquo age is an essential demographic characteristic and an important factor that
can influence householdslsquo willingness to pay An average age of the household in
district Peshawar and Mardan is computed and given in Table 41 The computation
depicts that an average age of the respondents in Peshawar is reported around 40 years
while in Mardan an average age is observed as 54 years Result reveals a significant
difference in the mean age of rural and urban location of Peshawar with a probability of
(0001) Whereas no significant difference was found in householdlsquos age in urban and
rural region of district Mardan
Table 41 Age of the householdrsquos head (Years)
District Age of the Respondents
Mean Rural Urban T-test
Peshawar 3997 35382 42333 7217
(0000)
Mardan 5402 53188 55870 1104
(0136)
All 46995 47310 46659
Source Authorrsquos calculation based on Survey Data 2016-17
Educational Level of the Householdrsquos Head
An individual entails modern education about developments in technology science and
an array of other managerial skills that drives consumerlsquos behavior Education can also
play a pivotal role in consumerlsquos awareness while choosing improved quality of food
Therefore education can be considered as an imperative factor influencing consumerlsquos
decision to pay higher price for pesticides free fruit Several research studies carried out
across the globe have corroborated that an educated households with higher
qualification are more conscious while making purchasing decision and prefer to
choose pesticides free fruit
Keeping in view an education as a substantial factor persuading consumer behavior the
householdlsquos head education level was analyzed and is presented in Table 42The
descriptive statistics divulged that the mean educational level was observed as 978 and
1138 years of schooling of the household head in Mardan and Peshawar respectively
Estimates of t-test further depicts a significant difference in educational level in rural
48
and urban region of both districts with a p-value of (0001) and (0000) for Mardan and
Peshawar respectively These findings suggest a higher level of education in urban
households compared to rural households These results are in line with Shah et al
(2016)
Table 42 Educational Level of the Householdrsquos Head (Years)
Districts Educational Level
Mean Rural Urban T-test
Mardan 978 8782 12012 3780
(0001)
Peshawar 1138 7735 13257 8016
(0000)
All 1058 8436 12855
Source Authorrsquos calculation based on Survey Data 2016-17
Households Size in the Study Area
Householdslsquo size is an important demographic characteristic which shape households
purchasing behavior Large householdslsquo size increases the consumption without taking
quality in consideration The probability of choosing an improved version of fruit
quality decreases with an increase a member in a household Small size households are
more concerned about good quality of fruit
An estimation of household size data illustrates that an average household size in
district Peshawar and district Mardan was reported as 06 and 09 members respectively
The results shown in Table 43 have suggested no significant difference in householdslsquo
size in urban and rural areas of both districts The average householdlsquos size was
computed as 715 members These results are consistent with Shah et al (2016) who
depicted similar findings for household size in KP
Table 43 Householdsrsquo size of the Respondents (Member in Number)
District
Mean Rural Urban T-test
Mardan 863 8666 8548 0965
(0400)
Peshawar 567 6029 5484 -2122
(0018)
All 715 7796 6463
Source Authorrsquos calculation based on Survey Data 2016-17
49
Income of the Households
The household income level is one of the driving aspects that manipulate the
consumption and saving behavior of an individual Those societies where individuals
earn high income are usually deemed as food secured societies across the globe
however low income group of the poor societies are generally reported as food
insecure It is worth-mentioning that surge in an income can subsequently leads to
choose high quality food (that includes cereals fruits vegetables pulses and their
byproducts) by individuals Likewise householdlsquos income has considered as an
important determinant of willingness to pay for quality attributes such as pesticides
free
An income status of the households in the study area is outlined in Table 44 The mean
income of the Household was calculated as Rs62130 and 42430 in district Mardan and
Peshawar respectively There was a significant difference in the mean income of
respondents from urban and rural areas of both the districts The T-value of Mardan
region was signified as 6018 and had a probability of (0000) while in Peshawar region
was 950 with P-value of (0000)
Table 44 Householdsrsquo Income in Pakistanrsquos Rupee (PKR)
District
Mean Rural Urban T-test
Mardan 63130 5489855 8145161 6018
(0000)
Peshawar 42430 2923529 4922727 9504
(0000)
All 52780 4642718 5952577
Source Authorrsquos calculation based on Survey Data 2016-17
Householdrsquos Expenditure on Food
Food consumption expenditure is the monetary expense incurred by household to
purchase food items Such food expenditure is the key component of current
expenditure to buy consumable goods The data regarding householdlsquos expenditure on
food is estimated and is shown in Table 45 The mean expenditure incurred on food by
the household in Mardan and Peshawar was determined as Rs 49280 and 34860
respectively A significant difference in rural and urban householdlsquos food expenditure
has been reported The computed t-value observed as 425 and 743 with a p-value
0000 which implies that householdlsquos expenditure in urban region was higher as
compared to rural households
50
Table 45 Households expenditure on food (PKR)
District
Mean Rural Urban T-test
Mardan 49280 4511594 5854839 4256
(0000)
Peshawar 34860 2544118 3971212 7435
(0000)
Total 42070 3862136 4573196
Source Authorrsquos calculation based on Survey Data 2016-17
Note Values in parenthesis is P-Value
Householdrsquos Monthly Expenditure Share on Fresh Fruit
Expenditure share is an amount of income that is incurred by an individual on certain
goods out of total spending Households in the study area have allocated their income
share to make an expense for fresh fruits which is shown in Table 46 It has been
observed that in districts Mardan an average spending for fresh fruit was computed as
4172 (PKR) per month by the household Whereas expenditure share for fresh fruit by
Peshawarlsquos household was 3800 (PKR) which was less as compared to Mardan The
given t-values of the estimates confirm a significant difference in expenditure share
incurred for fresh fruits by rural and urban region households of both the districts This
significant difference implies that householdlsquos expenditure share for fresh fruit in urban
area is higher as compared to rural households
Table 46 Householdrsquos monthly expenditure share on fresh fruits (PKR)
Respondents
Mean Rural Urban T-test
Mardan 4172 3798551 5003226 3055
(0000)
Peshawar 3800 2411765 4515152 5103
(0000)
All 3986 3340777 4671134
Source Authorrsquos calculation based on Survey Data 2016-17
51
412 Householdrsquos Awareness and Perceptions about Pesticides Application on
Fruit
This research endeavor was mainly designed to assess the consumer willingness to pay
for pesticides free fruit Therefore it was pertain to glean data about their awareness
about pesticide use on locally produced fruit in the study area These fruit include
Apple Peach and Mango Due to irrational use of pesticides environmental hazards are
also reported by previous research studies therefore there respondents were asked about
their perception about environmental hazards Major findings about the aforementioned
aspects are underscored in Table 47 which reveals that 61 percent of respondents have
a perception that there is an irrational and intensive use of pesticides on fruit by the
local fruitlsquos farmers Around 88 percent of the respondents perceived environmental
and health concerns over pesticides residues in food Similarly 91 percent of the
respondents believed that farmer should engage in environmental friendly agricultural
production practices which have a minimum adverse impact on health and the
environment
However the overall results indicate that sampled households were not entirely
cognizant about an intensive use of pesticide on local fruits however they were
correctly perceived over the impacts of pesticides on human health and environment
Table 47 Householdrsquos Awareness and Perceptions of Pesticides use on Fruit
Grown
Statements Agreed Disagreed
Local farmers are intensively using pesticides on
Apple Peach and Mango fruits
61 39
I feel the use of pesticides in agriculture has
negative effect on the environment
881
119
I am concerned about pesticide residue in our
food supply
876 124
I believe farmer should engage in environmental
friendly agricultural production practices with
minimum impact on human health
901
99
Source Authorrsquos calculation based on Survey Data 2016-17
52
42 Empirical Results of this Research Endeavour
The empirical analysis of the gleaned data was made to achieve the major objectives
and to address the research questions of this research endeavor Major estimates on
―willingness to pay for pesticide free fruits have been made and conferred in this
section Different elicitation techniques were employed to assess householdlsquos
willingness to pay price premium These estimation techniques encompassed double
bounded dichotomous choice model ordered logit model and linear regression model to
appraise dichotomous choice payment card and open ended question
421 Distribution of responses on householdsrsquo willingness to pay
(WTP)
Householdlsquos preferences to pay higher prices for pesticides free fruit were investigated
and highlighted in Figure 41 which demonstrates the distribution of response about
WTP price premium for pesticide free fruit in the survey area The households were
asked whether and how much they were willing to pay higher prices for pesticide free
fruit than conventional produced fruit The primary data estimates confirm that about
935 percent of respondents are willing to pay a higher price premium for pesticide free
fruit in the sampled districts These results are similar with the previous research study
undertaken by Hayati et al(2017) in Iran by using contingent valuation method
Furthermore an ordered logistic regression model was employed which depicts that out
of 394 respondents who were interviewed 97 percent of respondents were willing to
pay price premium for pesticides free fruits and vegetables These results are supported
by Nandi et al(2017) who conducted a study in India by using contingent valuation
method and applying binomial logistic regression model Data was obtained from 250
respondents and reported that more than 90 percent of the respondents were willing to
pay higher price for better quality fruits and vegetables Decomposing the responses 35
percent of the households are willing to pay 16 to 20 percent higher prices for
pesticides free fruits than the conventional 24 percent willing to pay 6 to 10 percent
higher price and 65 are not willing to pay higher price A plausible reason for higher
WTP for significant portion of the population is due to awareness As most of the
respondents in the study area were aware they may have some knowledge about
adverse effects of chemical pesticides Therefore they were willing to pay higher prices
for pesticide free fruits if available
53
NotWTP
1_5 6_10 11_15 16_20 21_25 26_30 31_35 36_40 Above40
650 4
24
9
35
6 550 150
550 3
Figure 41 Distribution of willingness to pay responses (Rskg)
422 Householdrsquos willingness to pay using ordered logit model
Estimated parameters and coefficients of ordered logit model are presented in table 48
Model is specified on the bases of R2 estimated from restricted and unrestricted
likelihood function The likelihood ratio test is used to test the null hypothesis that the
overall effect of coefficients is zero The p-value is 0000 shows that the model is
statistically significant at 95 level of significance The estimated model with a scaled
R2
about 022 which is in consist with the generally R2 value mostly observed in cross
sectional data In cross sectional data like the one used for this study the value of
Pseudo R2 is typically low The conventionally computed R
2 is of limited value in those
models having qualitative nature In most cases this value is low and use of coefficient
of determination as a summary statistics should be avoided in those cases where the
response variables are qualitative (Gujrati 1995)This pseudo R2 cannot be interpreted
separately or across the dataset but could be used when evaluating multiple models
which predict the same results on the same set of data It has only meaningful when
compared to some other pseudo R2 in the same data on the same type and predicting
the same results In this case pseudo R2 indicates which model better predict the results
(Bruin J 2006)This value pointed out overall ability of the model for the correct
prediction of willingness to pay of the consumer based on explanatory variables The
null hypothesis that the joint influence of explanatory variables was zero on the bases
of chi-squire value null hypothesis was rejected
Predicted probabilities and marginal effects are calculated separately because of the
non-linear behavior of logit model Most of the coefficients are statistically significant
54
The variables like householdlsquos age education level of the respondents awareness
income and health concern variables and household size are significant at five percent
The negative sign showed that as the size of numbers in a family increased the log
odds for willingness to pay decreased The same was reported in a relevant study by
Govindasamy and Italia 1999 carried out a research study in New Jearsy to provide
opinion on organic produce Objective of the study was to evaluate demographic
characteristics caused consumers to pay higher prices to obtained organic food
products Findings of the study showed female respondents consumer with higher
annual income and younger individual were more likely to pay higher premiums for
organic produce Our finding shows variables gender was not significant because most
of the respondents in the study area were male
Positive sign on income showed that consumer with higher income were more likely be
willing to pay higher prices for pesticides free fruit It has been also noted that with
increased in income purchasing power of the respondents increased that changed the
purchasing pattern of the respondents This was also confirmed by Roitner-
Schobesberger et al(2008) They conduct a study on consumerslsquo perception regarding
organic food in Bangkok and found that more than a third of the 848 respondents
reported having purchased organic fruits or vegetables and the main reason for buying
organic food was the expectation of the consumers that the food are healthier and
environmentally friendly The respondents who purchased organic vegetables were
those having more aged higher income and more education
Findings of our study also showed that respondents with friendly attitude regarding
environment would be willing to pay higher price for such fruit These results were in
line with Haghjou et al (2013) carried out a research study on factors effecting
consumerlsquos potential willingness to pay for organic food in Tabriz Iran By adapting an
ordered logistic regression model results showed that factors like income of the
respondent family dimension environmental concern and wholesome diet besides
consumerslsquo awareness were significantly increases consumerslsquo willingness to pay for
organic food Results revealed that consumers with higher care about their health were
more likely to be willing a higher price for such pesticides free fruit
55
Table 48 Factors influencing respondent householdrsquos WTP (Ordered logit
model)
Variables Estimated
Coefficient
Std Error Z-ratio P-value
Age 00698807 00147356 474 0000
Gender -02469171 08432503 -029 0770
Education 00821316 00223365 368 0000
Household size -00975395 00502583 -194 0052
Location
Urban
02783974 02961745 094 0347
Income 00000277 000000502 551 0000
Health concern 2600153 05346547 486 0000
Environment
concern
03993532 0574947 069 0487
Awareness 09595126 02836742 338 0001
Source Authorrsquos calculation based on Survey Data 2016-17
Log likelihood = -29863 Pseudo R-squared = 020 LR chi2 (9) = 15849
Number of observation = 200 Probability gt chi2 = 0000
Note indicate statistical significance at 5
56
423 Predicted probabilities and Marginal effects of ordered logit
model
Predicted probabilities and marginal effects of explanatory variables are underscored in
Table 49 These predicted probabilities indicate a strong likelihood that the average
respondent is willing to pay more prices for pesticides free fruit Producers usually
expect high price for their production so if they sought high premiums than marketing
efforts would be diverted to such fraction of consumer where they would probably
willing to pay high price than the conventional price Alone these predicted
probabilities are not too much informative what is more informative is the impact of a
change in predictors on the predicted probabilities (ie marginal effects)
Due to the non-linear behavior of ordered logit model to measure the impact of a
change in particular independent variable on householdslsquo willingness to pay marginal
effects of explanatory variables are calculated Marginal effects show the change in
predicted probabilities for different class of willingness to pay regarding an average
household concerning the particular variable For qualitative choice model estimated
coefficients affect marginal probabilities These marginal probabilities (probability
derivatives) were calculated from the estimated model They measure the change in the
probabilities of each willingness to pay outcome with respect to change in each
explanatory variable The sum of marginal probability is zero in each row because an
increase of the probability in one category must be set off a decrease in the other
category or categories
For continuous variables the interpretation is simple and straight forward Keeping all
other variables fixed a unit change in explanatory variable will results an increase or
decrease in the predicted probability equal to the degree of marginal effect of the stated
variable However in case of binary variable marginal effects shows change in
predicted probabilities based on whether the respondents falls in that category or not
Our results suggest some meaningful insight into the role of socio-economic and
demographic variables on householdlsquos WTP for pesticides-free fruit
Age has a positive and significant influence on householdlsquos WTP for pesticides free
fruit The results show that with an increase in age WTP also increases This finding is
consistent with other researchers who reported that WTP of organic and healthy food
57
increases with age beyond 30-40 years (Hayati et al 2017 Boccaletti and Nardella
2000 and Zellner and Denger 1989)With increase in age people are more concerned
about their health as they may perceive that they are prompt to low immunity and
higher risk for diseases With realization of aging they are more likely to pay higher
price premium for safer foods Our result suggests that the marginal effects of age is
negative for first three WTP classes (ie Not willing to pay WTP 1-5 percent WTP 6-
10 percent and WTP11-15 percent) while positive for the rest of the four classes in
upper tailsmdashindicating that higher age is associated with higher likelihood of paying
premium on upper tails The highest marginal effect of age 0007 is found for category
16-20 percent higher premium This indicates that an increase in age by one year is
associated with 07 percentage point increase in likelihood of paying 16-20 percent
higher premium for pesticides free fruits over conventional These results are in
contrast with Cranfield and Magnusson (2003) conducted a research study on
consumerlsquos willingness to pay for pesticides free food products in Canada by using
contingent valuation method and reported that younger consumers have the strongest
marginal effects (those consumers had an age less than 35 years younger) followed by
those consumers had an age less than 50 years Results showed younger consumers pay
more for healthy foods as compared to older in case of Canadian consumers However
our results are in consistent with several other studies (Hayati et al 2017 Zellner and
Denger 1989) finding a positive influence of age on consumerlsquos WTP for organic and
healthy foods In another study Boccaletti and Nardella (2000) conducted a study on
consumer willingness to pay for organic produce in Northern Italy By adapting an
ordered logit model the impacts of relevant explanatory variables were reported
Results suggests a positive impact of consumerlsquos age on WTP a price premium
The marginal effects for gender indicate female respondents are less likely to be willing
to pay more prices or likely to pay less amount for pesticides free fruit Female
respondents like to pay a price premium but less as compared to male respondents (no
premium or 1 to 5 percent premium) One can observe that most of the respondents in
the study area were male which support our findings These results are in contrast with
Cranfield and Magnusson (2003) The probability of marginal willingness to pay
decreased by (-0001 percent) for higher amount
58
Another significant variable affecting WTP in our study is the years of education of the
householdlsquos head Our result suggests a positive relationship of education on WTP for
pesticides free fruit Households with more formal education have better understanding
of the adverse effect of consuming fruit contaminated with pesticides So they may
better understand the benefits of pesticides free fruit Marginal effects of education are
positive as WTP progresses for higher classes (categories) beyond 16-20 percent (table
49) Among these the highest effect of education 0020 is shown for WTP category
36-40 percent which implies that an additional year of schooling of the household head
increases likelihood of paying 36-40 percent higher price premium for pesticides free
fruit over conventional by around 2 percentage These results are in line with the
findings of Haghjou et al (2013) who found a positive effect of education on WTP for
organic food products in Iran However these results are in contrast with Boccaletti and
Nardella (2000) who reported an inverse relation of consumer education with WTP a
price premium
We also found a significant effect of the household size and household income on WTP
for pesticides free fruit The effect of household size is negative Marginal effect in
table 49 shows that the highest negative effect of 012 is shown for 16-20 WTP
categories which indicate that an additional household member decreases the likelihood
of paying 16-20 percent higher premium for pesticides free fruits by 12 percent One of
the convincing reasons for this negative effect of household size can be the householdlsquos
budget constraint Budget constraint limits the extent to which consumer pay higher
prices for food products (Cranfield and Magnusson 2003) Our findings are consistent
with previous studies Ariyawardana et al (2009) conduct a study on consumerslsquo
willingness to pay for organic ethnic specialty produce in USA reported that marginal
effect of price premium decreases with an increase in householdslsquo member
In regards to income households with higher income are more willing to pay higher
premiums for pesticides free fruit Income always played a significant role in changing
consumerlsquos behavior to change hisher decision from not willing to pay or less willing
to pay to higher willing to pay for organic products Households in highest income
class showed a strong propensity to pay more prices Marginal effects of income for the
first four classes emerged negative Our results suggest a strong propensity to pay
higher prices as household income increases Our marginal effects of income show a
59
monotonic increase in the income effect as WTP premium level progresses beyond 16-
20 percent It implies that at low level of income households are unwilling to pay more
but with rise in income households are ready to pay higher premium for pesticides free
fruit a significantly higher magnitude is shown for the highest category (010 income
coefficient for more than 40 percent premium) Overall it clearly suggests that
household with higher level of income would pay more prices for pesticides free fruit
These results are in line with Hayati et al (2017) and Cranfield and Magnusson (2003)
who found that an increase in income increases purchasing power of consumer which
results a change in purchasing pattern Boccaletti and Nardella (2000) conducted a
study on consumerslsquo willingness to pay for pesticides free fresh fruits and vegetables in
Italy and found that willingness to pay is significantly and positively related to income
We also included variables indicating health and environmental concern of the
respondent Results indicated that the more the households were concerned about the
impact of pesticides in fruits on health and environment the more the probability of
willingness to pay The marginal effects for health concern is negative for first three
willingness to pay classes (ie not willingness to pay willingness to pay 1_5 wiliness
to pay 6_10 percent) and for environment concern it is negative for first four classes
while for the remaining WTP classes it is positive Strikingly the highest magnitude of
marginal effects up to 041 among all variables is found from the health concern
variable On one hand a significantly positive effect suggests that the health concerned
householdslsquo are more likely to pay higher premium for WTP than those not concerned
A magnitude of higher scale on marginal effect on the other hand strongly supports
the distinct difference in WTP between health concerned and non-concerned
individuals Overall this also highlights the importance of this variable on modeling
WTP for pesticides free fruits For example a 041 marginal effect of health concern
variable on 16-20 premium category of WTP suggest that health concerned individual
are 41 percent more likely to pay 16 to 20 percent higher premium for pesticides free
fruit as compared to non-concerned households The effect of health concern on WTP
is consistent and distinctly higher in magnitude from previous similar studies in other
countries For example Hayati et al (2017) found that health concerned individual were
26 percent more likely to pay 16 to 20 percent in Iran This indicates that health
concern factor is an important motivation to premium price for pesticides free fruits in
Pakistan
60
Finally we found a significant effect of awareness variable Recall that our awareness
variable is represented by dummies Our result suggests that the households in the study
area were aware of the fact that farmers are intensively using pesticides on fruits so
they were willing to pay more price premium for pesticides free fruits Marginal effects
show a negative signs for modest price premiums on WTP categories 1-5 and 6-10
while positive signs for all higher categories 16-20 21-25 26-30 31-35 36-40 and
above 40 This may indicate that households are more aware of the adverse impact of
pesticides on health and environment Probably awareness comes from education as our
results shows that the average years of education is higher in the study area
424 Matrix of Correlation Coefficient
Income is generally related with age and education of the households in the study area
(table 410) This result may indicate that more aged households have higher income
and advanced education Households in high income and more educated class shows
high propensity of willingness to pay for pesticides free fruit As the results indicated
that more aged people do care more about their health and high class income
respondents have more discretionary income to spend on fruit Overall the results show
that explanatory variables are not highly correlated hence no problem of
Multicollinearity was diagnosed in the data
61
Table 49 Predicted probabilities and marginal effects from the estimated ordered logit model
Not WTP
()
WTP 1-5
()
WTP 6-
10 ()
WTP 11-
15 ()
WTP 16-
20 ()
WTP 21-
25 ()
WTP 26-
30 ()
WTP 31-
35 ()
WTP 36-
40 ()
WTP
Above 40
()
Predicted Probabilities
00122 00179 02616 01183 04434 00620 00510 00110 00201 00026
Marginal effects
Age -0000 -0001 -0011 -0002 0007 0003 0003 0006 0001 0001
Gender 00039 00054 00623 0015 -0033 -0019 -0019 -0004 -0008 -0001
Education -0000 -0001 -0013 -0002 0010 0003 0003 0010 0020 0002
Household size 0002 0002 0012 0004 -0012 -0004 -0004 -0001 -0020 -0002
Urban rural -0003 -0004 -0049 -0009 0031 0013 0013 0002 0005 0001
Income -0003 -0004 -0004 -0010 0003 0001 0001 0002 0005 0010
Health concern -0103 -0113 -0372 0030 0410 0100 0100 0014 0030 0003
Environment
concern
-0005 -0007 -0072 -0010 0052 0017 0015 0003 0006 0008
Awareness -0014 -0020 -0120 -0030 0122 0045 0041 0010 0020 0002
Source Authorrsquos calculation based on Survey Data 2016-17
62
Table 410 Matrix of correlation coefficient between explanatory variables
Source Authorrsquos calculation based on Survey Data 2016-17
Variables Age Gender Education Location Households
size
Income Health
Concern
Environment
Concern
Age 10000
Gender -00193 10000
Education 00872 -00147 10000
Location 00725 00689 01047 10000
Households size -00294 00277 -00161 -01704 10000
Income 04123 -00690 02133 - 00405 01583 10000
Health Concern 01604 00224 02229 00660 - 00422 02102 10000
Environment Concern -00786 00944 -00245 00570 -00059 -00350 00118 10000
63
43 Householdrsquos willingness to pay using double bounded dichotomous
choice model
The double bounded dichotomous choice model was used to find out how much
households are willing to pay a price premium for pesticides free fruit The model has
been proved useful for the determination of the contribution of independent variables in
householdslsquo willingness to pay for pesticides free fruit Mainly those factors that
influenced the householdslsquo willingness to pay are age of the householdlsquos head
householdlsquos size gender awareness income head education and their perceptions
The Likelihood Ratio test statistic the Wald Chi2 value is 27228 with a p-value of lt
0001 confirmed that the model with all the explanatory variables has good prediction
power of householdslsquo choice and WTP for pesticides free fruit (table 411) The
estimated coefficients for most of the explanatory variables are statistically significant
and have signs consistent with prior expectations Headslsquo characteristics such as age
education level and awareness of pesticides use on fruits perception of health and
environmental concerns of pesticides are the most import determinants of the
householdlsquos WTP for pesticides free fruit Householdlsquos income and number of
individuals have significant effect on their price premium for fruits free of pesticide
residue
The coefficient for Age is positive and its value is 0294 which reveals that a one year
increase in headlsquos age would increase householdlsquos willingness to pay a price premium
of 0294 rupees for pesticides free fruit at constant level of other variables This
generally implies that household headed by an old individual has strong preferences
and high WTP for pesticides free fruits as compared to others These results are
supported by Vidogbena et al 2015 reported a positive significant effect of consumerslsquo
age WTP in Benin for minimized pesticides residues Results suggest older households
are more concerned about health benefits associated with fresh pesticides free food
This positive correlation of householdslsquo age and Willingness to pay a high price
premium for pesticides freeorganic food is also in agreement with findings of (Anifori
2013 Haghiri et al 2009 Misra et al 1991) However these findings are in contrast
with (Govindasamy and Italia 1999) carried out a research study on consumerslsquo
willingness to pay for organically produced fresh produce in New Jersey to find
64
opinion on organic produce and found that all the three age category younger people
like to pay a high price premium
Headlsquos education level has a positive significant association with householdlsquos
willingness to pay a price premium for pesticides free fruit A likely explanation is that
education increases consumerslsquo awareness regarding the adverse effect of pesticides on
human health and natural environment Consumerslsquo with a high level of education can
better understand the benefits attached to the consumption of food produced without the
use of pesticides These results are also in line with Vidogbena et al (2015) studied
consumerslsquo willingness to pay for cabbage with minimized pesticides residues in
Southern Benin and reported that consumers with high level of education were
positively affected WTP In some other related studies Darby et al (2008)Liu et al
(2009) and Misra et al(1991) also confirmed positive association of consumerlsquos
education and willingness to pay price premium for pesticides free organic fruits
Headlsquos awareness of pesticides use on local fruits production and their health and
environmental concerns over pesticides use are also the most important determinants of
householdlsquos willingness to pay for pesticides free fruits As discussed in the previous
section householdlsquos awareness and perception of pesticides use on fruits and their
education level are connected and have significant influence for creating market for
pesticides free organic fruits
Householdlsquos demand for best quality fruit is expected to rise with increase in their
income level The estimated coefficient for householdlsquos income is positive which
implies direct association with their price premium for pesticides free fruits and is
consistent with general theory and our prior expectations In future with economic
growth increased in per capita income is expected and this increase in per-capita
income will increase the demand for pesticides free fruits
We found a negative significant effect of the householdlsquos size on WTP for pesticides-
free fruit As the number of members increases household become less likely to pay a
price premium for pesticides free fruit More mouths to feed reduces budget for best
quality fruits as noted previously by (Oyawole et al 2016 Ghorbani and Harnraz
2009) In another study Govindasamy et al (2001) findings suggests that each
member in a lager household has less discretionary income to spend compared to a
65
smaller household and may consider paying a premium for integrated pest management
a luxury
Table 411 Factors influencing consumersrsquo WTP (double-bounded dichotomous
choice model)
Variables Coefficient Std Error z-statistic Pgt|z|
Constant -8614601 3640408 -237 0018
Age 0294755 00638171 462 0000
Gender -0133885 - 4628428 003 0977
Education 04521878 01574002 287 0004
Income 00001208 00000284 426 0000
Householdlsquos
Size
-06690743 2499154 -268 0007
Health concern 6165207 1882292 328 0001
Environment
concern
6739389
2053786 328 0001
Awareness 8194937 1693789 484 0000
Urban Rural 02295739 1339268 017 0864
Source Authorrsquos calculation based on Survey Data 2016-17
Log likelihood = -61347 Number of observation = 600
Wald chi2 (9) = 27226 Probabilitygt chi2 = 0000
Note indicate statistical significance at 5
431 Householdsrsquo estimated Mean WTP
The estimated model was used to derive each householdlsquos willingness to pay price
premium for pesticides free fruits Table 412 and figure 42 presents the summary
statistics for the estimated price premium The Table shows that householdlsquos estimated
mean willingness to pay price premium is around 26 rupees with a standard deviation
of 106 and the estimated minimum and maximum price premium are 0 and 445
rupees respectively These statistics reveals that householdslsquo on average are willing to
pay 26 percent more price premium for pesticide-free fruits than the existed market
producing pesticide free fruits
66
2
125 115
38
325
35
-5
0
5
10
15
20
25
30
35
40
45
0 1-10 11-20 21-30 31-40 gt40
Fre
qu
en
cy o
f th
e h
ou
seh
old
s
WTP bins
Table 412 Households mean estimated WTP
Mean Std Dev Min Max
WTP 25798 10601 0 44511
Source Authorrsquos calculation based on Survey Data 2016-17
Figure 42 householdsrsquo estimate WTP bids
432 Households Response to First Bid (Amount)
Table 413 and figure 43 shows households response to first bid of the WTP question
The Table clearly show the sensitivity of a householdlsquos yes - no response to the bid
amount As the bid amount goes up the probability of acceptance is expected to
decrease Results show that higher bids reduced the likelihood of acceptance For
example for a bid amount of Rs10 as price premium for pesticides free fruits 8833
percent of the households are willing to pay while it dropped to 222 percent when the
bid amount is increased to Rs40 which is consistent with the standard theory
67
0
01
02
03
04
05
06
10 20 30 40
Table 413 Householdsrsquo Response to First Bid (Amount)
Households
with YesNo
response
First bid amount (PKR)
10 20 30 40
Households
with No
response
21 (1167) 24 (2581) 141 (5732) 63 (7778)
Households
with Yes
response
159 (8833) 69 (7419) 105 (4268) 18 (2222)
Total
Households
180 93 246 81
Source Authorrsquos calculation based on Survey Data 2016-17
Figure 43 Probability of WTP given bids
44 Post Estimation Diagnostic Test
The model was tested against Multicollinearity by using (variance inflating factor
criteria) and for Heteroskedasticty (Breusch-Pagan test) and the results are presented in
table 414 Rule of thumb for VIF is that if the value is ge 10 than the problem of
Multicollinearity is severe According to our findings the mean value of variance
inflating factor is 114 less than the critical value suggests that there is no
Multicollinearity problem in the model Breusch-Pagan test is used for detecting
Heteroskedasticty problem The (χ2) value is 066 and p- value is 041 This p-value
suggests that the probability of rejecting the presence of Heteroskedasticty is 41percent
68
Table 414 Diagnostic test results
Problems Diagnostic Test Mean value P-value
Multicollinearity VIF 112 _
Heteroskedasticty Breusch-Pagan 066 041
Source Authorrsquos calculation based on Survey Data 2016-17
441 Householdsrsquo willingness to pay by using linear regression model Results of householdlsquos willingness to pay for pesticides-free fruits using linear
regression model is shown in table 415 Variables such as age education awareness
income householdslsquo size and consumer perceptions regarding health and friendly
environment are significantly influencing consumerslsquo WTP for pesticide-free fruits
Age has a positive and significant influence on willingness to pay ie the result shows
that with an increase in age willingness to pay also increases This result is slightly
different from few findings of other researchers who reported a high WTP in young and
middle age consumerslsquo (30-40) years Govindasamy and Italia (1999) But there are
some logical reasons behind our findings As young people are not so much health
conscious but with getting older and older the disease of aging caught their minds and
they keep more care about their health Another reason with an increase in age
education and experience increases as a result an increase in WTP for pesticides free
fruits These results are supported by Muhammad et al (2015) found a positive and
significant association between age and consumer willingness to pay Their results was
supported by the fact that young individual health consciousness is a rare phenomena
but as the people get older and older many diseases related to health induce them to
pay more attention towards safe and healthy food such as pesticides free organic food
Education and monthly income are the other factors positively and significantly
influencing householdslsquo WTP Households with more formal education have more
concern and better understanding of the risk associated with consuming food
contaminated with pesticides So they better understand that fruits produced without the
use of chemicals pesticides could be beneficial for health Results show that a one year
increase in formal education householdslsquo WTP increases by rupees 025 for pesticides
free fruit as compared to those having no education In regards to income respondents
with higher income are willing to pay more price premium A one rupee increase in
income will increase householdlsquos WTP by 0001 Muhammad et al (2015) reported a
69
significant effect of income and education on householdslsquo stated willingness to pay for
organic food in Arab Emirates consumer
Householdslsquo size is usually reported as negative influence on WTP Findings of our
study show a negative significant influence on householdlsquos willingness to pay This is
likely due to larger households requiring additional funds to satisfy households demand
for pesticides free fruit which may induce households to buy conventional fruit Other
reason may be as with limited resources feeding more mouths is increasingly difficult
These results are in contrast with Muhammad et al (2015) conducted a study on
factors affecting consumerlsquos willingness to pay for certified organic food products in
United Arab Emirates and reported a positive relationship of willingness to pay and
householdlsquos size Usually householdslsquo size is large in Arab Emirates and hence more
earning resources compared to small households which support their findings Our
finding shows a decrease of 085 rupees by an addition of one member in a household
Other important variables are householdslsquo concern regarding health and environment
Results show that respondentslsquo are highly concerned about residual effect of pesticides
on human health and environment Our results support these findings by positive WTP
Table 415 shows householdslsquo concerned regarding health and environment Results
suggest that households with more concerned for health and environment are willing to
pay Rs582 and Rs020 respectively higher prices for pesticides free fruit compared to
those not concerned
Finally we found variable awareness positively and significantly influencing
householdslsquo WTP for pesticides free fruit in survey area The result shows that more
aware households are willing to pay more price premium compared to unaware
households Awareness usually increases with education and age as can be evidence
from our findings a positive and significant influence of education and income on
householdlsquos WTP When households education level and age increases their awareness
regarding pesticidelsquos negative impact on health increase and hence an increase in WTP
for pesticides free fruit
70
Table 415 Estimated parameters using liner regression model
Variables Coefficient Std Error t-Statistics P-value
Constant -6174109 - 4353038 142 0158
Age 02348861 00467651 502 0000
Gender -2828394 3096026 - 091 0362
Education 0243413 00772618 315 0002
Income 00001237 00000157 790 0000
Householdlsquos
size
-03936806 01755667 -224 0026
Health concern 5567941 1465789 380 0000
Environment
concern
02999708 2023651 015 0882
Awareness 3567843 1001883 356 0000
Urban rural 0587075 1047051 056 0576
Source Authorrsquos calculation based on Survey Data 2016-17
Note indicate statistical significance at 5
No of observation = 200 F (9) = 2859 Probgt F = 0000 R-squired adjusted = 055
45 Comparison of elicitation questions formats Mean WTP by using double dichotomous payment card and open ended elicitation
format are reported in table 416The willingness to pay evaluated using average values
for the explanatory variables are Rs2576 for double bounded 1632 is for payment
card and 1437 for linear regression Results indicated that householdslsquo evaluated
through double dichotomous choice payment card scenario and open ended format are
willing to pay 26 16 and 14 more price for pesticides free fruits in the study area
These results are in line with Ngo et al (2013) conducted a study on consumerslsquo
willingness to pay for organic vegetables in Vietnam and found 70 more price
premium Rodriguez et al (2008) carried out a research study in Argentina on
consumerslsquo willingness to pay for organic food products and reported that consumers
were willing to pay a higher premium of 87 for leafy vegetables Mean willingness to
pay for double dichotomous model was calculated by maximum likelihood estimation
mentioned in the model while for payment card and open ended format logit regression
of response on bid amount was used All mean WTP values are significantly different
71
from zero and are different across the three questions format The probability (Plt
0000) between double bounded open ended and payment card method shows a
significant difference in estimated mean values of all the three questions elicitation
formats A t-value of 1483 250 and 1222 means that the mean values calculated
through different methods are significantly different from each other
Table 416 Mean willingness to pay comparison from CV question format
CV questions format Open ended
Mean WTP (1437)
Payment card
Means WTP (1632)
Payment card
Mean WTP (1632)
MD (194)
t-value (250)
P-value (0006)
--------
Double bounded
Mean WTP (2576)
MD (1143)
t-value (1483)
P-value (0000)
MD (949)
t-value (1222)
P-value (0000) Source Authorrsquos calculation based on Survey Data 2016-17
1MD = Mean difference 1US$=105 PKR in 2017
451 Response rate for zero WTP
Table 417 shows householdlsquos response rate to different elicitation formats The
response rate of payment card format is more than both DC and OE questions formats
Results show that 87 of the respondents respond to the willingness to pay question for
payment card method For dichotomous choice the response rate is 58 and for open
ended respondentslsquo response rate is 46 Taken together these results suggest that the
payment card format is easy for valuation task faced by respondents and lead to
efficiency in data collection
Table 417 Comparison of response rates by CV question format
Percent Response
to WTP question
Double dichotomous
choice
Payment card
method
Open ended
method
Yes 5850 87 4650
No 4150 13 5350
Source Authorrsquos calculation based on Survey Data 2016-17
72
46 Discussion about Major Findings This study was design to explore householdlsquos preferences and willingness to pay for
pesticides free fruit in Khyber Pakhtunkhwa Pakistan For this study a detailed
questionnaire was designed to obtained information from the households on their socio-
demographic characteristics perception regarding pesticides used on conventional fruit
and their willingness to pay a price premium for pesticides free fruit The overall
objective of the study was to know householdslsquo willingness to pay a price premium for
pesticides free fruit such as Apple Peach and Mango In response to willingness to pay
question 93 percent of the households were willing to pay a price premium while a
negligible portion were unwilling to pay any premium for pesticides free fruit Out of
total WTP 35 percent of the households were willing to pay16-20 percent higher
amount for pesticides free fruit
With regards to gender status of the households findings of the research showed most
of the respondents in the study area were male and a minor portion were female
Variable gender was not significant in this study because of the area structure where
male households are the primary purchaser of householdlsquos food items In this research
we found that majority of the respondents were educated most of them were highly
educated while a negligible portion of the respondents had no formal education The
mean education in Mardan and Peshawar was almost 10 and 12 years of schooling
respectively A significant difference was observed in urban and rural householdslsquo
education level in both the districts
Householdslsquo expenditure on food and fresh fruits were also calculated The mean
expenditure on food in district Mardan was PKR- 49280 and in district Peshawar was
PKR- 34860 Based on t-test a significant difference was observed on the consumption
of fresh fruit in urban and rural areas of the two districts Total expenditure on fresh
fruits in Mardan and Peshawar was 3340 and 4671 respectively Based on findings of
the study it could be concluded that respondents in urban region spent more income on
fresh fruit and consume more fresh fruits compared to rural region
Householdslsquo awareness of pesticides use on locally produced fruit such as Apple
Peach and Mango and their health and environmental concerns over pesticides use
were estimated The results revealed that 61 percent of the respondents were agreed that
local farmers use intensive pesticides on fruit Around 88 percent of the respondents
perceived environmental and health concerns over pesticides residues in food
Similarly 91 percent of the respondents believed that farmer should engage in
73
environmental friendly agricultural production practices which have a minimum
adverse impact on health and the environment These results induced households to pay
higher prices for such pesticides free fruit if available in the market The overall results
indicated that sampled households were not fully aware of the intensive pesticides use
on local fruit however they were correctly perceived over the impacts of pesticides on
human health and environment
The empirical findings of the study revealed socio-demographic characteristics had a
significant influence on householdslsquo willingness to pay a price premium for pesticides
free fruit Results showed more aged householdslsquo head were willing to pay more price
premium This is supported by the fact that older people are more health concern
compared to young individual Householdslsquo head education level also played a positive
and significant role with high education consumers seems slightly more willing to pay
These results are in line with Haghjou et al (2013) Householdlsquos size was negatively
influencing householdlsquos WTP and accord with the expectation Due to income
constraint with increase a member in a household will decrease WTP for pesticides-
free fruit because feeding more mouths with limited resources would be difficult These
results are in line with Oyawole et al 2016 Many Conflicting results are also reported
regarding household size Some studies indicated the presence of more children
positively influencing WTP for organic food while some results reported an inverse
relationship between WTP and householdslsquo size Findings of our research revealed a
negative significant influence on householdslsquo willingness to pay for pesticides free
fruits These results were also according to our expectation With an increase in family
size the households do not care much about quality but mostly quantity
Income of the householdslsquo head was taken as continuous variable in this research study
In most cases especially in willingness to pay research studies a positive association of
income and households WTP was observed Any increase in householdslsquo income leads
to rise in their willingness to pay for safer healthier and pesticides free fruit Despite
high prices for pesticides free food products householdslsquo with high income showed
likelihood to pay a price premium Our findings also showed a positive effect of
income on householdslsquo WTP for pesticides free fruit An increase in income changes
householdslsquo purchasing behavior and choose better quality of food So with an increase
in income households were willing to pay more price premium Same results were
reported by Cranfield and Magnusson 2003
74
Variable awareness played a significant role while consuming better quality of food
Findings of our study also showed a positive and significant influence of variable
awareness on householdslsquo WTP for pesticides free fruit More than half of the
respondents were aware of the intensive use of pesticides on fruit Majority of the
households knew about the risk attached with fruits produced with agrochemicals The
more aware households were willing to pay more price premium for pesticides free
fruit compared to unaware households These results are also supported by Oyawole et
al2016
Moreover results of this study are also consistent with previous studies that health and
environmental concern are the important factors in householdlsquos preferences for
pesticides free food and reduced input food products We also found a positive
significant influence of health concern and environment concern on WTP These results
suggest that respondents in the study area are more conscious about health and
environment They are willing to pay more prices for such fruit free from pesticides
residues Based on above results most of socio-demographic characteristics have
positive influence on householdlsquos willingness to pay for pesticides-free fruit in the
study area On the basis of these findings we reject the null hypothesis and accept the
alternative hypothesis by concluding that socio-demographic characteristics have
influencing behavior on householdslsquo WTP
Willingness to pay across urban and rural regions shows no significant difference The
P-value of 0864 showed that WTP of households in urban regions were not statistically
different from those in rural regions Although we had expected a positive and
significant difference among urban and rural households willingness to pay for
pesticides free fruit and the difference in householdslsquo income education and
expenditure across urban and rural households support our expectation One of the
reasons for no significant difference is the selection of rural union councils which are
nearby urban union councils If the study is spread to more rural union councils than an
expected difference in urban and rural households may be observed Based on these
results the null hypothesis of no significant difference between urban and rural
households is accepted and can be concluded that no significant difference was found
in willingness to pay amount across rural and urban households
75
A Payment Card Approach
In this approach respondents are asked to select their WTP from a payment card given
in absolute value or in percentage of prices (Boccaletti amp Nardella 2000 Lacaze
Rodriguez and Lupin 2009) Payment card requires smaller sample sizes for the
efficient estimation of parameters than the double bounded model A recent research
found that payment card is to be free of range and centering biases when the
willingness to pay values on the payment card is sufficiently large and the respondents
are not constrained (Rowe et al 1996) However choosing an amount from payment
card may be more cognitively burdensome on the respondents and difficult than simply
yes or no response
B Open Ended Approach
In open ended question respondents are asked to state their WTP for a certain attribute
without suggesting them any value This technique does not require an interviewer and
does not result in any starting bias This approach is easy for the respondents to answer
Due to non provision of any value respondents find it difficult to answer and results
large non- response rate
C Double Bounded Approach
The dichotomous choice contingent valuation method is an important method in
contingent valuation surveys Due to simplicity this method is popular and widely used
for data collection Two questions formats are used in this method single bound and
double bounded questions are asked from the respondents For single bound question
format the respondentlsquos only reply in yes or no while in double bounded approach
second question contingent on the first response is asked
Hanemann et al (1991) recommended double bounded dichotomous choice model for
eliciting householdslsquo WTP In the double bounded formate each respondent is
presented with two bids The level of the second bid is contingent upon the response to
the first bid If an individual responds in ― yes to the first bid Bi the second bid (Bu) is
some amount greater than the first bid (Bi lt Bu) is askedIf the respondent responds
―no to the first bid the second bid (Bl) is some amount smaller than the first bid (B
llt
Bi) is asked
76
Henemann et al (1991) and Leon (1995) confirmed that double bounded model is more
effcient than single bound model For the correction of poor choice of the initial vector
double bounded model was suggested Researchers also found that double bounded
method produce more precise point estimates of parameters Double bounded model
requires more sample size due to the statistical inefficiency imposed by the data
compared to payment card and open ended model If sample size is large enough
double bounded model estimates accurate results
Due to its potttential inconsistency with response to the first binary question and larger
scope for biased results double bounded model is contravartial Bateman et al (2001)
concluded that the respondents feel fury and guilt when the second question is asked
making the response of the double bounded internally inconsistence One of the main
disadvantage of double bounded model is that response of the respondents may be
influenced by the first offered amount which is generally called starting point bias
(Flachaire and Hollard 2005)
There are few notable patterens while studying consumerlsquos willingness to pay by using
different elicitation formats Estimated willingess to pay based on double bounded
format and payment card format tend to be large compared to open ended questins
format Furthermore estimated willingness to pay from double bounded model would
be larger than payment card format
Not surprisingly as shown in table 416 the estimated mean willingness to pay for
pesticides free fruit based on the models were significantly different across the three
elicitation format Estimated WTP for double bounded format payment card format
and open ended was 25 percent 16 percent and 14 percent respectively The estimated
mean WTP for double dichotomous model is higher than twice the estimated mean
willingness to pay based on payment card and open ended data
When comparing response rate of households to the willingness to pay questions
format was different across the three elicitation methods In double bounded method
the question was whether the households were willing to pay a specific amount in
payment card method households were asked to select the amount from a specified
values provided on a card whereas in open ended question households were asked to
say how much extra they were willing to pay for pesticides free fruits The difference in
questions leads us to expect that more individual would respond positively to
willingness to pay question in payment card method because in this elicitation format
consumers had to select from payment level The response rate of payment card format
77
is more than both DC and OE questions formats Results show that 87 of the
respondents respond to the willingness to pay question for payment card method For
dichotomous choice the response rate is 58 and for open ended respondentslsquo response
rate is 46 Taken together these results suggest that the payment card format is easy
for valuation task faced by respondents and lead to efficiency in data collection
It has been remained an unresolved issue that which CV questions format is best to use
While the NOAA panel (Federal Register 1993) recommended using double bounded
dichotomous choice model due to its easy use and resemblances in day to day decision
making In this study we found that the response rate in double dichotomous choice
model is lower than payment card format and higher mean willingness to pay than both
open ended and payment card format In contrast payment card format has desirable
response properties
One elicitation format is not clearly better than the others on priority ground The
appropriateness of any elicitation format depends upon the circumstances of the study
For example payment card elicitation format better suits if the sample size is small If
the sample size is large enough double bounded elicitation format is preferred
78
V SUMMARY CONCLUSION AND RECOMMENDATION
This chapter presents findings of the research study as well as policy recommendations
This chapter also outlined limitation in this research and suggestion for further research
in future
51 Summary
Conventional agriculture has gained the power of providing food to majority of the
world population but at the cost of damaging the environment and human health While
pesticides free farming on the other side is environmental and human health friendly
farming that avoids the use of such hazardous chemicals which are harmful for human
plants and animal planet Pesticides free farming system is increasingly becoming
popular in producers as well as in consumer The term pesticides free denote production
of fruit without the use of pesticides and play a vital rule in future agriculture
commodities production It has been observed that fruit produced without the use of
chemicals pesticides are generally higher in prices than the conventional fruit
production in most part of the world However pesticides free farming and pesticides
free food is a relatively new phenomenon and very few people especially in developing
countries are aware about the beneficial impacts of such food on health and
environment Willingness to pay for pesticides free fruit is different from fruits
produced through the use of chemicals pesticides because pesticides free fruits are
relatively expansive
The main theme of this study was to investigate householdslsquo awareness and willingness
to pay for pesticides free fruit and to determine socio-economic and socio-demographic
characteristics in relation to their impact on willingness to pay a price premium This
study was carried out in two districts of Khyber Pakhtunkhwa (Pakistan) namely
Peshawar and Mardan The household level data employed in this study were obtained
from 1000 households through face to face interview by employing pretested
questionnaires Householdslsquo perception and attitude about pesticides free fruit were
also analyzed Three questionnaire elicitation formats ie dichotomous choice payment
card and open ended were used in this study For the estimation of dichotomous choice
data double bounded dichotomous choice model was used An ordered logit model was
used for the estimation of payment card type data and for the estimation of open ended
79
questionnaires linear regression model was used to estimate householdslsquo willingness to
pay price premium for pesticides free fruits
52 Conclusions
Adoption of technological advancement in agriculture has attracted considerable
attention in many developing countries because majority of population in less
developed countries derives its likelihood from agricultural production New
technologies provide farmers an opportunity to increase production and enhance
economic growth (Carvalho 2006) Although the green revolution spread across
developing countries in Asia and resultant in increased food production by adopting
technological inputs like fertilizer and pesticides However the high usage of these
chemicals to bring this spectacular growth in agriculture production is not without its
problems In most countries it has been observed that using commercial agricultural
practices causes many problems like environmental degradation and human health
effects (Wilson 2000) Coordinated efforts are needed to increase food production
with a view to enhance food safety and quality Although chemicals free agriculture is
gaining more and more support for safer food but still not providing enough food to
support need of the population in developing countries
Demand and markets for pesticides free fruit has gained a significant and valuable
interest of research scientist in all over the world Several research studies have been
identified price premium that consumers are willing to pay for pesticides free fruit and
also showed some socio-demographic factors influencing their decision to pay more
price premiums Different approaches are adopted in these studies depending on their
objectives These research studies mainly focused on attitudes and perception towards
these foods and not their actual purchase According to our knowledge studies on
householdlsquos willingness to pay and the most relevant factors influencing their decision
to pay more price premium are limited in developing countries such as Pakistan
The general objective of this survey was to study the socio-demographic and socio-
economic characteristics of the householdslsquo and to investigate factors influencing their
willingness to pay for pesticides free fruit A variety of factors including respondentlsquos
age gender householdlsquos size respondentlsquos income householdlsquos head education
awareness and certain attitudinal questions like health concern and environment
concern appear to influence householdlsquos willingness to pay a price premium Findings
80
of the study suggest health concern and environment concern has significant influence
on householdslsquo willingness to pay Hence it can be concluded that households in the
study area are more concern about their health and surrounding environment Results of
the study also indicated no significant difference in willingness to pay across rural and
urban regions of the study area
Study concluded that the most relevant explanatory variables positively influencing
householdslsquo willingness to pay for pesticides free fruit are age of the householdlsquo head
income of the household headlsquos education householdslsquo awareness health concern and
environmental concern while householdlsquos size is negatively significant which usually
reported that householdslsquo with more members do not care much about quality but more
quantity because feeding more people with limited resources are difficult Majority of
the households are willing to pay price premium for pesticides free fruit especially
those with high level of income household leads to high degree of willingness to pay
Education level also became an important factor in willingness to pay higher price for
pesticides free fruit More aged people have always been concern about their health As
the people get aged more and more the diseases of aging caught their minds so they
like to pay more for safer food While when it become to pay more price variable
gender shows insignificant affect due to the limited availability of female respondents
in the sample data
Results of the households awareness regarding pesticides used on conventional fruit
and its impact on health and natural environment are positive Most of the households
are highly concern about health and environment Results suggest that more than half of
the households are aware of the adverse impact of pesticides on health and
environment Survey suggested that more than half of the households are strongly
agreed that farmers should produce such an agricultural food product which has
minimum adverse impact on human health and natural environment Results of the
study are consistent with other findings conducted on consumerslsquo willingness to pay for
organic food and pesticides free food and reported that health and environmental
concern were the most important factors
Health and environmental concern is an important factor constituted a significant
influence which inclined households towards willingness to pay for pesticides free fruit
Krisoff (1998) reported that consumers perceived pesticides free food as healthier safer
and environmental friendly as compare to food produced by conventional method
81
From this study it is observed that households perceived pesticides free food as
healthier they are willing to pay more price premium
Results obtained from this study concluded that 93 percent of the households are
willing to pay more prices for pesticides free fruit Out of this proportion 35 percent of
households are willing to pay 16 to 20 percent more price above the regular price while
24 percent are willing to pay 6 to 10 percent higher price for pesticides free fruit
Households are willing to pay above than 20 percent comprised of 215 percent of the
sample data Results show that out of total willingness to pay 4 percent of the
households are willing to pay 1 to 5 percent price premium and 9 percent are willing to
pay 11 to 15 percent more price premium Results also show that only a minor portion
65 percent of the sampled respondents is unwilling to pay any more
Householdslsquo willingness to pay was also assessed The study revealed that on average
the respondents are willing to pay 26 percent higher price for pesticides free fruit than
the regular price which concluded that households in the study area are responsive
towards safer food and they like to pay higher premium for such fruit
53 Recommendations
This study is one of the first analytical attempts to measure householdslsquo willingness to
pay for pesticides free fruit in Pakistan Since not much research work is done on
pesticides free fruit in Pakistan so this study would contribute a little for future
researchers Findings of the survey suggest some recommendations for consumers and
producers Researchers may consider this study as basis for further research
An important task is to provide more information to consumers regarding
pesticides free fruit and the perceived benefits by consuming these fruit This
research study also provides information to consumers that how pesticides free
fruit is differ from fruit produced conventionally The sampled studied shows
that there is a potential for market growth of pesticides free fruit To identify
these potential consumers knowledge about their socio-demographic and socio-
economic characteristics is important
With potential demand and high price premium pesticides free fruit production
could be one of the lucrative strategies for producers to earn higher net margin
from their production so like other new technologies management practices
and production system pesticides free fruit production also needs government
82
assistance such as advertisement consumers awareness campaigns financial
aids as well as green subsides and loans to the producers to develop well
established market and efficient supply chain in Pakistan
By adopting new agricultural practices and comply with standards of World
Trade Organization (WTO) this will not only abridge the supply demand gap
for pesticide free fruit sat domestic level but also will boost the economy of the
country due to increase in fruit and vegetables exports
Contribution in the field of pesticides free fruit production from academics
research workers extension graduates scientist and other professionals are
necessary to brief producers as well as consumers about the negative impact of
pesticides due to incorrectly use of these hazardous chemicals on human and
animals health as well as effect on natural environment
Based on the findings from this research government non-government
organization and other stakeholders should formulate policies and would
promote and encourage the production of pesticides free fruit in Pakistan
Demonstration centers should be established within the agriculturist community
for the awareness of farmers regarding the production of pesticides free food
As the results identified householdlsquos willingness to pay is effected by
explanatory variables so more independent variables should be included in the
model to further explain willingness to pay for pesticides free fruit
In addition the area of sampling could be more spread and not be limited to only
two districts of Khyber Pakhtunkhwa If data are collected from different
provinces and districts all over Pakistan the results obtained might be a better
representation of the whole population
As this research study conducted only at few fruit such as Apple Peach and
Mango future research should focus on more fruit as well as on vegetables
54 Limitation and Suggestion for Future Envisage
A couple of limitations were encountered during this research study
This research study has investigated willingness to pay for fruit only due to
time and budget constraint In future a large scale research study should be
carried out both on fruit and vegetable
83
Second since only two districts of Khyber Pakhtunkhwa were examined in
the future such studies should be replicated to other districts and provinces of
Pakistan to determine householdslsquo willingness to pay for pesticides free fruit
Third some variables employed in this study were not statistically significant
presumably due to small sample size To overcome this problem in future
study large sample size should be taken into consideration in order to enhance
the degree of freedom
56 Suggestions
The future of pesticides free agriculture production is very bright To lead a healthy life
human being needs pure food and pollution free environment It has been proved that
pesticides free agriculture is the only solution to provide safe and healthy food to the
world population Chemicals free agricultural system is a natural phenomena and
human being can feel its importance By adopting pesticides free farming soil fertility
can also be maintained Farmers can provide healthy and safer environment by
strengthening the sustainable and pesticides free agriculture Now a daylsquos demand for
pesticides free food is increasing very fast and in the future it would be necessary to get
rid of food produced by using chemical fertilizer and pesticides
To inform consumers long term investment in promotion and education campaigns
would help to develop individual concern regarding the risk associated with pesticides
on food products This concern will translate individual willingness to pay towards a
positive price premium
84
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Anwar TI Ahmad and S Tahir 2011 Determination of pesticide residues in fruits of
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Abhilash P C and NaditaS 2009 Pesticide use and application an Indian scenario J
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Arrow K RSolow PR Portney EELeamer R Radner and
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Bhavsar H k Baryeh and F Tegegne 2016Willingness to pay more for 0rganic
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BoldV D M N Kohli S GillespieS ZuberiS Rajeeshand B Chakraborty 2015
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Boys A K D B Willis and C E Carpio 2014 Consumer willingness to pay for
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Bektas Z BMiran O KUysal and CGunden 2011 Consumer awareness for food
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Bruin J 2006 Command to compute new test UCLAAcademic technology
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Breidert C M Hahsler and T Reutterer 2006 A review of methods for
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Bateman I J Carson R T Day B Hanemann M Hanley N Hett T ampSugden
R 2002 Economic valuation with stated preference techniques A
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Boccaletti S and M Nardella2000Consumerlsquos willingness to pay for pesticide-free
fresh fruit and vegetables in italy International Food and Agribusiness
Management 3(3)297-310
Baker A G and P J Crosbie 1993Measuring food safety preferencesIdentifying
householdlsquos segmentsJornel of Agriculture and Resource Economics
18(2)277-287
Bishop R G and T AHeberlein1979 Measuring value of extra-market goods Are
indirect measures biased American Journal of Agricultural Economics
61(5)926-930
Coulibaly O T Nouhoheflin C C Aitchedji A J Cherry and P Adegbola
2011Householdlsquos perceptions and willingness to pay for pesticide freegrown
Environmental science and pollution research international 21(23)13367-93
Cerda A A L Y Garcia S O Farias and A M Ubilla 2012Consumer preferences
and willingness to pay for organic apples Ciencia e
InvestigacioacutenAgraria 39(1) 47-59
Champ A P and R C Bishop 2006 Is willingness to pay for a public good sensitive
to the elicitation format Land Economics 82(2)162-173
Carson R T and Hanemann W M2005 Contingent valuation Handbook of
Environmental Economics 2 821ndash936
Cranfield JA L and E Magnusson 2003 Canadian consumerslsquo willingness to pay
for pesticide-free food products An ordered Probit analysis International Food
amp Agribusiness Management Review 6 13ndash30
87
Calia P and Strazzera E 2000 Bias and efficiency of single versus double bound
modelsfor contingent valuation studies A Monte Carlo analysis Applied
Economics 32(10)1329-1336
Cameron T A and J Quiggin 1994Estimation using contingent valuation data from a
dichotomous choice with follow-up questionnaireJournal Environmental
Economics and Management 27(3) 218-234
Ciriacy-Wantrup S V 1947 Capital returns from soil-conservation practices
Journal Farm Economics 29 1181ndash96
Dettmann R L 2008 Organic produce Wholsquos eating it A demographic profile of
organic produce consumers In American Agricultural Economics Association
Annual Meeting Orlando (pp 27-29)
Darby K M T Batte S Ernest and B Roe 2008Decomposing local a conjoint
analysis of locally produced foods American Journal of Agricultural
Economics 90(2) 476-486 httpsdoiorg101111j1467-8276200701111
Dubourg W R M W Jones and G Loomes 1994Imprecise preferences and the
WTP-WTA disparityJournal of Risk and Uncertainty 9(2)115-133
Davis R K 1963 The value of outdoor recreation an economic study of Maine
woods Unpublished Ph D dissertation Harvard University
Economic Survey of Pakistan 2014 Finance Division Government of Pakistan
Islamabad httpwwwfinancegovpksurveysur_chap
Economic Survey of Pakistan 2006 Finance division government of Pakistan
Islamabad httpwwwfinancegovpksurveysur_chap_ 05-0602-Agriculture
Eom Y 1994 Pesticide residue risk and food safety valuation A random utility
approach American Journal of Agricultural Economics 76(4) 760-771
Flachaire E ampHollard G 2006 Controlling starting-point bias in double-bounded
contingent valuation surveys Land economics 82(1) 103-111
88
Food and AgricltureOrganization 2006Fertilizer use by Crop Fertilizer and Plant
Nutrition Bulletin VialedelleTermepp 1ndash61
Food and Agriculture Organization2002Submission and evaluation of pesticide
residues data for the estimation of maximum residue levels in food and feed
FAO Rome 1ndash279
Fox J A1995 Determinants of consumer acceptability of bovine
somatotropin Review of Agricultural Economics 51-62
Fox J A D J Hayes J B Kliebenstein and J F Shogren1994 Consumer
acceptability of milk from cows treated with Bovine Somatotropin1 Journal of
Dairy Science 77(3) 703-707
Federal Register 1993Natural resource damage assessments under the oil pollution act
of1990Department of commerce national oceanic and atmospheric
administration 58(10)
Gumber G and J Rana 2017 Factors Influencing Willingness to Pay Price Premium
forOrganic Food in IndiaInternational Journal of Emerging Research in
Management ampTechnology 6 (2)
Government of Pakistan 2016 Fruit vegetables and condiments statistics of Pakistan
Provincial Agricultiural Marketing Departments
GhorbaniM and S Hamraz 2009A survey on consumerlsquos potential willingness to pay
for organic products in Iran Trends in Agricultural Economics2(1)10-16
Griffith R and L Nesheim 2008 Consumer willingness to pay for organic products
CEPR Discussion Paper No DP6905 Available at
SSRN httpsssrncomabstract=1240215
GraciaA and TDMagistris 2007 Pesticide free good product purchase behavior
Spanish journel of agriculture research 5(4) 439-451
89
Gil J M A Gracia M Sanchez 2000 Market segmentation and willingness to pay
for organic products in SpainThe International Food and Agribusiness
Management Review 3(2) 207-226
Govindasamy R and J Italia 1999Predicting willingness to pay a premium for
organically grown fresh produce Journal of Food Distribution
Research30(2)0044
HayatiB M Haghjou and E Peshbahar 2017Effecting factors on consumerslsquo
willingness to pay a premium for pesticide-free fruit and vegetables in Iran
MOJFoodProcessingampTechnology4(5)00105Availablehttpmedcraveonline
comMOJFPTMOJFPT-04-php
HUICL C W MAY and W K LI 2013 Research on householdlsquoslsquo willingness to
pay for pesticide free productsUniversity Tunku Abdul RahmanFaculty of
Accountancy and Management Department of Economics
Hai M N M Moritaka and S Fukuda 2013 Willingness to pay for organic
vegetables in Vietnam An empirical analysis in Hanoi capital J Fac Agr
Kyushu Univ58 (2) 449-458
Haghjou M B Hayati E Pishbahar RMohammadrezaei GDashti2013 Factors
affecting consumerslsquo potential willingness to pay for organic food products in
Iran Case study of Tabriz Journal of Agricultural Science and Technology
15(2) 191-202
Haghiri M J E Hobbs and M LMcnamara 2009 Assessing consumer preferences
for organically grown fresh fruits and vegetables in Eastern New Brunswick
International Food and Agribusiness Management Review Volume 12( 4)81
HeoSW and H Kim 2004 Green marketing strategies and willingness to pay for
environment-friendly agricultural products in the metropolitan area Korean
Journal of Organic Agriculture
90
HossainF B Onyango B Schilling W Hallman and AAdelaja2003 Product
attributes consumer benefits and public approval of genetically modified
foods International Journal of Consumer Studies 27(5) 353-365
Hanemann M J Loomis and B Kanninen 1991Statistical efficiency of double-
bounded dichotomous choice contingent valuationAmerican Agricultural
Economics 73(4)1255-1263
HanemannWM 1984Welfare evaluations in contingent valuation experiments with
discrete responses Am J Agric Econ 66(3) 332ndash341
Jakobsson K M and A K Dragun 1996 Contingent valuation and endangered
species methodological issues and applications Edward Elgar Publishing
Khan J M M S Zia and M Qasim 2010 Use of pesticides and their rule in
environmental pollution International Journal of Environmental and Ecological
Engineering4 12-25
KalogerasN S Valchovska G Baourakis and P Kalaitzis2009Dutch householdlsquos
willingness to pay for pesticide free olive oilJournal of International Food amp
Agribusiness Marketing 21(4) 286-311
Kimenju S C and HD Groote 2008 Householdlsquos willingness to pay for genetically
modified food in Kenya Agricultural economics 38(1) 35-46
Krystallis A and G Chryssoidis 2005 Consumers willingness to pay for organic
food Factors that affect it and variation per organic product type British Food
Journal 107(5) 320-343
Kuperis A P M MVeeman and W L Adamowicz 1999 Householdlsquosresponse to
the potential use of Bovine Somatotrophin in Canadian dairy production
Canadian Journal of Agricultural Economics47(2) 151-163
KmentaJ 1997Elements of Econometrics University of Michigan Press Second
edition
91
Lusk JL and Hudson D 2004 Willingness-to-pay estimates and their relevance to
agribusiness decision making Review of Agricultural Economics 26(2) 152-
169
Liu Y Y Zeng and X Yu 2009Consumer willingness to pay for food safety in
Beijing a case study of food additives In Contributed paper prepared for
presentation at the international association of agricultural economists
conference Beijing China (pp 16-22)
Loureiro M L and W J Umberger 2005 Assessing consumer preferences for
country-of-origin labeling Journal of Agricultural and Applied
Economics 37(1) 49-63
Loureiro M L and W JUmberger 2003 Estimating consumer willingness to pay for
country-of-origin labeling Journal of Agricultural and Resource
Economics28(2) 287-301
Loomis J P Kent L Strange K Fausch and A Covich 2000 Measuring the total
economic value of restoring ecosystem services in an impaired river basin
results from a contingent valuation survey Ecological Economics 33(1) 103ndash
117
MuhammadS E Fathelrahman and RUT Ullah 2015 Factors affecting
householdlsquoslsquo willingness to pay for certified pesticide free food products in
United Arab Emirates Journal of Food Distribution Research 46(1)37-45
MagnussonE and J A L Cranfield 2005 Householdlsquos demand for pesticide free food
products in Canada A Probit Analysis Canadian Journal of Agricultural
Economics53(1) 67ndash81
MagnussonK MA Arvola UKKHursti L Aringberg PO Sjoumldeacuten 2003 Choice
oforganic foods is related to perceived consequences for human health and to
environmentallyfriendly behavior Appetite40 (2)109ndash117
92
Millock K H and L G Hansen 2002 Willingness to pay for pesticide-freefoods A
Comparison between Survey Data and Panel Data from Denmark Available at
httpmpraubuni-muenchende47588
Mitchell R C and R T Carson 1989 Using surveys to value public goods the
contingent valuation method Resources for the FutureResources for the Future
Maddala G S 1986 Limited-dependent and qualitative variables in econometrics (No
3)Cambridge university press
Mitchell R C amp Carson R T 1984 A contingent valuation estimate of national
freshwater benefits technical report to the US Environmental Protection
Agency Washington DC Resources for the Future
Nandi R W Bokelmann N VGowdruand G Dias2017 Factors influencing
consumerslsquo willingness to pay for organic fruits and vegetables Empirical
evidence from a consumer survey in India Journal of Food Products
Marketing 23(4) 430-451
Ngo Minh H M Masahiro andF Susumu 2013 Willingness to pay for organic
vegetables in Vietnam An empirical analysis in Hanoi capital J Fac Agr
Kyushu Univ 58(2) 449-458
NouhoheflinT O Coulibaly A J Cherry R A Hassan and PYAdegbola2004
Consumerslsquo perception and willingness to pay for pesticide free vegetable in
Benin and Ghana African Association of Agricultural EconomistsThe role of
social scientistsProceedings of the Inaugural SymposiumGrand Regency
Hotel Nairobi Kenya
Oyawole F P D Akerele and A O Dipeolu 2016 Factors influencing willingness to
pay for organic vegetables among civil servants in a developing
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OwusuV and M OAnifori2013Consumerwillingness to pay a premium for pesticide
freefruit and vegetable in Ghana International Food and Agribusiness
Management Review16(1)67-86
93
OwusuV and A M Owusu 2010Measuring market potential for fresh pesticide free
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African Association of Agricultural Economists (AAAE) and 48th Agricultural
Economists Association of South Africa (AEASA) Conference Cape Town
South Africa
OramanY and G Unakitan 2010Analysis of factors influencing organic fruit and
vegetable purchasing in Istanbul Turkey Ecology of food and nutrition 49(6)
452-466
PiyasiriAGSA and A Ariyawardan2011 Market potentials and willingness to pay
for selected organic vegetables in Kandy Sri Lankan Journal of Agricultural
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PanhwarF 2004Organic farming in PakistanPublished by City Farmer Canadalsquos
Office of Urban Agriculturehttpwwwcityfarmerorg Pakistan Org
Farminghtml
Portney P R 1994 The contingent valuation debate why economists should care The
Journal of Economic Perspectives 8(4)3ndash 17
httpwwwjstororgstable2138336
Quagrainie K K JUntershultz and M Veeman 1998 Effects of product origin and
selected demographics on householdlsquoschoice of red meats Canadian Journal of
Agricultural Economics46(2)201-216
RodriacuteguezE V Lacaze and B Lupiacuten 2008Contingent valuation of householdslsquo
willingness to pay for pesticide free food in Argentina12th Congress of the
European Association of Agricultural Economists
Roitner-Schobesberger B I Darnhofer SSomsook and C R Vogl2008Consumer
perceptions of organic foods in Bangkok Thailand Food policy33(2) 112-121
Randall A B Ives and C Eastman1974 Bidding games for valuation of
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d Management 1(2)132ndash149
94
Salmet A S A k Nakayasu and H Bai 2016The determinants of organic vegetables
purchasing in Jabodetabek region IndonesiaFoods 5(4)85
103390foods5040085
SyedJ H A Alamdar A Muhammad K Ahad Z Shabir HAhmad SM Ali SG
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2014Pesticide residues in fruits and vegetables from Pakistan a review of the
occurrence and associated human health risks Environmental science and
pollution research 21(23)13367-13393
SangkumchaliangP and W C Huang 2012 Consumerslsquo perceptions and attitudes of
organic food products in Northern Thailand International Food and
Agribusiness Management Review 15(1) 87ndash102
Syed J H and R N Malik 2011 Occurrence and source identification of
organochlorine pesticides in the surrounding surface soils of the Ittehad
Chemical Industries KalashahKaku Pakistan Environmental Earth Science
62(6)1311ndash1321
Smith A T C L Hung and B H Lin 2009 Does Price or Income Affect Organic
Choice Analysis of US Fresh Produce Users Journal of Agricultural and
Applied Economics 41(3)731-744
Taiba B M Khan M Nazir M Sajjad D Jan and A U Jan 2011 Estimation of
demand for processed fruit and vegetables products Interdisciplinary journal of
contemporary research in business 3(8)688-704
Vidogbena F A Adeacutegbidi R Tossou F A KomlanAnselme T Martin M
Ngouajio S Simon L Parrot and K K Zander 2015Consumerslsquo
Willingness to Pay for Cabbage with minimized pesticide residues in Southern
Benin Environments 2(4) 449-470
Valerian J E Domonko S Mwita and A Shirima 2011Assessment of the
willingness to pay for organic products amongst householdslsquo in Morogoro
MunicipalReport of the original work done for Sustainable Agriculture
Tanzania (SAT)
95
Veeman M and W Adamowicz 2000Consumerlsquos perceptions of environmental risks
and the demand for food safety httpsdoiorg107939R3ZS2KG11
Wooldridge J M 2010 Econometric analysis of cross section and panel data MIT
press London
Wang Q and J Sun 2003 Consumer preference and demand for organic food
Evidence from a Vermont survey Paper prepared for American Agricultural
Economics Association Annual Meeting 12
Zia M S M J Khan M QasimandARehman 2009Pesticide residue in the food
chain and human body inside Pakistan J Chem Soc Pak 31(2) 284ndash291
Zhongmin X U J Loomis Z Zhiqiang and K Hamamura 2006Evaluating the
performance of different willingness to pay question formats for valuing
environmental restoration in rural ChinaEnvironment and Development
Economics 11(5) 585ndash601 httpsdoiorg101017S1355770X06003147
Zellner JA and RL Degner1989Consumer willingness to pay for food safety Paper
presented at the Southern Agricultural Economics Meeting Nashville TN
96
Appendix- 1 Questionnaire
Q1Socio-economic characteristics
1 Location
o Rural
o Urban
2 Name ____________________
3 Age ____________________(years)
4 Gender
o Male
o Female
5 Educational status ______________ Years
6 Household Size_________________ No
7 Monthly income _______________________________Rs
8 Monthly consumption expenditure _________________Rs
9 How much you spend on Fresh Fruits Rs __________month
10 How much you consume the following fruits
Fruits Quantity
Apple
Mango
Peaches
11 Local farmers are intensively using pesticides on Apple Peach and Mango fruits
o Aware
o Not aware
97
12 Attitudinal question responses
Householdrsquos Awareness Perceptions of Pesticides use
Questions Agreed Disagreed
Local farmers are intensively using pesticides on
Apple Peach and Mango fruits
I feel the use of pesticides in agriculture has negative
effect on the environment
I am concerned about pesticide residue in our food
supply
I believe farmer should engage in environmental
friendly agricultural production practices with
minimum impact on human health
The effect of pesticides residues on human health
The use of pesticides can badly affect the agro-ecological system as well as human
health Human health related problems may vary with the composition of chemicals
The most common problems are skin flue and headache while severe health hazards
include paralysis cancer etc Studies show that globally around 30 lakh people are
poisoned annually from consumption of pesticides contaminated food and 2 lakh of
them die from different heath problems caused by pesticides residues Most of the
pesticides used on agricultural crops are banned by the WHO
13 Householdrsquos willingness to pay for pesticide free fruit
Wording for Dichotomous choice question
Suppose your favorite fruit such as apple mango and peach regularly cost on average
Rs 100kg Assuming no difference in taste and nutritional content would you pay Rs
X more to consume pesticide free version of the same fruits
Yes No
Wording for open ended question
Suppose your favorite fruit such as apple mango and peach regularly cost on average
Rs 100kg Assuming no difference in taste and nutritional content how much would
you pay for pesticides-free version of the same fruits
Rs _________
98
Wording for payment card question
Suppose your favorite fruit such as apple mango and peaches regularly costs on
average Rs 100kg you purchase Assuming no difference in taste and nutritional
content would you pay slightly more for a pesticides free version of the same fruits
Yes No
If yes how much would you pay to consume pesticide free version of the same fruit
Select from the given payment card
1 WTP= 0
2 WTP= 1-5
3 WTP= 6-10
4 WTP= 11-15
5 WTP= 16-20
6 WTP= 21-25
7 WTP= 26-30
8 WTP= 31-35
9 WTP= 36-40
10 WTP= Above than 40
If no what are the reasons for not paying price premium for pesticide free
commodities (PFC) Please select the most relevant one
o I canlsquot afford to pay price premium on PFC
o The pesticide have no harmful effect on health
o We do not use fresh fruits
o Other reasons ___________________________
99
PLAGIRIASM UNDERTAKING
It is certified that the research work presented in the Ph D dissertation of Mr Jahangir
Khan C No 45 University Registration No2006-Agr-U-13234 Session 2014-2017
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar under the titled ―HOUSEHOLD
PREFRENCES AND WILLINGNESS TO PAY FOR PESTICIDES FREE FRUIT IN
KHYBER PAKHTUNKHAWA (KP) PAKISTAN was conducted under the
supervision of Dr Abbas Ullah Jan
I understand the zero-tolerance policy of HEC and the University of Agriculture
Peshawar towards plagiarism Therefore I as an author of the above titled research
thesis declared that no portion of my thesis has been plagiarized and the material used
for references is properly cited
I undertake that I found guilty at any time and any statement is found to be incorrect or
plagiarized in the above mentioned titled thesis even after my graduation the
University has the right to withdraw my Ph D degree and the HEC has the right to
publish my name on the HECUniversity website on the list of persons who submitted
plagiarized thesis of guilty under plagiarism policy
Jahangir Khan
100
AUTHORrsquoS DECLARATION
I Mr Jahangir Khan C No 45 Session 2014-2017 hereby stated that my Ph D
dissertation titled ―Household Preferences and Willingness to Pay for Pesticides free
Fruit in Khyber Pakhtunkhwa (KP) Pakistan is my own work and not been submitted
previously by me or anyone else for taking degree from The university of Agriculture
Peshawar or any other University in the country world At any time if any statement
found to be incorrect even after my graduation the university has the right to withdraw
my Ph D Degree
Jahangir khan
Date
101
CERTIFICATE OF APPROVAL
It is certified that the research work presented in the Ph D dissertation of Mr Jahangir
Khan C No 45 University Registration No 2006 -Agr-U-13234 Session 2014-2017
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar under the titled ―HOUSEHOLD
PREFRENCES AND WILLINGNESS TO PAY FOR PESTICIDES FREE FRUIT IN
KHYBER PAKHTUNKHAWA (KP) PAKISTAN was conducted under the
supervision of Dr Abbas Ullah Jan
No part of this dissertation has been submitted anywhere else for any degree The
dissertation is submitted for the award of degree of Doctor of Philosophy in the
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar
Ph D Scholar Jahangir Khan
APPROVED BY
1 External Examiner _________________ Lal K Almas Ph D
Associate Dean and Regents
Professor Agricultural Business amp
Economics University of West Texas
AampM USA
2 External Examiner ___________________ Prof Dr Harun Ucak
Alanya Alaadin Keykubat
University Turkey
Major Supervisor ___________________ Dr Abbas Ullah Jan
Head of Department ________________
Dr Ghaffar Ali
362 WTP and CVM 35
37 Elicitation Techniques 36
371 Bidding Game Approach 37
372 Open-ended Elicitation Method 37
373 Payment Card Approach 37
374 Dichotomous Choice Model 37
38 Empirical Estimation of WTP by Payment Card using Ordered Logit
Model 39
39 Empirical Estimation of WTP using Double Bounded Dichotomous
Choice Model 42
391 Factors which could Influence WTP 43
392 Bids Design 44
310 Empirical Estimation of WTP using Linear Regression Model 44
311 Description of Variables 45
1V RESULTS AND DISCUSSION 46
41 Descriptive Analysis 46
411 Demographic and Socio-economic Characteristics 46
412 Householdlsquos Awareness and Perceptions about Pesticides Application
on Fruit 51
42 Empirical Results of this Research Endeavour 52
421 Distribution of responses on householdslsquo willingness to pay
(WTP) 52
422 Householdlsquos willingness to pay using ordered logit model 53
423 Predicted probabilities and Marginal effects of ordered logit model 56
424 Matrix of Correlation Coefficient 60
43 Householdlsquos willingness to pay using double bounded dichotomous
choice model 63
431 Householdslsquo estimated Mean WTP 65
432 Households Response to First Bid (Amount) 66
44 Post Estimation Diagnostic Test 67
441 Householdslsquo willingness to pay by using linear regression model 68
45 Comparison of elicitation questions formats 70
451 Response rate for zero WTP 71
46 Discussion about Major Findings 72
V SUMMARY CONCLUSION AND RECOMMENDATION 78
51 Summary 78
52 Conclusions 79
53 Recommendations 81
54 Limitation and Suggestion for Future Envisage 82
56 Suggestions 83
LITERATURE CITED 84
Appendix- 1 Questionnaire 96
i
LIST OF TABLE
Table No Title Page No
31 Total population and sampled households from selected UClsquos 32
32 Payment card format 41
33 Bid system for Pesticides free fruits 44
34 Description of explanatory variables 45
41 Age of the householdlsquos head (Years) 47
42 Educational Level of the Householdlsquos Head (Years) 48
43 Householdslsquo size of the Respondents (Member in Number) 48
44 Householdslsquo Income in Pakistanlsquos Rupee (PKR) 49
45 Households expenditure on food (PKR) 50
46 Householdlsquos monthly expenditure share on fresh fruits (PKR) 50
47 Householdlsquos Awareness and Perceptions of Pesticides use on Fruit
Grown 51
48 Factors influencing respondent householdlsquos WTP (Ordered logit model) 55
49 Predicted probabilities and marginal effects from the estimated ordered
logit model 61
410 Matrix of correlation coefficient between explanatory variables 62
411 Factors influencing consumerslsquo WTP (double-bounded dichotomous
choice model) 65
412 Households mean estimated WTP 66
413 Householdslsquo Response to First Bid (Amount) 67
414 Diagnostic test results 68
415 Estimated parameters using liner regression model 70
416 Mean willingness to pay comparison from CV question format 71
417 Comparison of response rates by CV question format 71
ii
ACKNOWLEDGEMENTS
I am grateful to Almighty Allah for blessing me with the potential of seeking
the light of knowledge the taste of gaining knowledge courage and for all the blessings
which enabled me to complete a stage of education
Doing a research is not an individual work Itlsquos indeed the result of efforts by
many people I would like to thanks all people who helped and supported me to
complete this research successfully
My whole hearted and profound thanks to my advisor Dr Abbas Ullah Jan
Department of agricultural amp Applied Economics for his support critical review
valuable suggestions and inspiration to make this research success
My most special thanks to Assistant Prof Dr Syed Attaullah Shah Department
of agricultural amp Applied Economics for his cooperation and valuable suggestions
providing me all facilities during the course of this research
My sincere thanks to Dr Ghaffar Dr Dawood Jan and all faculty members
Department of agricultural amp Applied Economics for their cooperation advices and
back-up to achieve my goals and their encouragement and instrumental support during
the research practical work
I would like to submit my admirations to my friends and foreign research expert
Dr Kar Ho Lim and Dr Aditya Khanal Department of Agricultural amp Environmental
Sciences College of Agriculture Tennessee State University USA for their help
especially in thesis write-up and paper publication
At last but the not least I wish to put across my deep admiration to my parents
friends relatives and family members who support me during my study
Jahangir Khan
iii
HOUSEHOLDrsquoS PREFRENCES AND WILLINGNESS TO PAY
FOR PESTICIDES FREE FRUIT IN KHYBER
PAKHTUNKHAWA PAKISTAN
Jahangir Khan and Abbas Ullah Jan
Department of Agricultural amp Applied Economics
Faculty of Rural Social Sciences
The University of Agriculture
Peshawar-Pakistan
May 2018
ABSTRACT
The over use of fertilizers and pesticides in agriculture are degrading natural ecosystem
and human health The substantial association of health risk with pesticide residues and
its adverse impact on environment has fetched attention of researchers across the globe
In this alarming scenario pesticide free farming is deemed as panacea to
environmental human and animal health friendly production system Pesticide free
fruit are considered to be superior in quality as compared to fruit produced
conventionally and helps in preventing several health and environmental hazards
Therefore the demand for pesticide free fruit is increasing throughout the world Given
this increasing demand for pesticide free fruit this study is designed to measure what
price premium household would be willing to pay (WTP) for fruit free from pesticides
such as apple peach and mango This study also aims to identify factors influencing
householdslsquo WTP decision of pesticide free fruit in Khyber Pakhtunkhwa (KP)
Pakistan The primary data was gleaned from 1000 sampled respondents through face
to face interview from two selected districts namely Peshawar and Mardan KP
Pakistan To elicit householdlsquos WTP information Contingent Valuation Method
(CVM) was employed Contingent valuation is a survey based method used for eliciting
willingness to pay of the householdslsquo for environmental and natural resources
Different elicitation techniques are used to design CV question scenario such as
payment card question double dichotomous choice question and open ended question
Consequently this study used the entire three payment format to elicit householdlsquos
WTP for pesticide free fruit The ordered logit model was employed to appraise the
payment card method However linear regression model was adopted to identify
factors influencing householdlsquos willingness to pay for pesticides free fruit
Nevertheless the double bounded dichotomous choice model was performed to
measure dichotomous choice questions The major results demonstrate that 935 percent
households were willing to pay higher prices for fruit pesticides free in the study area
Estimates remarkably reveal that around 35 percent households were willing to pay 16
to 20 percent higher prices and 24 percent households were willing to pay 6 to 10
percent higher prices for pesticides free fruit than the prevailing prices of conventional
produce It is reported by 61 percent of the households that local farmers use irrational
pesticides on fruit Major findings have also corroborated that 881 percent sampled
household have perceived health concerns over pesticides residues in food Similarly
911 percent of the households have supported the idea that farmer should be engaged
in environmental benign agricultural production practices which have a minimum
adverse impact on health and the environment Socio economic and demographic traits
have confirmed positive significant effects on householdlsquos willingness to pay The
iv
results of householdlsquos head awareness on WTP are according to the prior expectations
that awareness of householdlsquos head has significant contribution in willingness to pay
for pesticides free fruit While householdlsquos size has a significant but inverse effect on
willingness to pay for pesticides free fruit Furthermore householdlsquos perception
regarding health and environment concern has a propensity to positively influence the
willingness to pay for pesticides free fruit It is also depicted by the results that mean
WTP by using double dichotomous payment card and open ended elicitation format
validates consumer demand for pesticide free fruit in the study area Three separate
mean WTP were computed for each double dichotomous choice payment card and
open ended format which were figured as Rs2576 1632 and 1437 respectively
These results reveal market potential for pesticides free fruit in the study area This
research study is expected to contribute in the three different aspects Firstly this study
has figured out the potential for pesticides free markets in Pakistan This study has also
abridged the research gap regarding consumerlsquos preferences and willingness to pay for
pesticides free fruit which can be generalized and replicated to other areas In addition
results have provided insight to fruit producers helping them to strategize production
system decisions Based on the findings from this research government non-
government organization and other stakeholders should formulate policies and would
promote and encourage the production of pesticides free fruit in Pakistan
1
I INTRODUCTION
Pesticides are agrochemical formulated to cope with the severe problems diseases
caused by insects fungi virus and self-grown weeds The term pesticide can be defined
as any chemical or natural substance applied with the objective to repel destroy or
control pests and regulate plant growth (FAO 2002) In modern agriculture arena
pesticides are intensively used on crops before and after harvest The application of
pesticides surged with the passage of time due to an increase in the demand for
agricultural commodities by the burgeoning population of the world The overall
pesticidelsquos consumption across the globe is observed as about 2 million tons per year
While this massive pesticides consumption demonstrates that about 69 percent is used
by European countries and the remaining 31 percent is utilized by the rest of the world
as mentioned by Abhilash and Singh (2009) The more alarming situation is that the
aforementioned magnitude of pesticides consumption is increasing with the every
passing year as reported by FAO (2002)
The green revolution as well as a huge increase in the application of pesticides in the
agriculture realm had enhanced food and non-food crop production Resultantly the
significant surge in the economic growth of several agricultural based economies was
reported over the last few decades as demonstrated by Carvalho (2006) Despite the
substantial contribution of pesticides to diminish the food insecurity societies around
the world are cognizant and concerned about the food sanitation safety and
environmental externalities owing to irrational use of pesticides and other croplsquos input
(Wilson 2000) More categorically the food safety realization in developed countries
has been led to organic agriculture Whereas in many developing countries which
include but not limited to Pakistan the pesticides-free and organic food markets
remained underdeveloped due to several reasons One of the obvious reasons is the
uncertainty among consumerlsquos preference that led to their concern if an organic market
can be self-sustained Similarly a dearth of proper market structures and institutional
support failed to provide environment-friendly agriculture practices in developing
countries (Rehber and Turhan 2002) The current scenario of agriculture sector in
developing countries has raised several considerable questions to acquire the
anticipated implications for this sector However the most relevant query drifted that
2
―Is there sufficient consumerlsquos willingness to pay (WTP) available in a developing
country for grass-roots development of pesticide-free agriculture
11 Background of the Research Endeavor
Agriculture sector is the mainstay of Pakistanlsquos economy which significantly
contributes as 192 percent to overall Gross Domestic Product (GDP) of its economy
(GOP 2016-17) Despite many efforts and policy reforms still this sector is entangled
with insignificant growth momentum
Since the inception of this country in 1947 there wasnlsquot any notable crop and plant
protection policy adopted by concerned policy makers over a long span of time It is
evident from past timeline that ―Grow More slogan was initiated by the government of
Pakistan back in 1970s to address the escalating foodlsquos demand of rapidly increasing
population of Pakistan Subsequently Grow More policy resulted in ever increasing
pest problem which couldnlsquot be controlled with conventional crop management
practices Therefore the government started to provide the direct subsidy to Pesticides
Industry to provide panacea to croplsquos pest problem But unfortunately the colossal
surge in pesticides utilization had not only destroyed the pests but was also found lethal
for the environment benign organisms that include predators birds etc This irrational
use of pesticides and other crop inputs has caused huge economic loses and health
issues among the farming community
Pakistanlsquos agriculture is endowed with 11 (Eleven) different agro-ecological zones
providing the country an incredible exciting arena for experimentation and state of the
art for agriculture as reported by Altaf (2010) This diversified nature of ecological
zones can be utilized in a lucrative way to attain an optimal output The driving forces
of this sector are striving hard to curtail the gaps by ensuring the adequate production
and supplying the food to meet the demand of rapid growing population of the country
However the emerging challenges such as irrational use of croplsquos input and complying
with world trade organization (WTO) obligations are insisting the concerned policy
makers to focus on paradigm shift for significant contribution of agriculture towards
livelihood welfare and prosperity
3
These different agro ecological conditions provide the encouraging and conducive
environment for the production of cereal crops fruits vegetables and even for non-food
crops Fruits and vegetables grown in Pakistan have a wide domestic demand and have
also attracted the international consumer by exporting these edibles in the international
market Pakistan exports mango apple dates oranges guava and dry fruits like pine
nuts to different countries which include but not limited to Afghanistan UAE Saudi
Arabia and Europe (GOP 2014-15)
The relative importance of agricultural sector can be gauged with high growth rate of
exports of fruits and vegetables from Pakistan to different countries mainly South East
and the Middle East (Khalid Mustafa 2003) where low Sanitary and Phytosanitary
(SPS) standards are comply with Yet several more fruit grown in Pakistan have
enormous potential to be exported in the international market Specifically insect pest
infestation during pre- and post- harvest of fruit and vegetables is a significant problem
To protect from those many kinds of pesticides and agro-chemicals are widely used in
Pakistan These include different types of agro-chemicals which consist more than 100
types of insecticides almost 30 types of fungicides and approximately 39 different
types of herbicides (Zia et al 2009Anwar et al 2011) In 1960 the consumption of
chemical pesticides in Pakistan was 7000 tons per year which has risen to 78 232 tons
per year in 2003 (Syed and Malik 2011)With the development of pest resistance to
those chemicals over years each year new chemical compounds in large amount are
used to protect crops Overuse of these agro-chemicals has caused many adverse health
and environmental effects
However significant variation in consumer behavior in the developed countries has
excelled the demand of high quality food which had encouraged the organic
agriculture Thatlsquos why developing countries who have still adopted obsolete strategies
for pest control are out of race for agriculture export and are at venture to be considered
as ―dirty producer in an international market Similarly in Pakistan massive increase
in the pesticidelsquos use has escorted to two major harms to Pakistanlsquos economy Firstly
Pakistan imports a large quantity of pesticides incurring billions of costs on it and
second overuse of pesticides on agricultural commodities has created many health and
environmental hazards in the farming community of Pakistan Several research
endeavors such as Ahmad et al (2004) Rizwan et al (2005) Parveen and Masud
4
(2001) had divulged that individuals working in field under pesticides exposed
environment specifically women who worked long time in the cotton croplsquos field
sustained more health hazards These health hazard underscored skin irritation
headache nausea and gastroenteritis It is also evident that the hazardous chemical
residues of organo-chlorines organophosphate and synthetic pyrethroids pesticides
were found in 85 percent of the blood samples drawn from 75 sampled individuals
(male and female) in Pakistan
12 Pesticides free Food and Products
Pesticides free fruit and vegetable are those edibles that are grown without the use of
pesticides and can be deemed as major component of an organic farming Due to
awareness among people about advantages of Pesticides free fruit and vegetable which
upshot in food safety and benefit environment as well the production and consumption
of such food products is being highly valued With the consumption of food produced
without the use of pesticides can be helpful in the prevention of some of the health
hazards related with the consumption of conventional food (Nouhoheflin et al 2004)
The term ―Pesticides free was introduced for the first time in a book ―Look to the
Land in 1939 by Lord Northbourne The author narrates pesticides free farm as an
organization that making use of environment balance technique by adopting zero
pesticides In early 20th
century pesticides free food ideology was brought forward
while correspondingly there was an immense use of chemical in food products as well
Householdslsquo were having great concern about their health as well as soil condition and
they began to grow such food which was free from chemical residuals In the era of
70s a noteworthy change was reported in escalating the demand of pesticides free food
and pesticides free farming Therefore in year 1972 ―International Federation of
Pesticide free Agriculture Movement was formed In the same era the producers who
were producing pesticides free food individually commenced the certification process
The obvious aim of the process was to develop rules and to underpin the standards of
pesticides free production
In this modern era where food consumers are highly concerned about their health safety
and environment benign practices they prefer to buy pesticides free food products
This is because of their knowledge about the relationships between the production
practices and quality of food produced Consumers are becoming more conscious as
5
they are aware of the harmful effects of food produced with irrational pesticides use on
their health Many research endeavors have corroborated that fresh fruit and vegetables
confers health related benefits and provide protection against the risk associated with
different types of diseases like diabetes stroke and cancer(Van and Pivonka 2000 Stan
Kar Stoner Singh 2008) Likewise the world health organization (WHO) has
revealed in their research carried out in 2002 that the fruits and vegetables
contaminated with pesticides can cause about 31 percent of diseases related to heart and
11 percent stroke in all over the world However if best quality of fruit and vegetable
consumption is adequately increased it is projected that about 27 million of lives can
be protected each year Pesticides free food contains higher level of antioxidants which
fight against various diseases and provide different essential vitamins More
importantly pesticides free food products also aimed to prevent from some allergies
and diseases common in human being It is corroborated by other research studies that
chemical fertilizer free food are beneficial for human health as well as for the animals
wildlife and for the ecosystem To encourage such agricultural management techniques
in developing countries in general and Pakistan in particular still there is long way to
go but such research studies can provide the paved way to open new avenues for the
concerned policy makers and stakeholder in the realm of Agriculture
In addition locally grown pesticide free produce tends to fetch higher prices due to
sanitation concerns of the consumer and improved quality of the product Subsequently
such produce are preferred by the household and they are agree to pay a price premium
for such food produced free from pesticides compared to prevailing regular market
price of conventional food products Thus it is important to measure householdlsquos
willingness to pay for locally produced pesticide free fruit To acquire a good or
service consumerslsquo wants to sacrifice an extra amount of money which show their
willingness to pay Willingness to pay can also be defined more categorically as the
extra amount of money that an individual wants to pay for best quality of food (Lusk
and Hudson 2004) The commonly used model for eliciting householdlsquos willingness to
pay information is Contingent Valuation Method (CVM) Contingent valuation (CV) is
a survey-based method which is used to elicit householdlsquos willingness to pay for
environmental and natural resources
6
12 Justification of the Study
With the every passing year the demand for agriculture products is hiking due to rapid
increase in the worldlsquos population Pakistan being an agrarian country is striving hard
to fulfill the domestic and international demand for agricultural food To overcome the
escalating demand for agricultural product farmers mainly depend on chemical
technologies to manage pests and to provide enough food Besides their benefits now it
is clear that pesticides are negatively influencing human health and also the natural
environment The food that we are eating has gained more discussion in all over the
world including developing countries like Pakistan that whether this food is safer for
human health and for natural environment Consumers are facing with problemslsquo which
food is safe to eat and which is not safe Which food processing is beneficial for human
and environment and which is worse (Bold et al 2015 Chiew Shi Wee et al 2014
Sirieix 2011 and Butt et al 2015) Most of people are turning towards the production
and consumption of pesticides free food to resolve these issues
In developed countries consumers are highly concerned about the excessive use of
chemicals on food and its negative impact on health and natural environment thatlsquos
why the production of food produced without the use of pesticides Large numbers of
studies are conducted on consumerslsquo perception regarding pesticides- free food in
developed countries like Europe Australia United State and New Zealand but in
developing countries very little is known about consumerslsquo perception regarding
pesticides-free food
Despite the fact that food production without pesticides and other chemicals are safe for
health and environment its production and consumption is very low In Pakistan only
few farmers are using chemicals free technology for food production It has only 28
farms producing pesticides-free food which they just growing for their own
consumption not for commercial purpose In Pakistan there is high gape of information
about consumerlsquos perception and awareness regarding pesticides-free food and
consumerslsquo willingness to pay for pesticides-free food (Panhwar 2004)
Keeping in view the human health hazards and environmental vulnerability owing to
irrational use of pesticides alternative farming systems such as pesticides free farming
integrated pest management (IPM) and organic farming is becoming progressively
7
more popular in the global context However in the country like Pakistan where costly
input and lower output agriculture was a historic focus Following the Green
Revolution in 1960s adoption of certified organic production is expected to be fairly
low Nevertheless aforementioned agriculture practices could be an alternative system
in convincing farmers towards safe and sustainable agriculture and to comply with the
strict regulations and mandates of certified organic system and WTO Moreover due to
conducive and diversified weather and climatic condition of the country and relatively
cheaper labor force availability production of such safer food seems feasible
Pesticides free food is supposed to be having high prices however it is important to
examine whether households are willing to pay a higher price for these pesticides free
fruit According to the research study conducted in different countries of the world on
pesticides free food this study also focus to investigate a price premium that
households are willing to pay for pesticides-free fruit and factors influencing their
decision For this purpose Khyber Pakhtunkhwa (KP) is selected as a research area
Khyber Pakhtunkhwa (KP) is blessed with fertile soil and plenty of water for irrigation
and is famous for production of delicious fruit such as peach apple guava plum
mango Pear apricot date and citrus Fruit farming has been an important business of
Khyber Pakhtunkhwa and the total fruit production during 2015-16 was 411448 tons
from 44737 hectare (GOKP 2015-16) Given that the region is one of the important
fruit growing regions with relatively readily available agricultural labor growers has
the potential to produce pesticides free fruit in this region In this direction more
research work is required to estimate a price premium householdslsquo willing to pay for
fruit free of chemicals and pesticides Thatlsquos why this study is designed to measure
what price premium households would be willing to pay for pesticides free fruit and
improvement in apple peach and mango quality produced by farmers
14 Purpose and objectives of the Study
The irrational and overuse of pesticides in agricultural food production causes severe
damages to human as well as animal health and to the environment too Thus a new
production and new system is needed to overcome these problems and to limiting the
use of these hazardous chemicals during production process The risk of harmful effects
on health and environment are generally reduced with pesticides free farming compared
8
to conventional farming methods Hence pesticides-free farming has the potential to
provide a healthy and safer environment The purpose of conducting this study is to
understand the factors that influence householdlsquos behavior in purchasing pesticide free
food and their willingness to pay for such food The main theme to carry out this study
is to discuss on the variables which determines householdlsquos behavior in the buying
pattern of pesticide free food Besides this research also aims to increase the
understanding on householdlsquos awareness attitude and perceptions towards pesticide
free products
The general objective of this study was to investigate what price premium householdslsquo
are willing to pay for pesticides free fruit produced locally
The specific objectives of this research study are mentioned as below
To study socio-economic characteristics of household and their expenditure on
fruit
To investigate householdlsquos perception towards the use of pesticides on fruit
production
To identify factors influencing householdlsquos willingness to pay (WTP) for
pesticides free fruit
To compare householdlsquos willingness to pay across urban and rural regions of
the study area
To examine the effect of different contingent valuation elicitation format on
householdlsquos WTP
15 Research Questions
1 Do householdlsquos willingness to pay a price premium for pesticide free fruit
produced locally is affected by their socio-economic characteristics
2 Do householdslsquo willingness to pay price premium for pesticide free fruit
produced locally are different in rural and urban regions
3 Do householdslsquo willingness to pay price premium for pesticide free fruit
produced locally are affected by WTP question format
9
16 Hypotheses
Hypothesis is a proper statement that shows the expected association between an
exogenous and endogenous variable (Creswell 1994) Hypothesis is mainly of two
types the null (Ho) and the alternative (H1) hypothesis The null hypothesis is a
statement about the relationship between the dependent and independent variables
while the alternative hypothesis is tested for the acceptance or for the rejection of null
hypothesis through using different test-statistics and usually opposite to the null
hypothesis
161 Hypotheses to be tested
Hypothesis 1
H1 Socioeconomic characteristics have significant effect on householdlsquos WTP
for pesticides free fruit produced locally
Hypothesis 2
H1 Rural and urban locations have significant effect on householdlsquos WTP for
pesticides free fruit produced locally
Hypothesis 3
H1 WTP question format have significant effect on householdlsquos WTP for
pesticides free fruit produced locally
17 Contribution of the Study
The major findings of this research endeavor could be lucrative to pesticides-free food
industry players in designing and implementing programs relating to the production
marketing and consumer behavior regarding fruit and vegetable The study is providing
information regarding householdlsquos willingness to pay an extra amount for pesticides
free fruit at market place The identification of factors influencing purchase of
pesticides free food provides valuable information in formulating short and long term
marketing programs Also the outcomes of the study provide benefits to Government
in their policy making towards pesticides-free farming and pesticides free products
Pesticides free fruit could contribute significantly to wealth formation poverty
lessening and can assess to export market Pesticides free fruit provide healthy food and
natural environment to the society
10
18 Organization of thesis
This study is organized into five chapters In the first chapter background of the study
research questions study hypothesis research justification and contribution of this
study is discussed Chapter two is consist of review of literature related to consumerslsquo
perception market potential and market prospects empirical research studies on
consumerlsquos willingness to pay and consumer knowledge about pesticides free food
socio-demographic variables and their effects on willingness to pay price premium are
discussed Chapter three discuss in detail the study area conceptual and empirical
framework on consumerslsquo willingness to pay and contingent valuation methods are
discussed Chapter four presents descriptive analysis and results obtained from
empirical findings and Chapter five provide summary conclusion and recommendation
and future suggestions on the basis of research findings
11
II LITERATURE REVIEW
Literature review is a synthesis of previous study in the content of a thesis In this
chapter different past investigation are reviewed Mostly this chapter concern on the
methods adopted by different researchers while measuring willingness to pay It also
figure-out various explanatory variables which have been found influencing
householdslsquo willingness to pay an extra amount of money for pesticides-free food
Previous researches on perception questions are also discussed
21 Illustration of Contingent Valuation Method (CVM)
A number of research studies are undertaken across globe to investigate about
consumerslsquo WTP for safer foods such as organically produced pesticides free or
naturally grown Most of the WTP studies use contingent valuation methods where
hypothetical market scenario is developed and subjects are asked to name their WTP
price as compared to existing market price Different techniquesquestionnaires are
used in contingent valuation method where respondents are directly asked to state their
maximum amount of money they are willing to pay for specified improvements in
environmental or health quality The methods used in CVM includes personnel
interview mail and survey that elicit consumerlsquos WTP for those goods yet not available
in the market Survey questions include single bounded double bounded dichotomous
choice and open ended or closed ended (Lusk and Hudson 2004)
Misra et al (1991) studied consumer preferences and their willingness to pay for
pesticides free fresh produce by applying contingent valuation method An ordered
probit model was adopted to know householdlsquos stated willingness to pay for products
free from pesticides residual The study also aimed to know the factors affecting the
probability of householdslsquo WTP for a number of alternative price premiums The
results indicated that householdlsquos willingness to pay was different across different
factors The study concluded that testing and certification was the recommendation of
the households Results also showed that consumers in the study area opposed higher
prices for certified-FPR fresh produce
In another study Gil et al (2000) adopted contingent valuation method and studied
consumerslsquo willingness to pay for pesticides free fruit in Spanish regions Results
showed that consumerslsquo concern over health and environment was increased Results
12
also suggested that due to the adverse impact of conventional food on health and
environment demand for pesticides-free food has raised Results of the study also
showed that consumerslsquo were willing to pay more prices for fruits vegetables and
meats which were free of pesticides
Boccaletti and Nardella (2000) used contingent valuation method to assess householdlsquos
willingness to pay for pesticides free fresh fruit and vegetables To know the impacts of
explanatory variables on the probability of householdslsquo willingness to pay different
price premium an ordered logit model was used and results were reported A
significant and positive effect of income on householdlsquos willingness to pay was
observed Results of the study also suggest that householdlsquos education and associated
risk concern has an inverse relation with households WTP
In another study Millock et al (2002) conducted a research study by using contingent
valuation technique to estimate willingness to pay for pesticides free products through
panel data The information collected was based on weekly report of householdslsquo
purchases of 2000 Danish families Questionnaires were sent to households and asked
them to differentiate different food attributes The food product attributes were included
environmental issues animal welfare and food safety The result showed that
household had given high value to food free from pesticideslsquo residues
Similarly in a relevant study Cranfield and Magnussan (2003) studied willingness to
pay of the Canadian householdlsquos for those products which were free from pesticides
residuals by applying an Ordered Probit Analysis model A contingent valuation (CV)
study was attempted to know that if Canadian households would pay a price premium
for pesticides free food products About sixty five (65) percent of the householdlsquos were
willing to pay a 1 to 10 percent extra amount of compared to those products
contaminated with pesticides residuals About five percent of the total respondents were
willing to pay more than 20 percent price premium The main determinants that switch
over the households to pay higher premiums for pesticides free products were
householdslsquo health concern and environmental concern
In a relevant study John and Eric (2004) developed a survey based research to find out
householdlsquos choice of paying an extra amount for fresh and pesticides free products by
using a contingent valuation technique According to their research 65 percent of
13
households were willing to pay one to ten percent extra prices for pesticides-free
products as compare to conventionally produce one five percent respondents willing
to pay more than twenty percent Health and natural environmental issues youth and
grocery stores were the important factors influencing consumers to pay higher prices
Masias et al (2012) carried out a research study in Spain to analyze the level of
knowledge consumption and consumerlsquos willingness to pay for organic vegetables
such as organic tomatoes By using contingent valuation method three distinct
consumerslsquo groups were identified The results showed consumerlsquos lack of knowledge
regarding organic vegetable Result of the study revealed a clear relationship between
level of knowledge and organic food consumption and consumerslsquo potential willingness
to pay
Boys et al (2014) conduct a research study in Dominica to assess willingness of the
consumerslsquo and their opinion for organic or locally grown produce By adopting
contingent valuation method (CVM) maximum likelihood estimation (MLE) procedure
was applied Findings from the study reported that respondents in Dominica were
willing to pay 175 percent for organic and 12 percent price premium for locally
produced food Results of the study showed that consumer response towards
willingness to pay was different across socio-demographic characteristics family health
status and experience regarding adoption of organic food products
22 Crux of the Double bounded dichotomous choice model
Many recent research studies deployed double bounded dichotomous choice model to
study consumerslsquo willingness to pay for pesticides free organic and related food
Owusu (2010) studied and analyzed market possibility for new pesticides free lettuce
and water melon by using a double bounded dichotomous choice contingent valuation
technique in the city of Kumasi in Ghana The information of the respondents was
collected By applying a Tobit model householdslsquo willingness to pay was assessed
More than 50 percent price premium were paid by 71 percent of the respondents for
natural vegetables and 82 were willing to pay 1 to 50 percent higher premiums for
natural fruits Results showed that human capital food qualities and householdlsquos
recognition impact householdlsquos willingness to pay for pesticide free commodities The
14
evaluated market possibility for pesticide free fruits were (GHcent32117113 US$
26453433) for every annum and for naturally produced vegetable was GHcent1991224
(US$1640083) per year suggested an immense market possibility for naturally
produced fruits in Ghana
sum
(
)
(
)
Where
are binary valued (0 or 1) indicators and the formulas
for the corresponding response probabilities are given above The model was estimated
through maximum likelihood estimation method and the results were used to find out
the mean and individual WTP (s) for pesticides free fruits
Where ƒ(WTP) is a function X is a set of socio-economic characteristics are
coefficients and is error term
In another study Cerda et al (2012) investigated different markets regarding
respondentlsquos preferences and willingness pay a price premium for products free from
pesticide in Chile Conjoint analysis was also used to estimate the marginal willingness
to pay of the consumer for pesticide-free apple A total of 400 individuals were
interviewed to know householdlsquos willingness to pay and to determine different
attributes that consumer search when purchasing apple by using a logistic probability
function and single-bound dichotomous elicitation format The output showed sweet
apple lowest price and pesticides free production attributes were preferred by
households Results of the study revealed that consumers in the study area were willing
to pay about 130 Chilean pesos kilogram for pesticide free apple
By using double bounded dichotomous choice approach Minh et al (2013) conducted
a research study on consumption and willingness to pay a price premium for pesticides
free vegetables in Vietnam Under contingent valuation method 185 respondents were
surveyed and analyzed Results showed that about 15 percent of the consumers had
already used pesticides free vegetables and 88 percent sought to try and purchase such
products if available in the market Result revealed that consumerslsquo were willing to pay
15
on average 70 percent more amount for pesticides free vegetable than the convention
price Findings also showed that respondents with more concerned about pesticides free
food and high purchasing power were more likely to pay extra amount of money
Findings of the study showed most of the consumers were still worrying about safe
food because of chemical residues in vegetables Results suggest that control of
pesticides level was difficult for state agencies because of insufficient capabilities
Some recommendations were suggested based on findings of the study such as the
consumers should be informed regarding organic vegetables and information should be
publicized to consumers and to expand organic market share in the future new shops
should be open
Hai et al (2013) conducted a research study on consumption of organic vegetables and
consumer WTP for vegetables produced without the use of pesticides in Vietnam They
reported in their study that most of the consumers were still worrying about safe food
because of chemical residues in vegetables Control of pesticides level was difficult for
state agencies because of insufficient capabilities By using double bounded
dichotomous choice approach under contingent valuation method 185 respondents
were surveyed and analyzed The results showed that about 15 percent of the
consumers had already used pesticides-free vegetables and 88 percent of the total
respondents desired to try and purchase if such pesticides free products were available
in the market On average consumers were willing to pay 70 percent more price than
the convention price Findings of the study also showed that respondents with high
income and more concerned about pesticides-free food were more likely to pay price
premium
23 Overview of the Ordered Logit Model
Regarding discrete nature and ordinal ranking of the WTP variables in payment card
method an ordered logistic regression was applied in many research studies Ordered
logistic regression is the most appropriate choice in studying these issues (Green
2007) Under latent variable framework the willingness to pay model can be written as
follows
16
Where is an unobserved latent variable reflecting the WTP for pesticides-free fruits
for household i expressed in terms of utility to switch from the traditionally grown
fruits consumption to pesticide free fruits is a parameterlsquos vector reflecting the
relationship between WTP captures a set of socioeconomic and demographic
variables influencing WTP and is the unobserved disturbance term reflecting
stochastic differences between households not controlled for The relationship between
the unobserved and the observed outcome for household ( =0 1 2hellipj) can
be summarized as follows
It is presumed that ɛ is normally distributed across observation
With regards to ordered logistic model Valchovska S (2004) investigated Dutch
householdlsquos attitudes and behavioral intentions to purchase pesticides-free olive oil By
applying CVM to assess consumer willingness to pay a price premium for pesticides
free olive oil on the Dutch consumer an ordered logit regression model was used
Results suggested that willingness to pay did not depend on socio-demographic factors
but rather on consumers awareness and experience with the product Results also
showed that experience regarding the product was significantly related to purchase
intention and willingness to pay Most of the consumers considered pesticide-free olive
oil to be too expensive Results suggested high prices appeared the biggest constraint
on consumption Results clearly verified that consumerslsquo familiarity with pesticide-free
olive oil in the Netherlands was low at present This situation may however be
changed by a possible increased availability of the product in the supermarkets
17
Rodriguez et al (2008) carried out a research study to measure consumers WTP for the
available pesticides free products in Argentina domestic market The data was collected
through a survey from the consumers of Buenos Aires city For the analysis of data a
binomial multiple logistic regression model was applied Five different organic
products such as regular milk leafy vegetables whole wheat flour and fresh chicken
and aromatic herbs were selected for the research The method of contingent valuation
(CVM) was adopted to estimate consumerslsquo stated willingness to pay The result
revealed that pesticide free agriculture has undergone momentous expansion and
consumers in the study area were willing to pay a higher amount of money for such
organic products Research results suggest that along with price that play a significant
rule while consuming organic products non availability of stores for organic products
and a reliable regulatory system limits the consumption of pesticides free organic
products in the study area
According to Kalogeras et al (2009) carried out a research study that concentrates on
the identification of Dutch householdslsquo willingness to pay (WTP) for natural olive oil
The study was carried out in 5 biggest Dutch cities in Netherland To evaluate the
impact of explanatory variables on householdslsquo willingness to pay a price premium for
natural produced olive oil an ordered logit regression model was constructed Results
suggest that experience awareness and consumerslsquo personnel satisfaction were the
variables influencing consumerslsquo WTP for natural olive oil
Travis et al (2009) conduct a research on consumer purchasing behavior for pesticides
free fruits and vegetables To identify the impact of socio-economic and socio-
demographic characteristics on the probability of consumers belonging to certain
groups like devoted casual or nonuser an ordered logistic model was used Results
showed that factors like price and income were influencing householdlsquos willingness to
purchase pesticides-free fruits and vegetables to some extent The results also showed
that respondents with a college degree children aged more than six years and aged
above than fifty years were willing to purchase pesticides-free fruits and vegetables
Zeki and Zia (2009) carried out a research study to investigate consumerslsquo stated WTP
for tomatoes produced free from pesticides residues The study also aimed to measure
the impacts of socio-demographic and hazard variables on WTP Ordered Probit model
18
was used to figure out the likelihood of WTP for pesticide free tomatoes The
information was acquired from 666 respondents by survey method in Ankara and Tokat
regions at same occasion The study results revealed that 3423 percent of Turkish
households were not willing to pay 7702 percent willing to pay a 30 percent higher
amount of money and 22 97 percent would be willing to pay more than 30 percent
premium According to the results Turkish households were paying a little price
premium for tomatoes produced free from pesticides Furthermore the important
factors significantly influencing willingness to pay for pesticides free tomatoes were
gender education statue of mother recognizes for ecologic agriculture solid
sustenance and risk
Oyawole et al (2016) conducted a study in Nigeria to asseslsquo consumer awareness
benefits and willingness to pay for organic vegetables Descriptive statistics and logit
model was used for the analysis of data According to the research findings about 70
percent of consumers were aware of the benefits of organic agriculture and hence they
were willing to pay price premium Results showed that factors influencing willingness
to pay positively were higher education and consumer awareness regarding organic
food while age income and gender had no significant influence on consumer
willingness to pay
Hayati et al (2017) conducted a research study in Marand city to identify factors
effecting consumerslsquo WTP for pesticides-free fruits and vegetables To assess
respondentlsquos willingness to pay an ordered logistic regression model was applied By
using Contingent valuation method data was collected from 394 respondents The
results revealed that 33 of the respondents were willing to pay 20 more price
premium 64 showed 5 to 20 more price premium while only a small portion 3
of the total sample of the consumers were not willing to pay more price for pesticides
free fruits and vegetables Findings of the study also revealed that factors such as
income of the respondent environmental and health concern and consumerlsquos
knowledge regarding pesticides free fruits and vegetables were significantly affecting
respondentslsquo willingness to pay for vegetables and fruits free from pesticides residues
19
24 Factors influencing Householdsrsquo Willingness to Pay
Based on the literature review factors influencing households WTP a price premium
are discussed below
WTPj = β0 +β1Agej + β2Genj + β3Eduj+ β4Hsizej + β5Incj + β6Locj + β7Healthconj+
β8Envirconcernj +
Where
WTP = Willingness to pay for pesticides free fruit = Householdslsquo head age in years
= Gender status of the householdslsquo head = Education level of householdslsquo head in
years = Householdslsquo size = Income of the household = Householdslsquo
location = Health concerned = Environment concerned micro=Error term
Govindasamy and Italia (1991) investigated households in different grocery retail
markets in New Jersy to know their different opinion regarding pesticides free
products The main theme of the research study was to know demographic
characteristics that caused the household to pay a price premium for products free from
pesticides residues than the price prevailing in the market The result showed the
influencing factors that caused the individual to pay more price premium for pesticides
free products were demographics characteristics such as females those having higher
income and young individuals The result also showed that number of member in
households had an inverse relation with willingness to pay More individual in a house
were not willing to pay higher prices for pesticides free products
Piyasiri and Ariyawardana (2002) conduct a research study to identify market potential
and consumerslsquo expectations for pesticides free food in Kandy Sri Lanka The study
also aimed to identify factors influencing consumerslsquo willingness to pay price premium
for pesticides-free food Results revealed that most of consumers in the study area were
aware of the use of pesticides free food and this awareness influenced their
consumption of organic food and willingness to pay more for organic food Results
showed that socio-demographic characteristics like income education of the
respondents beside environment knowledge were the important factors influencing
consumerslsquo WTP for pesticides-free food Study suggested that market for organic food
could be enhanced by availability of organic food in easily accessible shops and market
20
should also direct awareness in consumer regarding demand and consumption of
organic food
Qingbin and Junjie (2003) conduct a study to identify market potential for pesticides
free apple and milk by adopting a conjoint analysis technique in Vermont State of
USA Results found that there was a significant niche market for pesticides free apple
and milk The results also suggested that especially those consumers who were
regularly purchased pesticides free products were willing to pay price premium for
apple and milk produced without the use of chemicals and certified by NOFA
Heo and Kim (2004) investigated green marketing strategies and willingness to pay for
environment-friendly agricultural products in the Metropolitan area The results
revealed consumerlsquos WTP for grain vegetables fruit and processed foodstuffs were
206 percent 202 percent 193 percent and 172 percent respectively higher than
agricultural products produced by conventional farming method
Gracia and Magistris (2007) conduct a research study to know consumerslsquo purchasing
behavior regarding pesticide-free food and also factors influencing food purchasing in
Iran A multivariate limited dependent variable model was used Results showed that
households purchasing pattern was more for pesticides free products and they
purchased such safer products in large quantity Findings of the study showed that
purchase of pesticide free products depends on householdlsquos behavior and information
regarding the product Moreover householdlsquos behavior regarding health concern and
environment concerns given by pesticides-free products were the factors that explained
both intension and final decision to purchase pesticide free products Income and
information about pesticide free products had a significant positive influence on the
decision of the consumer to purchase pesticides free products
Kamal et al (2009) studied householdlsquos willingness to pay a higher price for
pesticides-free products in Kathmandu valley About 180 respondents were interviewed
by using well designed questionnaires to find out their perception for pesticide-free
food commodities and asses their willingness to pay The study revealed that almost all
the respondents were willing to pay a higher price for such food but the level of
acceptability varied Up to 58 of the respondents were willing to pay 6- 20 more
price while 13 were willing to pay half premium The average price premium was
21
noted about 30 Over 39 of the respondents suggest the extra price is reasonable for
pesticide-free food while 27 suggest it a really higher price However results showed
that the consumption of pesticide free food had increased
Morteza et al (2009) conducted a study to examine consumerslsquo willingness to pay for
pesticides free fruits and vegetables The results showed that variables such as socio-
demographic characteristics and perception of the respondents regarding environment
and health concern were influencing consumerslsquo WTP for pesticides free food
Environment concern was the important factor of consumer willingness to pay but
results from this study showed that respondents in New Brunswick gave more priority
to health as compare to environment Results also indicated a positive influence of
income and health concern on consumer willingness to pay for organic food
Ghorbani and Harnraz (2009) carried out a research study on factors influencing
consumer WTP for pesticides free products in Iran By applying Tobit model the
results showed that physical look and information of consumerslsquo were the influencing
factors affecting willingness to pay higher price Consumerlsquos concern of chemicals
residues in diets were also positively affecting willingness to pay In demographic
characteristics such as education of the respondents had negative effect on WTP The
study suggested that farmers and consumers should be encouraged to produce and
consume pesticides-free food Study also suggests that marketing strategies should be
encouraged for the marketing of such organic food products
Akgungor et al (2010) carried out a research study to estimate consumerslsquo perception
regarding safe food and the trade-off that urban Turkish consumer made between good
quality and chemicallsquos free fresh fruits and vegetables The date was gathered from a
representative sample of urban consumers The results suggested higher income and
more educated respondents were highly interested and they had more knowledge
regarding organic products Results showed suggested reason for choosing organic
products was consumerslsquo perception regarding organic products of low health risk and
higher nutritional value Results showed 36 percent higher price premium consumers
were willing to pay for organic food that suggests urban Turkish consumerslsquo demand
for organic products
22
Oraman and Unakitan (2010) analyzed factors influencing Turkish consumerslsquo
purchasing decisions for fruits and vegetables The survey conducted in Istanbul by
applying logistic model Results of the survey showed that health and safety concern
were the important factors influencing consumerslsquo preferences regarding organic food
Findings of the study would help organic food producer in targeting factors that were
influencing consumerslsquo decisions to purchase organic food products
Bektas et al (2011) conducted a research study to determine level of consumerslsquo
awareness regarding food safety in Izmir Turkey by applying Probit model Results
revealed that consumerslsquo with high income and more education were more aware
regarding safer food Outcome of the study also identified aged respondents had more
probability for healthy and safe food products Results suggested that awareness for
safer food should be passed through informative campaign targeting especially low and
middle income groups as well as low education level population
Coulibaly et al (2011) studied the health risk caused by using large quantity of
chemicals and pesticides on vegetables By using a hedonic pricing model they
identified the determinants of the householdlsquos WTP for pesticide free products
Information was collected through a well designed questionnaire on householdlsquos
perception awareness and consumerslsquo willingness to pay for pesticide free vegetables
The perception of householdlsquos for good quality vegetables included color freshness no
external damage and firmness The most important factor effecting householdlsquos choice
to pay more for pesticide-free vegetables were awareness about the health hazards
caused by those chemical Households were willing to pay more than fifty percent for
those products free of such pesticides and chemicals
Joyce et al (2011) conduct a survey to examine consumerslsquo perceptions and to assess
their willingness to pay for pesticides-free product They surveyed 100 households in
Morogoro municipal The results presented showed that 78 of the respondents were
willing to pay a higher price for pesticides-free food The results revealed that
environment and health concern were the most important factors effecting householdlsquos
willingness to pay for organic food Results from the survey suggested that
consumption of pesticides free food were increasing but need certification labeling
processing and packaging to boost up the demand
23
Sangkumchaliang and Huang (2012) conducted a survey on consumerslsquo perception and
attitude towards organic food products Results showed that consumers were
purchasing organic food products because of the expectations that organic food is
healthier and safer to the environment Results also revealed that respondents with old
aged and more educated were more willing to purchase organic food products The
study suggested that consumerlsquos information needed to purchases organic food
Owusua and Anifori (2013) analyzed the willingness of householdlsquos to pay an extra
amount of money to watermelon and lettuce produced naturally or free from pesticides
by applying a (CV) contingent valuation information starting with urban Kumasi in
Ghana The impacts of the determinants of the householdlsquos willingness to pay a higher
price were examined with a Bivariate Tobit model Results showed socioeconomic
characteristics as well as freshness and cleanness of products had a great influence on
householdlsquos choice to pay a higher price than they pay for conventional products
While householdslsquo size has a negative impact on consumerslsquo willingness on paying
premium to natural lettuce The estimated mean householdlsquos willingness to pay for
pesticide free watermelon was Ghcent05554 (US$ 0 4575) and for natural lettuce was
GHcent12579 (US$1 0361)
Haghjou (2013) investigated that the demand for those products that was grown without
the use of pesticides has increased amazingly in the recent years The study was carried
out to assess the factors effecting householdlsquos willingness to pay a higher price for
organic products accessible in the Argentinean provincial market The output of the
study reveals that 95 of the respondents were willing to pay a higher price while 10
of the householdlsquos were like to pay about 35 percent higher price than the market
existed price for naturally grown products The results suggested that householdslsquo
income family size ecological problems including respondentslsquo knowledge has
enhanced their desire to pay higher price for pesticide-free products than the
conventional one The result also showed that female as well as house wives were
agreed to pay more price premium
HUI et al (2013) conduct a survey on householdslsquo WTP a price premium for
pesticides-free products in Klang valley The study was based on householdlsquos
purchases by 2012 on their demographic and social-economic characteristics To study
the householdlsquos perception and WTP for pesticide free products 500 households were
24
interviewed by using well designed questionnaires The data collected were analyzed to
find what determined the presence of pesticide-free products The main theme of the
research study was to know the determinants that playing rule in willingness to pay for
products free from pesticides residues The result revealed that majority of the
households were agreed to pay a higher price premium for pesticide free products
Different factors like environment psychology food free from pesticide residuals and
health conscious were related to explain household willingness to pay for organic
products However the result also showed that social demographic and level of
knowledge did not explain the WTP for products free from pesticide
Syed et al (2014) studied different level of pesticides in different vegetables and fruits
in Pakistan The results obtained showed that more than half of the collected samples
were contaminated with organophosphate pyrethroids and more organochlorines
pesticides Numerous research studies found that tomato apple melon mango grapes
and plum among fruits and vegetables has crossed the maximum residual levels of
FAO and World Health Organization (WHO) The comparison with other areas showed
that in 50 of the sample the residual level was above than the stated level but was in
agreement with neighboring countries like china and Bangladesh Higher hazard risk
index (HRI) values were calculated for dieldrin methamidophos op-DDT diazinon
and pp-DDT in apple mango banana melon potato and onion
Vidogbena et al (2015) carried out a research study in major cities in Benin to asseslsquo
consumer perceptions about cabbage produced by a physical barriers method to protect
cabbage from pesticides Results showed that consumers were aware of the impacts of
pesticides on health and environment but they were not able to differentiate between
cabbage produced conventionally and through this net method Results of the study
revealed that consumer were willing to pay higher price for cabbage produced with
minimum application of pesticides as compared to one produced with pesticides
application Consumers were willing to pay 38 more price than the existed market
price Results indicated that females more educated and aged respondents were willing
to pay more prices for better quality cabbage
Safdar et al (2015) studied pesticide free food consumption and consumerslsquo WTP in
the United Arab Emirates To recognize major determinants of respondentlsquos willing to
pay more price for products free from pesticides residues a regression model was used
25
Around 300 hundred respondents were interviewed and information was collected The
results showed that the consumption of such food was increased in the study area This
increment was due to high per person price premium more knowledge about nourished
food products and different household population Consumers were paid price premium
for the food free from pesticides residuals Results showed that majority of the
respondents respond when inquired as to whether they were willing to pay more for
pesticide-free products Age nationality instruction family size and salary were main
factors influencing consumerslsquo to pay higher price for the pesticides-free food products
Hiren et al (2016) carried out a survey in Tennessee State USA The data were
collected on a random sample from grocery shoppers to assess consumer general
knowledge about pesticides-free food and to know their willingness to pay For this
study binary logistic regression model was used The survey showed that most of the
consumer had a fair knowledge about pesticides free food Results indicated that
number of those respondents who had never been used organic food was higher than
those who usually used The results showed that income and environmental concern
were the factors that effectively determine to pay more for pesticides-free food
Aguiar et al (2016) studied factors influencing consumerslsquo purchasing behavior
regarding organic food in Brazil by using structural equation modeling (SEM)
approach Results revealed that most of the consumerslsquo were willing to buy organic
food Respondents were willing to pay 25 percent price premium for organic food as
compared to food produced conventionally Results suggest the main determinants of
consumerslsquo willingness to pay were their beliefs of positive effects of organic food on
health and environment
Mangan et al (2016) studied level of awareness and willingness to pay for organic
vegetables in Sindh province of Pakistan Result of the study reported that majority of
the respondents had knowledge about the beneficial effect of organic vegetables while
less than half of the respondents had never heard about organic vegetables Results also
showed that most of the respondents (82) were not aware of the benefits of organic
vegetables to the environment Majority of the respondents were willing to pay price
for organic vegetables
26
Nandi et al (2016) studied consumer willingness to pay for organic fruits and
vegetables and also factors influencing consumerslsquo WTP in India For the estimation of
respondentlsquos willingness to pay contingent valuation method (CVM) was used For the
data analysis 250 respondents were selected A binomial regression model was used to
know respondents willingness to pay and the factors influencing on WTP Results
revealed that most of the respondents were confronted with environment problem
health related issues and safe environment and food The respondents were increasingly
desired to have more healthier and environmental friendly food To acquire better
quality of fruits and vegetables about 90 percent of consumers were willing to pay a
price premium ranging from 5 percent to 100 percent Factors like income of
respondents householdlsquos size gender and other opinion variables such as pesticides
residues in food taste and environmental concern were significantly influencing
consumer willingness to pay a price premium
Slamet et al (2016) conducted a research study to identify factors influencing
consumerslsquo willingness to purchase pesticides free vegetables in Jabodetabek region
(Jakarta) Data was obtained through a householdlsquos survey Three methods binary logit
model descriptive analysis and factor analysis were used for analysis of data The
results showed that respondents with more income minimum householdlsquos size and
price tolerant were more likely to purchase pesticides-free vegetables The study also
indicated other factors determining consumerlsquos willingness to purchase for pesticides-
free vegetables were positive attitude health concern environment concern as well as
positive belief in pesticides-free vegetables
Gumber and Joyti (2017) conduct a research study in national capital region of India to
find out price premium and factors effecting consumerslsquo WTP for pesticides free food
Results of the study showed that consumerlsquo demographic characteristics like education
income of the respondents environmental concern and health related issues were the
important factors influencing consumers to pay higher price for organic food Besides
other variables like taste physical look certification packaging and promotion were
found to have no influence on consumer willingness to pay for pesticides-free food
Results suggested organic food producer to design communication strategies and
suitable pricing strategies in the study area
27
25 Essence of the Literature Reviewed
The above literature reported that several studies have been conducted on
consumerhouseholds willingness to pay for pesticides-free fruits with contingent
valuation method (Govindasamy and Italia 1999 Krystallis and Chryssohoidis 2005
Quagrainie 2006 Kimenju and De Groote 2008) In this type of models a
hypothetical market scenario is developed in which consumer are asked about their
stated WTP a price premium Misra et al (1991) and Boccaletti and Nardella (2000)
used contingent valuation method and analyzed household willingness to pay for
organic products in Italy and USA Gil et al (2000) also used the contingent valuation
model in Spain and reported that respondents in that study area were willing to pay a
price premium for pesticide-free fruits
Regarding the socio-demographic profile of pesticides-free products the above
underline research study showed that mostly female respondents were willing to pay
price premium more frequently than male respondents Age factors also played an
important role with older consumers observed more WTP due to their health concern
On the other hand income played a vital role while buying safer food Literature also
supported that more educated respondents are willing to pay more price premium for
healthier and environmental friendly food products
The preceding review presents valuable information on contingent valuation method
and consumer willingness to pay price premium for organic foods and environment
resources Since most of the work had done on consumer willingness to pay for
pesticide-free fruits in developed countries but not a few studied paid much attention to
conduct research on householdslsquo willingness to pay for pesticides-free fruits in
developing countries like Pakistan
A few facts emerge the literature review One the coverage of consumerslsquo WTP for
organic and pesticide-free food is rather thin in the literature The lack of this
information could inhibit governmental and developmental agencieslsquo decision Second
the consumer WTP is a factor demographics and consumerslsquo perception This study
uses CVM to explore Pakistani consumer WTP for pesticide-free fruit We found socio-
demographic factors such as age education income householdlsquos size householdlsquos
head education and perception significantly influencing householdslsquo WTP Findings of
28
WTP
Environmental
concern
Socio-demoghr
aphic characte
risitcs
consumer knowledge of PFF
Health
concern
this study almost showed 26 percent price premium that suggest a strong indication of
consumerslsquo demand for pesticide-free fruit This is a convincing message for
agriculture policymakers to encourage and educate farmers for production of pesticide-
free fruits Thus this study is timely relevant and provided additional information on
understanding consumerlsquos attitudinal behavior choice and factors effecting willingness
to pay for pesticide free fruits in Khyber Pakhtunkhwa (Pakistan)
Review of literature highlighted different influencing factors that affect the consumers
willingness to pay for pesticides-free food are shown in figure 1 It shows that
perception of consumers regarding human health and environment and socio-economic
and socio-demographic characteristics have an influential affect on consumer
willingness to pay
Figure 1 Factors effecting consumerrsquos WTP for pesticides free fruits
29
III MATERIALS AND METHODS
This chapter consists of two sections The first section describes the study area while
the second section presents the conceptual frame of the study The second section
provides a detailed discussion about the methodology being employed for the research
In the beginning of this section a brief debates provided on Contingent Valuation
Method (CVM) used to analyze householdslsquo willingness to pay (WTP) and later on
elaborate specification of the empirical models used for capturing the factors
influencing householdlsquos willingness to pay for pesticides-free fruit and vegetables is
given followed by a discussion on how the data was collected in the study area
31 Khyber Pakhtunkhwa
Khyber Pakhtunkhwa (KP) occupies a north-west position in Pakistan with a total area
of about 74521 square km Gilgit-Baltistan is situated on its northeast Punjab on the
southeast and Azad Kashmir on the east A long and narrow piece of land belongs to
the Federally Administered Tribal Areas (FATA) borders situated to its south and
Baluchistan directly below it On its west Federally Administered Tribal Areas are
situated and Afghanistan is situated on its northwest According to census report 1998
the total population of KP was 177 million According to the 2011 Census Bureau of
Pakistan house listing operation the population of KP was estimated to be more
than 268 million There are a total of 26 districts in KP Naturally KP has been
endowed with abundant cultural and tourism friendly environment It has the capability
to become a charming area for the tourist in the world Due to its beautiful and
attractive scenery geographical location climate and God gifted natural resources KP
is exceptionally abundant in terms of multitudes of tourist attraction The core of this
charm is clear from the striking natural picturesque consisting of beautiful rivers
attractive and splendid waterfalls spiral lakes mostly in the hilly areas and ever green
valleylsquos in most parts of the province TCKP (Tourism Corporation Khyber
Pakhtunkhwa(2015)Districts of KP is shown in figure31
30
Figure 31 District Peshawar and Mardan of Khyber Pakhtunkhwa
31
32 Sampling Technique
Three stage stratified sampling technique was used for the collection of data
from study area
321 Stage 1 _Selection of district Peshawar and Mardan
In the first stage as KP is comprised of 26 districts Peshawar and Mardan was
purposively selected The purpose behind this selection was huge population in these
two districts
322 Stage 2 _ Selection of Union Councils (UCs)
In the second stage from each selected district one urban and one rural union
council were randomly selected Thus a total of 4 union councils were taken as a
sample location from both districts
323 Stage 3 _Selection of households from each Union Council
In the third and final stage a list of households was obtained from local union
councillsquos health department (BHU) The following Yamanelsquos (1967) formula was
used to decide sample size of households
Where
- r is the sample size for households
- N is the total households in selected UCs and
- e is the minimum probability of error
The value of ―e was selected at e = 003 with the intension to keep the error at lowest
possible level and select a best representative sample from the given population of
10020 households
The Yamanelsquos formula suggests a sample size of 1000 households from two districts
After deciding sample size households was taken from selected union councils (UCs)
using proportional allocation sampling technique The allocation is said to be
32
proportional when the total sample size n is distributed among the different union
councils in proportion to the size of strata
=
____________________ (2)
Where
- = no of sampled respondents in each stratum
- Ni =population size of ith UCs
- N = the total number of households in selected UCs
- n = total number of households
The number of sampled households selected through proportional allocation method is
given in table 31
Table 31 Total population and sampled households from selected UCrsquos
District Union councils Total households Sampled
households
Mardan Urban 3090 309
Rural 1910 191
Peshawar Urban 3000 300
Rural 2020 202
Total 4UClsquos 10020 1000
Source Local Basic Health Unit (BHU) Peshawar and Mardan
33 Allocation of Sample Size for Different Models
A total of 1000 sampled respondents were selected for this research study from urban
and rural areas of the two districts namely Peshawar and Mardan of Khyber
Pakhtunkhwa Pakistan A sample of 600 respondents was reserved for double
bounded dichotomous choice model For the best estimation of parameters double
bounded model requires large sample size compared to open ended and payment card
model (Calia and Strazzera 2000) Out of total respondents a sample of 400
households were allocated for linear regression model and ordered logit model 200
for each model
33
34Contingent Valuation Survey Designing
CVM produces values contingent upon the description of the resource and the method
of payment The accurate measurement of any resource requires a detailed description
of the resource (Loomis et al 2000) The survey designed for this study started with the
description of the conventional food commodities and uses of different varieties of
chemical pesticides on fruit and vegetables before and after harvest After the
description of pesticides its harmful effects on human being as well as on environment
then pesticide free fruits were discussed with the households After describing the
benefits of pesticides free fruit respondents were asked to rank the relative importance
of each benefit The main reason for asking this question was to reveal householdlsquos
preferences their non-monetary value for use and nonuse benefits and to compare
them with their stated WTP response
Results in CVM are sensitive to the valuation question format and payment mechanism
(Carson and Hanemann 2005) The National Oceanic and Atmospheric Administration
(NOAA) Blue Ribbon Panel recommended the use of single bounded dichotomous
choice CV questions with mandatory payment vehicles (Arrow et al 1993) However
recent studies show that the single bounded dichotomous choice method provides
limited information about householdlsquos WTP and produces higher WTP compared to
open-ended question and payment card method (Zhongmin et al 2006) The single
question dichotomous choice method requires a large number of respondents to obtain
an accurate estimate of WTP (Carson and Hanemann 2005) People in the study area
were not familiar with CV Survey The use of an open-ended question format may
generate high zero WTP responses Consequently this study used the entire three
payment format to elicit householdlsquos WTP for pesticides-free products
35 Householdsrsquo Survey
This research mainly based on primary data The primary data was amassed through
interview schedule On the basis of objectives of the study a well-defined questionnaire
was prepared and was pre-tested in the field A small Pre-test was conducted before the
final data collection About 1000 households from Peshawar and Mardan were face to
face interviewed In contingent valuation studies face to face interview is more reliable
(Carson 2000) Socio-demographic characteristics attitudinal and behavioral
34
information of the households were collected Through this survey the data was
gathered both from rural and urban areas of the selected districts District Peshawar and
urban areas were taken equal to one and district Mardan and rural areas were taken
equal to zero Before asking the respondents for their willingness to pay a price
premium they were briefed about the differences among the conventional and
pesticides free fruit The attitudes of the consumers and knowledge about the minimum
use of pesticides on fruit were also gathered to better know how the respondents relate
different aspects of pesticides free fruit These attitudinal behavior questions were
posed using a modified Likert scale response (where a one equals agree and zero equals
disagree) Different values were assigned to each response according to a well-defined
method in the literature (Cranfield and Magnusson 2003)
36 Conceptual Framework
This section is devoted to the conceptual framework of the study Households utility
and willingness to pay willingness to pay and contingent valuation method and the
estimation of mean WTP are discussed The empirical discussion on the factors
influencing householdlsquos willingness to pay a price premium is also discussed
361 Householdrsquos Utility and Willingness to Pay
Willingness to pay could be analyzed as a householdlsquos choice problem Following
Canfield et al 2003 the study assumes that a household who buys and consumes a
conventionally produced food products encounters the same food products but in
pesticide free form on the market The household who decides to purchase pesticide-
free fruits instead of the conventional one does so because it is assumed that hisher
utility is higher for the pesticide-free food (Magnusson et al 2005) If the utility does
not change then a rational household will not be willing to pay as an increase in the
price results in a lower level of utility compared to the base level of utility Also if the
utility increases then the household may be willing to pay more for pesticides-free
food on the basis that the price increase does not lower the utility beyond the base level
(Cranfield et al 2003) The householdlsquos willingness to pay is therefore a function of
the change in utility arising from the consumption of pesticides-free food Thus
35
Where ∆U is the change in utility
Since the choice of one product over another is a discrete one it is convenient to look at
householdlsquos choice problem in a random utility setting Random utility models have
been used extensively in the valuation literature in the analysis of householdlsquos food
safety valuation and assessment of householdlsquos response to new (or different) products
(Eom 1994 Veeman and Adamowicz 2000 Kuperis et al 1999 Quagrainie et al
1998) Following the random utility framework proposed by Cranfield et al (2003) it
is assumed that a household faces a choice between buying either the conventional or
pesticides-free food variety of the same product The utility derived from consuming a
given product by a household is given as
Where
Where is the utility arising from choosing the ith alternative is the deterministic
component of the utility function is a vector of observable alternative specific
factors that influence utility is a vector of parameters and is the stochastic
component The households choose alternative if and only if for all (or
that without loss of generality
The utility of the household is however not observable What is observed is whether or
not the household chooses to pay a premium for the pesticide free product
362 WTP and CVM
On the basis of stated preferences consumer willingness to pay can be measured by
several methods To extensively elicit consumer preferences for food labels on different
attributes economist and market researchers have used contingent valuation (CV)
choice experiment (CE) and experimental auction (EA) or combination of all the three
methods (Fox et al 1994 Fox 1995 Huffman et al 1996 Hossain et al 2003
Loureiro and Umberger2003 2005) To estimate willingness to pay (WTP) economist
must turn to hypothetical due to unavailability of markets for the good or service
Historically Contingent Valuation Method (CVM) has been used for the evaluation of
consumerlsquos preferences for those goods not available in the market
36
Contingent Valuation Method is a survey based method where respondents are
presented with a hypothetical payment scenario for pesticide free products in this study
pesticides-free fruits Methods used in contingent valuation include face to face
interview surveys and mail to elicit consumerlsquos willingness to pay for organic and
pesticide-free food Contingent valuation method based on a survey approach was
presented by SVCiariacy-Wantrup (1947) however contingent valuation method was
first time empirically used by Davis (1963) Due to its proficiency most of the
researchers and policy makers used this technique to elicit consumerlsquos valuation for
those goods which are not available in the market such as research concerns to
environment health and recreation (Jakobsson ampDragun 1996)
The classification of framework to measure WTP based on the data collection methods
are as presented in Figure 32 We employed contingent valuation method (CVM) to
measure householdslsquo willingness to pay for pesticides-free fruits among the different
available alternative methods in the literature CVM was the most widely used
approach (Hanemann 1984)
Figure 32 Classification framework of methods to measure willingness-to-pay
Source (Breidert Hahsler ampReutterer 2006)
37 Elicitation Techniques
According to Portney(1994)to draw out the value of good and service different
elicitation techniques are used to design CV question scenario It is the important part
37
of any CVM study The elicitation used in contingent valuation methods are of various
types The most popular ones are bidding game approach open ended payment card
and dichotomous choice approach
371 Bidding Game Approach
In this approach a bid is randomly assigned to each respondent from a list of
predetermined bids The assigned bid may be a lower bid or higher bid Respondents
are to answer the bid and the process is continuous until the highest positive response is
recorded (Randall et al 1974 as cited in Venkatachalam 2004) Since this approach
provides market like situation and the respondents can research their preferences so the
results obtained through this approach are quite better
372 Open-ended Elicitation Method
In open ended questions format respondents are asked to identify a single amount
without suggesting them any value Respondents are asked to give their opinion on
―How much they willing to pay for a certain attribute Mitchell and Carson (1989)
found certain drawbacks in using this question format They reported that this method
provides maximum no response no answer and outliers In this method respondents do
not know what value heshe has to select
373 Payment Card Approach
Another technique in contingent valuation method is the payment card approach In this
question format respondents are asked to select an amount in willingness to pay from a
checklist given in absolute value or in percentage of prices (Boccaletti ampNardella
2000 Lacaze Rodriguez and Lupin 2009)This approach is used for small sample
size However it has been noted that the respondents could easily be confused if the
survey is not carefully designed (Wang and Whittington 2005)
374 Dichotomous Choice Model
In this format two choices are provided to respondents ―Yes or ―No This format
resembles the market choice behavior It included single bounded double bounded and
multiple bounded questions format
38
A Single Bounded Method
The single bounded format was first used by (Bishop and Heberlein 1979) The
consumers are asked whether they would be willing to pay a single amount for a certain
goods having an extra quality attribute The answer expected might be ―yes or ―no to
the given amount This format is easy to use but it provides limited information for
willingness to pay amount and the bidding game stop after a single information
provided
Most of the research work done on willingness to pay has suggested that respondents in
contingent valuation methods do not have a single value of price but they might have a
range of economic values in their mind (Cameron ampQiggim 1994 Dobourg Jones-lee
and Loomes 1994)
B Double Bounded Method
In double-bounded questions format respondents are presented with follow-up
questions after asking the first question For example if respondentlsquos answered to the
first question is ―yes willingness to pay a $X the next question might be whether
respondents willing to pay $Y (typically $Y gt $X) On the other hand if respondents
say ―No the first question than heshe might ask whether the respondents willing to
pay $Z (typically $Z lt $X) This questionlsquos approach is also called doubled-bounded
referendum approach (Cameron ampQiggim 1994) In comparison with single bounded
model more statistical efficiency can be seen by estimating doubled-bounded
willingness to pay data with the help of interval based econometric model (Heinemann
et al 1991) Figure 33 shows double bounded choice format
This study used all the three question scenarios to elicit WTP for pesticide free fruits
39
WTP
Yes
wtp
1st bid
yes
wtp 2nd
higher bid
yes No
No
wtp 2nd lower bid
yes No
No
Figure 33 Double Bounded Choice formats
38 Empirical Estimation of WTP by Payment Card using Ordered Logit Model
Regarding discrete nature and ordinal ranking of the WTP variables in payment card
method an ordered logistic regression was applied as the most appropriate choice in
studying these issues (Green 2007) The WTP model can be written under latent
variable framework as follows
Where is an unobserved latent variable reflecting the WTP for pesticides-free fruits
for household i expressed in terms of utility to switch from the traditionally grown
fruits consumption to pesticide free fruits is a vector of parameters reflecting the
relationship between WTP captures a set of socioeconomic and
demographicvariables influencing WTP and is the unobserved disturbance term
reflecting stochastic differences between households not controlled for The
40
relationship between the unobserved and the observedoutcome for household
( =0 12hellipj) can be summarized as follows
It is presumed that ɛ is normally distributed across observation By normalizing the
mean and variance of ɛ to zero and one the following probabilities can be calculated
Where F () indicates distribution function and microlsquos are unknown parameters to be
estimated with β
A natural question arises that when a variable influencing outcome changes than how
this variable influences the probabilities of different outcome For example if age is a
factor which influence consumer willingness to pay different choices then how would a
personlsquos probability of being WTP different choices be effected if heshe was a year
older Aldrich and Nelson stated that the estimated coefficients only determine the
direction of the effect but not the magnitude The magnitude of ordered logit cannot be
simply interpreted but signs and statistical significance agree with linear regression
(Wooldridge 2001) To answer the above question and take the idea marginal effects
can be calculated The marginal effects show that how a change in explanatory
variables affects the probability of willingness to pay that consumers are willing to pay
for different WTP classes In this model the coefficients are not equal to the marginal
41
effects of explanatory variables on probabilities Since the marginal effects can be
calculated by the following equation
There are two broad Cumulative density function (CDF) choices Logistic density
function and standard normal density function The model is said to be ordered logit if
the distribution is cumulative standard logistic (F) and the model is said to be ordered
Probit if the distribution is cumulative standard normal (Φ) Results obtained from
both of these models are same only the difference is in the tail The logistic distribution
has heavier tail than the standard normal distribution As Green (2000) reported ―It is
difficult to justify choice of one distribution over other on theoretical grounds in most
applications it seems not much difference The results obtained from both models
may be quite similar because of the similar distribution However an ordered logit
model is applied in this study
Empirically we estimated ordered logit model where WTPj is an ordered dependent
variable with ten WTP price premium categories
Table 32 Payment card format
Price premium classes (PKR)
WTP
= 0
WTP
1-5
WTP
6-10
WTP
11-15
WTP
16-20
WTP
21-25
WTP
26-30
WTP
31-35
WTP
36-40
Above
40
Source Pre- tested field survey (2017)
42
39 Empirical Estimation of WTP using Double Bounded Dichotomous Choice
Model
For Dichotomous choice question Following Chen et al (2002) and Kimenju et al
(2005) a double bounded dichotomous choice model was used in this study to assess
householdslsquo willingness to pay and the influence of explanatory variables on
householdlsquos WTP a price premium for pesticides-free fruits This model was used
because the dependent variable was double dichotomous whether the respondents
would be willing to pay or not so they provide answer with ―yes or ―no Many
researchers used double-bounded dichotomous choice method in their research such as
(Ara 2002 Rodriguez et al 2007 Abdullah and Jeanty 2011 and Claudy et al
2011)
The double-bounded method confronts each respondent with two dichotomous choice
WTP questions (bids) The 2nd
bid value is contingent on the respondentlsquos reply to 1st
bid If the respondent responds in ―yes to the first bid (B) than the second bid (Bu) is
some amount higher than the first bid (Bu
gt B) If the respondent says ―no to the first
bid the second bid (Bd) is then some lower amount (B
d lt B) Thus there are the
following four possible outcomes for the double-bounded WTP question ―yes-yes
―yes-no ―no-yes and ―no-no
According to Hanemann et al (1991) the probability of answering ―yes-yes (Pryy) is
= )
Where Pryy is the probability of answering ―yes-yes WTP is the respondentlsquos
willingness to pay for the product and F is the cumulative distribution function with
parameter vector Similarly the probability for each of the other three outcome
responses is
]
43
Where and are the probabilities for saying ―yes-no ―no-yes and ―no-
no to the double-bounded question respectively Thus the log-likelihood function for
the ith
respondent can be written as
sum
(
)
(
)
Where
are binary valued (0 or 1) indicators and the formulas
for the corresponding response probabilities are given above The model was estimated
through maximum likelihood estimation method and the results were used to find out
the mean and individual WTP (s) for pesticides free fruits
Where ƒ(WTP) is a function X is a set of socio-economic characteristics are
coefficients and is error term The models were estimated using maximum
likelihood estimation method
391 Factors which could Influence WTP
As Kimenju et al (2005) has indicated WTP is influenced by householdlsquos knowledge
and perception in addition to price and socio-economic factors Moreover
householdlsquos WTP may be influenced by individuals tastes and preferences income
and perceptions on the products in addition to household and socio-economic
characteristics (Cranfield and Magnusson 2003)
A number of different explanatory variables were included in the WTP model These
include demographic variables regional variables and perceptional variables The
variables that are included may depend on the manner by which the data is gathered
(ie contingent valuation surveys experimental methods etc) Factors which
influence householdlsquos willingness to pay for pesticides-free fruits are formally specified
as
44
392 Bids Design
In this study hypothetical prices (bids) for double-bounded dichotomous choice model
were designed based on the prices available for conventional fruit in the market On
average (Rs100kg) To minimize starting bids bias bidding system was used in table
31 Respondents were asked different bid
Table33 Bid system for Pesticides free fruits
First bid High bid Low bid
10 20 5
20 30 10
30 40 20
40 Above 30
Source Field Survey (2017)
310Empirical Estimation of WTP using Linear Regression Model
For open ended questions data a linear WTP model was used to estimate WTP and
identified its determinants
sum
Where
= is the WTP of the jth household for Pesticides-free fruits
= Set of socioeconomic characteristics of the jth household
Factors effecting consumerslsquo willingness to pay for pesticides free fruits can be written
as
Willingness to pay is actually represents the demand of the household The difference
in both is only the consumer surplus If we suppose zero consumerslsquo surplus than the
two identities are the same Therefore willingness to pay in the above model showed
percentage of expenditure on pesticides free fruit of the total food expenditure The
explanatory variables included were age gender education householdlsquos size income
45
location health concern environment concern and awareness Since the dependant
variable in the model is continuous so the appropriate method of estimation was
ordinary least square (OLS)
311Description of Variables
Table 34 presents a list of explanatory variables used in estimation of willingness to
pay a price premium for pesticides-free fruits
Table34 Description of explanatory variables
Respondents willingness to pay
WTP ( Price Premium)
0= Not willing to pay
1= Willingness to pay 1-5
2= Willingness to pay 6-10
3= willingness to pay 11-15
4= willingness to pay 16-20
5= willingness to pay 21-25
6= willingness to pay 26-30
7= willingness to pay 31-35
8= willingness to pay 36-40
9= willingness to pay above
Age of the householdlsquos head
Age Age of the householdlsquos head measured in years
Gender of respondents (Dummy variable)
Gender 0= Female
1= Male
Householdlsquos head education
Education Education of the householdlsquos head in years
Member in each household
Householdslsquo Size In number including all family members
Households location 0 = Rural households
1= Urban households
Awareness Household knowledge regarding pesticides uses on fruits
where 1 shows aware respondents and 0 shows unaware
respondents
Income Income of the households in Pakistani rupees
Consumer attitude towards impact of pesticides on health
Health concern 1 if respondents concern to health 0 if not concerned
Consumer attitude towards impact of pesticides on environment
Environment concern 1 if respondents concern to environment 0 if not
concerned
46
1V RESULTS AND DISCUSSION
This chapter illustrates the major finding of this research endeavor These findings are
computed in the light of major objectives and hypotheses constructed for this research
The collected primary data was punched into the computer and was estimated
encompassing double bounded dichotomous choice model ordered logit model and
linear regression model in the STATA econometric software This chapter is further
bifurcated into three sections In the first section a descriptive statistics is computed to
elaborate the respondentlsquos traits of the study area that includes socio-economic and
demographic aspects as well Followed by the analysis of major attributes such as
attitudinal behavior perception about pesticides free fruit and householdlsquos consumption
behavior that has attain the specific objectives of this study The empirical results on
willingness to pay are underscored in section two Moreover the three different
questionnaires ie dichotomous choice open ended and payment card are adopted and
their results are discussed and compared with each other in section three
41 Descriptive Analysis
Descriptive analysis is a statistical tool that is used to summarize the collected data in
tabulated form The range of data mean value median standard error and variance
coefficients are highlighted via statistical analysis This helps the researcher and readers
to get understanding about the pattern of data This section consists of the descriptive
part of the analysis Socio-demographic characteristics such as age gender education
and other attributes of the respondents are shown in the tabulated form Moreover
socio-economic portfolio that includes income consumption and certain perception
along their attitudinal trend regarding organic and conventional fruits are given and
discussed
411 Demographic and Socio-economic Characteristics
This section demonstrates the demographic and socio-economic characteristics of the
respondents The information was gathered from 1000 household of the study area
47
Age of the householdrsquos head
Householdslsquo age is an essential demographic characteristic and an important factor that
can influence householdslsquo willingness to pay An average age of the household in
district Peshawar and Mardan is computed and given in Table 41 The computation
depicts that an average age of the respondents in Peshawar is reported around 40 years
while in Mardan an average age is observed as 54 years Result reveals a significant
difference in the mean age of rural and urban location of Peshawar with a probability of
(0001) Whereas no significant difference was found in householdlsquos age in urban and
rural region of district Mardan
Table 41 Age of the householdrsquos head (Years)
District Age of the Respondents
Mean Rural Urban T-test
Peshawar 3997 35382 42333 7217
(0000)
Mardan 5402 53188 55870 1104
(0136)
All 46995 47310 46659
Source Authorrsquos calculation based on Survey Data 2016-17
Educational Level of the Householdrsquos Head
An individual entails modern education about developments in technology science and
an array of other managerial skills that drives consumerlsquos behavior Education can also
play a pivotal role in consumerlsquos awareness while choosing improved quality of food
Therefore education can be considered as an imperative factor influencing consumerlsquos
decision to pay higher price for pesticides free fruit Several research studies carried out
across the globe have corroborated that an educated households with higher
qualification are more conscious while making purchasing decision and prefer to
choose pesticides free fruit
Keeping in view an education as a substantial factor persuading consumer behavior the
householdlsquos head education level was analyzed and is presented in Table 42The
descriptive statistics divulged that the mean educational level was observed as 978 and
1138 years of schooling of the household head in Mardan and Peshawar respectively
Estimates of t-test further depicts a significant difference in educational level in rural
48
and urban region of both districts with a p-value of (0001) and (0000) for Mardan and
Peshawar respectively These findings suggest a higher level of education in urban
households compared to rural households These results are in line with Shah et al
(2016)
Table 42 Educational Level of the Householdrsquos Head (Years)
Districts Educational Level
Mean Rural Urban T-test
Mardan 978 8782 12012 3780
(0001)
Peshawar 1138 7735 13257 8016
(0000)
All 1058 8436 12855
Source Authorrsquos calculation based on Survey Data 2016-17
Households Size in the Study Area
Householdslsquo size is an important demographic characteristic which shape households
purchasing behavior Large householdslsquo size increases the consumption without taking
quality in consideration The probability of choosing an improved version of fruit
quality decreases with an increase a member in a household Small size households are
more concerned about good quality of fruit
An estimation of household size data illustrates that an average household size in
district Peshawar and district Mardan was reported as 06 and 09 members respectively
The results shown in Table 43 have suggested no significant difference in householdslsquo
size in urban and rural areas of both districts The average householdlsquos size was
computed as 715 members These results are consistent with Shah et al (2016) who
depicted similar findings for household size in KP
Table 43 Householdsrsquo size of the Respondents (Member in Number)
District
Mean Rural Urban T-test
Mardan 863 8666 8548 0965
(0400)
Peshawar 567 6029 5484 -2122
(0018)
All 715 7796 6463
Source Authorrsquos calculation based on Survey Data 2016-17
49
Income of the Households
The household income level is one of the driving aspects that manipulate the
consumption and saving behavior of an individual Those societies where individuals
earn high income are usually deemed as food secured societies across the globe
however low income group of the poor societies are generally reported as food
insecure It is worth-mentioning that surge in an income can subsequently leads to
choose high quality food (that includes cereals fruits vegetables pulses and their
byproducts) by individuals Likewise householdlsquos income has considered as an
important determinant of willingness to pay for quality attributes such as pesticides
free
An income status of the households in the study area is outlined in Table 44 The mean
income of the Household was calculated as Rs62130 and 42430 in district Mardan and
Peshawar respectively There was a significant difference in the mean income of
respondents from urban and rural areas of both the districts The T-value of Mardan
region was signified as 6018 and had a probability of (0000) while in Peshawar region
was 950 with P-value of (0000)
Table 44 Householdsrsquo Income in Pakistanrsquos Rupee (PKR)
District
Mean Rural Urban T-test
Mardan 63130 5489855 8145161 6018
(0000)
Peshawar 42430 2923529 4922727 9504
(0000)
All 52780 4642718 5952577
Source Authorrsquos calculation based on Survey Data 2016-17
Householdrsquos Expenditure on Food
Food consumption expenditure is the monetary expense incurred by household to
purchase food items Such food expenditure is the key component of current
expenditure to buy consumable goods The data regarding householdlsquos expenditure on
food is estimated and is shown in Table 45 The mean expenditure incurred on food by
the household in Mardan and Peshawar was determined as Rs 49280 and 34860
respectively A significant difference in rural and urban householdlsquos food expenditure
has been reported The computed t-value observed as 425 and 743 with a p-value
0000 which implies that householdlsquos expenditure in urban region was higher as
compared to rural households
50
Table 45 Households expenditure on food (PKR)
District
Mean Rural Urban T-test
Mardan 49280 4511594 5854839 4256
(0000)
Peshawar 34860 2544118 3971212 7435
(0000)
Total 42070 3862136 4573196
Source Authorrsquos calculation based on Survey Data 2016-17
Note Values in parenthesis is P-Value
Householdrsquos Monthly Expenditure Share on Fresh Fruit
Expenditure share is an amount of income that is incurred by an individual on certain
goods out of total spending Households in the study area have allocated their income
share to make an expense for fresh fruits which is shown in Table 46 It has been
observed that in districts Mardan an average spending for fresh fruit was computed as
4172 (PKR) per month by the household Whereas expenditure share for fresh fruit by
Peshawarlsquos household was 3800 (PKR) which was less as compared to Mardan The
given t-values of the estimates confirm a significant difference in expenditure share
incurred for fresh fruits by rural and urban region households of both the districts This
significant difference implies that householdlsquos expenditure share for fresh fruit in urban
area is higher as compared to rural households
Table 46 Householdrsquos monthly expenditure share on fresh fruits (PKR)
Respondents
Mean Rural Urban T-test
Mardan 4172 3798551 5003226 3055
(0000)
Peshawar 3800 2411765 4515152 5103
(0000)
All 3986 3340777 4671134
Source Authorrsquos calculation based on Survey Data 2016-17
51
412 Householdrsquos Awareness and Perceptions about Pesticides Application on
Fruit
This research endeavor was mainly designed to assess the consumer willingness to pay
for pesticides free fruit Therefore it was pertain to glean data about their awareness
about pesticide use on locally produced fruit in the study area These fruit include
Apple Peach and Mango Due to irrational use of pesticides environmental hazards are
also reported by previous research studies therefore there respondents were asked about
their perception about environmental hazards Major findings about the aforementioned
aspects are underscored in Table 47 which reveals that 61 percent of respondents have
a perception that there is an irrational and intensive use of pesticides on fruit by the
local fruitlsquos farmers Around 88 percent of the respondents perceived environmental
and health concerns over pesticides residues in food Similarly 91 percent of the
respondents believed that farmer should engage in environmental friendly agricultural
production practices which have a minimum adverse impact on health and the
environment
However the overall results indicate that sampled households were not entirely
cognizant about an intensive use of pesticide on local fruits however they were
correctly perceived over the impacts of pesticides on human health and environment
Table 47 Householdrsquos Awareness and Perceptions of Pesticides use on Fruit
Grown
Statements Agreed Disagreed
Local farmers are intensively using pesticides on
Apple Peach and Mango fruits
61 39
I feel the use of pesticides in agriculture has
negative effect on the environment
881
119
I am concerned about pesticide residue in our
food supply
876 124
I believe farmer should engage in environmental
friendly agricultural production practices with
minimum impact on human health
901
99
Source Authorrsquos calculation based on Survey Data 2016-17
52
42 Empirical Results of this Research Endeavour
The empirical analysis of the gleaned data was made to achieve the major objectives
and to address the research questions of this research endeavor Major estimates on
―willingness to pay for pesticide free fruits have been made and conferred in this
section Different elicitation techniques were employed to assess householdlsquos
willingness to pay price premium These estimation techniques encompassed double
bounded dichotomous choice model ordered logit model and linear regression model to
appraise dichotomous choice payment card and open ended question
421 Distribution of responses on householdsrsquo willingness to pay
(WTP)
Householdlsquos preferences to pay higher prices for pesticides free fruit were investigated
and highlighted in Figure 41 which demonstrates the distribution of response about
WTP price premium for pesticide free fruit in the survey area The households were
asked whether and how much they were willing to pay higher prices for pesticide free
fruit than conventional produced fruit The primary data estimates confirm that about
935 percent of respondents are willing to pay a higher price premium for pesticide free
fruit in the sampled districts These results are similar with the previous research study
undertaken by Hayati et al(2017) in Iran by using contingent valuation method
Furthermore an ordered logistic regression model was employed which depicts that out
of 394 respondents who were interviewed 97 percent of respondents were willing to
pay price premium for pesticides free fruits and vegetables These results are supported
by Nandi et al(2017) who conducted a study in India by using contingent valuation
method and applying binomial logistic regression model Data was obtained from 250
respondents and reported that more than 90 percent of the respondents were willing to
pay higher price for better quality fruits and vegetables Decomposing the responses 35
percent of the households are willing to pay 16 to 20 percent higher prices for
pesticides free fruits than the conventional 24 percent willing to pay 6 to 10 percent
higher price and 65 are not willing to pay higher price A plausible reason for higher
WTP for significant portion of the population is due to awareness As most of the
respondents in the study area were aware they may have some knowledge about
adverse effects of chemical pesticides Therefore they were willing to pay higher prices
for pesticide free fruits if available
53
NotWTP
1_5 6_10 11_15 16_20 21_25 26_30 31_35 36_40 Above40
650 4
24
9
35
6 550 150
550 3
Figure 41 Distribution of willingness to pay responses (Rskg)
422 Householdrsquos willingness to pay using ordered logit model
Estimated parameters and coefficients of ordered logit model are presented in table 48
Model is specified on the bases of R2 estimated from restricted and unrestricted
likelihood function The likelihood ratio test is used to test the null hypothesis that the
overall effect of coefficients is zero The p-value is 0000 shows that the model is
statistically significant at 95 level of significance The estimated model with a scaled
R2
about 022 which is in consist with the generally R2 value mostly observed in cross
sectional data In cross sectional data like the one used for this study the value of
Pseudo R2 is typically low The conventionally computed R
2 is of limited value in those
models having qualitative nature In most cases this value is low and use of coefficient
of determination as a summary statistics should be avoided in those cases where the
response variables are qualitative (Gujrati 1995)This pseudo R2 cannot be interpreted
separately or across the dataset but could be used when evaluating multiple models
which predict the same results on the same set of data It has only meaningful when
compared to some other pseudo R2 in the same data on the same type and predicting
the same results In this case pseudo R2 indicates which model better predict the results
(Bruin J 2006)This value pointed out overall ability of the model for the correct
prediction of willingness to pay of the consumer based on explanatory variables The
null hypothesis that the joint influence of explanatory variables was zero on the bases
of chi-squire value null hypothesis was rejected
Predicted probabilities and marginal effects are calculated separately because of the
non-linear behavior of logit model Most of the coefficients are statistically significant
54
The variables like householdlsquos age education level of the respondents awareness
income and health concern variables and household size are significant at five percent
The negative sign showed that as the size of numbers in a family increased the log
odds for willingness to pay decreased The same was reported in a relevant study by
Govindasamy and Italia 1999 carried out a research study in New Jearsy to provide
opinion on organic produce Objective of the study was to evaluate demographic
characteristics caused consumers to pay higher prices to obtained organic food
products Findings of the study showed female respondents consumer with higher
annual income and younger individual were more likely to pay higher premiums for
organic produce Our finding shows variables gender was not significant because most
of the respondents in the study area were male
Positive sign on income showed that consumer with higher income were more likely be
willing to pay higher prices for pesticides free fruit It has been also noted that with
increased in income purchasing power of the respondents increased that changed the
purchasing pattern of the respondents This was also confirmed by Roitner-
Schobesberger et al(2008) They conduct a study on consumerslsquo perception regarding
organic food in Bangkok and found that more than a third of the 848 respondents
reported having purchased organic fruits or vegetables and the main reason for buying
organic food was the expectation of the consumers that the food are healthier and
environmentally friendly The respondents who purchased organic vegetables were
those having more aged higher income and more education
Findings of our study also showed that respondents with friendly attitude regarding
environment would be willing to pay higher price for such fruit These results were in
line with Haghjou et al (2013) carried out a research study on factors effecting
consumerlsquos potential willingness to pay for organic food in Tabriz Iran By adapting an
ordered logistic regression model results showed that factors like income of the
respondent family dimension environmental concern and wholesome diet besides
consumerslsquo awareness were significantly increases consumerslsquo willingness to pay for
organic food Results revealed that consumers with higher care about their health were
more likely to be willing a higher price for such pesticides free fruit
55
Table 48 Factors influencing respondent householdrsquos WTP (Ordered logit
model)
Variables Estimated
Coefficient
Std Error Z-ratio P-value
Age 00698807 00147356 474 0000
Gender -02469171 08432503 -029 0770
Education 00821316 00223365 368 0000
Household size -00975395 00502583 -194 0052
Location
Urban
02783974 02961745 094 0347
Income 00000277 000000502 551 0000
Health concern 2600153 05346547 486 0000
Environment
concern
03993532 0574947 069 0487
Awareness 09595126 02836742 338 0001
Source Authorrsquos calculation based on Survey Data 2016-17
Log likelihood = -29863 Pseudo R-squared = 020 LR chi2 (9) = 15849
Number of observation = 200 Probability gt chi2 = 0000
Note indicate statistical significance at 5
56
423 Predicted probabilities and Marginal effects of ordered logit
model
Predicted probabilities and marginal effects of explanatory variables are underscored in
Table 49 These predicted probabilities indicate a strong likelihood that the average
respondent is willing to pay more prices for pesticides free fruit Producers usually
expect high price for their production so if they sought high premiums than marketing
efforts would be diverted to such fraction of consumer where they would probably
willing to pay high price than the conventional price Alone these predicted
probabilities are not too much informative what is more informative is the impact of a
change in predictors on the predicted probabilities (ie marginal effects)
Due to the non-linear behavior of ordered logit model to measure the impact of a
change in particular independent variable on householdslsquo willingness to pay marginal
effects of explanatory variables are calculated Marginal effects show the change in
predicted probabilities for different class of willingness to pay regarding an average
household concerning the particular variable For qualitative choice model estimated
coefficients affect marginal probabilities These marginal probabilities (probability
derivatives) were calculated from the estimated model They measure the change in the
probabilities of each willingness to pay outcome with respect to change in each
explanatory variable The sum of marginal probability is zero in each row because an
increase of the probability in one category must be set off a decrease in the other
category or categories
For continuous variables the interpretation is simple and straight forward Keeping all
other variables fixed a unit change in explanatory variable will results an increase or
decrease in the predicted probability equal to the degree of marginal effect of the stated
variable However in case of binary variable marginal effects shows change in
predicted probabilities based on whether the respondents falls in that category or not
Our results suggest some meaningful insight into the role of socio-economic and
demographic variables on householdlsquos WTP for pesticides-free fruit
Age has a positive and significant influence on householdlsquos WTP for pesticides free
fruit The results show that with an increase in age WTP also increases This finding is
consistent with other researchers who reported that WTP of organic and healthy food
57
increases with age beyond 30-40 years (Hayati et al 2017 Boccaletti and Nardella
2000 and Zellner and Denger 1989)With increase in age people are more concerned
about their health as they may perceive that they are prompt to low immunity and
higher risk for diseases With realization of aging they are more likely to pay higher
price premium for safer foods Our result suggests that the marginal effects of age is
negative for first three WTP classes (ie Not willing to pay WTP 1-5 percent WTP 6-
10 percent and WTP11-15 percent) while positive for the rest of the four classes in
upper tailsmdashindicating that higher age is associated with higher likelihood of paying
premium on upper tails The highest marginal effect of age 0007 is found for category
16-20 percent higher premium This indicates that an increase in age by one year is
associated with 07 percentage point increase in likelihood of paying 16-20 percent
higher premium for pesticides free fruits over conventional These results are in
contrast with Cranfield and Magnusson (2003) conducted a research study on
consumerlsquos willingness to pay for pesticides free food products in Canada by using
contingent valuation method and reported that younger consumers have the strongest
marginal effects (those consumers had an age less than 35 years younger) followed by
those consumers had an age less than 50 years Results showed younger consumers pay
more for healthy foods as compared to older in case of Canadian consumers However
our results are in consistent with several other studies (Hayati et al 2017 Zellner and
Denger 1989) finding a positive influence of age on consumerlsquos WTP for organic and
healthy foods In another study Boccaletti and Nardella (2000) conducted a study on
consumer willingness to pay for organic produce in Northern Italy By adapting an
ordered logit model the impacts of relevant explanatory variables were reported
Results suggests a positive impact of consumerlsquos age on WTP a price premium
The marginal effects for gender indicate female respondents are less likely to be willing
to pay more prices or likely to pay less amount for pesticides free fruit Female
respondents like to pay a price premium but less as compared to male respondents (no
premium or 1 to 5 percent premium) One can observe that most of the respondents in
the study area were male which support our findings These results are in contrast with
Cranfield and Magnusson (2003) The probability of marginal willingness to pay
decreased by (-0001 percent) for higher amount
58
Another significant variable affecting WTP in our study is the years of education of the
householdlsquos head Our result suggests a positive relationship of education on WTP for
pesticides free fruit Households with more formal education have better understanding
of the adverse effect of consuming fruit contaminated with pesticides So they may
better understand the benefits of pesticides free fruit Marginal effects of education are
positive as WTP progresses for higher classes (categories) beyond 16-20 percent (table
49) Among these the highest effect of education 0020 is shown for WTP category
36-40 percent which implies that an additional year of schooling of the household head
increases likelihood of paying 36-40 percent higher price premium for pesticides free
fruit over conventional by around 2 percentage These results are in line with the
findings of Haghjou et al (2013) who found a positive effect of education on WTP for
organic food products in Iran However these results are in contrast with Boccaletti and
Nardella (2000) who reported an inverse relation of consumer education with WTP a
price premium
We also found a significant effect of the household size and household income on WTP
for pesticides free fruit The effect of household size is negative Marginal effect in
table 49 shows that the highest negative effect of 012 is shown for 16-20 WTP
categories which indicate that an additional household member decreases the likelihood
of paying 16-20 percent higher premium for pesticides free fruits by 12 percent One of
the convincing reasons for this negative effect of household size can be the householdlsquos
budget constraint Budget constraint limits the extent to which consumer pay higher
prices for food products (Cranfield and Magnusson 2003) Our findings are consistent
with previous studies Ariyawardana et al (2009) conduct a study on consumerslsquo
willingness to pay for organic ethnic specialty produce in USA reported that marginal
effect of price premium decreases with an increase in householdslsquo member
In regards to income households with higher income are more willing to pay higher
premiums for pesticides free fruit Income always played a significant role in changing
consumerlsquos behavior to change hisher decision from not willing to pay or less willing
to pay to higher willing to pay for organic products Households in highest income
class showed a strong propensity to pay more prices Marginal effects of income for the
first four classes emerged negative Our results suggest a strong propensity to pay
higher prices as household income increases Our marginal effects of income show a
59
monotonic increase in the income effect as WTP premium level progresses beyond 16-
20 percent It implies that at low level of income households are unwilling to pay more
but with rise in income households are ready to pay higher premium for pesticides free
fruit a significantly higher magnitude is shown for the highest category (010 income
coefficient for more than 40 percent premium) Overall it clearly suggests that
household with higher level of income would pay more prices for pesticides free fruit
These results are in line with Hayati et al (2017) and Cranfield and Magnusson (2003)
who found that an increase in income increases purchasing power of consumer which
results a change in purchasing pattern Boccaletti and Nardella (2000) conducted a
study on consumerslsquo willingness to pay for pesticides free fresh fruits and vegetables in
Italy and found that willingness to pay is significantly and positively related to income
We also included variables indicating health and environmental concern of the
respondent Results indicated that the more the households were concerned about the
impact of pesticides in fruits on health and environment the more the probability of
willingness to pay The marginal effects for health concern is negative for first three
willingness to pay classes (ie not willingness to pay willingness to pay 1_5 wiliness
to pay 6_10 percent) and for environment concern it is negative for first four classes
while for the remaining WTP classes it is positive Strikingly the highest magnitude of
marginal effects up to 041 among all variables is found from the health concern
variable On one hand a significantly positive effect suggests that the health concerned
householdslsquo are more likely to pay higher premium for WTP than those not concerned
A magnitude of higher scale on marginal effect on the other hand strongly supports
the distinct difference in WTP between health concerned and non-concerned
individuals Overall this also highlights the importance of this variable on modeling
WTP for pesticides free fruits For example a 041 marginal effect of health concern
variable on 16-20 premium category of WTP suggest that health concerned individual
are 41 percent more likely to pay 16 to 20 percent higher premium for pesticides free
fruit as compared to non-concerned households The effect of health concern on WTP
is consistent and distinctly higher in magnitude from previous similar studies in other
countries For example Hayati et al (2017) found that health concerned individual were
26 percent more likely to pay 16 to 20 percent in Iran This indicates that health
concern factor is an important motivation to premium price for pesticides free fruits in
Pakistan
60
Finally we found a significant effect of awareness variable Recall that our awareness
variable is represented by dummies Our result suggests that the households in the study
area were aware of the fact that farmers are intensively using pesticides on fruits so
they were willing to pay more price premium for pesticides free fruits Marginal effects
show a negative signs for modest price premiums on WTP categories 1-5 and 6-10
while positive signs for all higher categories 16-20 21-25 26-30 31-35 36-40 and
above 40 This may indicate that households are more aware of the adverse impact of
pesticides on health and environment Probably awareness comes from education as our
results shows that the average years of education is higher in the study area
424 Matrix of Correlation Coefficient
Income is generally related with age and education of the households in the study area
(table 410) This result may indicate that more aged households have higher income
and advanced education Households in high income and more educated class shows
high propensity of willingness to pay for pesticides free fruit As the results indicated
that more aged people do care more about their health and high class income
respondents have more discretionary income to spend on fruit Overall the results show
that explanatory variables are not highly correlated hence no problem of
Multicollinearity was diagnosed in the data
61
Table 49 Predicted probabilities and marginal effects from the estimated ordered logit model
Not WTP
()
WTP 1-5
()
WTP 6-
10 ()
WTP 11-
15 ()
WTP 16-
20 ()
WTP 21-
25 ()
WTP 26-
30 ()
WTP 31-
35 ()
WTP 36-
40 ()
WTP
Above 40
()
Predicted Probabilities
00122 00179 02616 01183 04434 00620 00510 00110 00201 00026
Marginal effects
Age -0000 -0001 -0011 -0002 0007 0003 0003 0006 0001 0001
Gender 00039 00054 00623 0015 -0033 -0019 -0019 -0004 -0008 -0001
Education -0000 -0001 -0013 -0002 0010 0003 0003 0010 0020 0002
Household size 0002 0002 0012 0004 -0012 -0004 -0004 -0001 -0020 -0002
Urban rural -0003 -0004 -0049 -0009 0031 0013 0013 0002 0005 0001
Income -0003 -0004 -0004 -0010 0003 0001 0001 0002 0005 0010
Health concern -0103 -0113 -0372 0030 0410 0100 0100 0014 0030 0003
Environment
concern
-0005 -0007 -0072 -0010 0052 0017 0015 0003 0006 0008
Awareness -0014 -0020 -0120 -0030 0122 0045 0041 0010 0020 0002
Source Authorrsquos calculation based on Survey Data 2016-17
62
Table 410 Matrix of correlation coefficient between explanatory variables
Source Authorrsquos calculation based on Survey Data 2016-17
Variables Age Gender Education Location Households
size
Income Health
Concern
Environment
Concern
Age 10000
Gender -00193 10000
Education 00872 -00147 10000
Location 00725 00689 01047 10000
Households size -00294 00277 -00161 -01704 10000
Income 04123 -00690 02133 - 00405 01583 10000
Health Concern 01604 00224 02229 00660 - 00422 02102 10000
Environment Concern -00786 00944 -00245 00570 -00059 -00350 00118 10000
63
43 Householdrsquos willingness to pay using double bounded dichotomous
choice model
The double bounded dichotomous choice model was used to find out how much
households are willing to pay a price premium for pesticides free fruit The model has
been proved useful for the determination of the contribution of independent variables in
householdslsquo willingness to pay for pesticides free fruit Mainly those factors that
influenced the householdslsquo willingness to pay are age of the householdlsquos head
householdlsquos size gender awareness income head education and their perceptions
The Likelihood Ratio test statistic the Wald Chi2 value is 27228 with a p-value of lt
0001 confirmed that the model with all the explanatory variables has good prediction
power of householdslsquo choice and WTP for pesticides free fruit (table 411) The
estimated coefficients for most of the explanatory variables are statistically significant
and have signs consistent with prior expectations Headslsquo characteristics such as age
education level and awareness of pesticides use on fruits perception of health and
environmental concerns of pesticides are the most import determinants of the
householdlsquos WTP for pesticides free fruit Householdlsquos income and number of
individuals have significant effect on their price premium for fruits free of pesticide
residue
The coefficient for Age is positive and its value is 0294 which reveals that a one year
increase in headlsquos age would increase householdlsquos willingness to pay a price premium
of 0294 rupees for pesticides free fruit at constant level of other variables This
generally implies that household headed by an old individual has strong preferences
and high WTP for pesticides free fruits as compared to others These results are
supported by Vidogbena et al 2015 reported a positive significant effect of consumerslsquo
age WTP in Benin for minimized pesticides residues Results suggest older households
are more concerned about health benefits associated with fresh pesticides free food
This positive correlation of householdslsquo age and Willingness to pay a high price
premium for pesticides freeorganic food is also in agreement with findings of (Anifori
2013 Haghiri et al 2009 Misra et al 1991) However these findings are in contrast
with (Govindasamy and Italia 1999) carried out a research study on consumerslsquo
willingness to pay for organically produced fresh produce in New Jersey to find
64
opinion on organic produce and found that all the three age category younger people
like to pay a high price premium
Headlsquos education level has a positive significant association with householdlsquos
willingness to pay a price premium for pesticides free fruit A likely explanation is that
education increases consumerslsquo awareness regarding the adverse effect of pesticides on
human health and natural environment Consumerslsquo with a high level of education can
better understand the benefits attached to the consumption of food produced without the
use of pesticides These results are also in line with Vidogbena et al (2015) studied
consumerslsquo willingness to pay for cabbage with minimized pesticides residues in
Southern Benin and reported that consumers with high level of education were
positively affected WTP In some other related studies Darby et al (2008)Liu et al
(2009) and Misra et al(1991) also confirmed positive association of consumerlsquos
education and willingness to pay price premium for pesticides free organic fruits
Headlsquos awareness of pesticides use on local fruits production and their health and
environmental concerns over pesticides use are also the most important determinants of
householdlsquos willingness to pay for pesticides free fruits As discussed in the previous
section householdlsquos awareness and perception of pesticides use on fruits and their
education level are connected and have significant influence for creating market for
pesticides free organic fruits
Householdlsquos demand for best quality fruit is expected to rise with increase in their
income level The estimated coefficient for householdlsquos income is positive which
implies direct association with their price premium for pesticides free fruits and is
consistent with general theory and our prior expectations In future with economic
growth increased in per capita income is expected and this increase in per-capita
income will increase the demand for pesticides free fruits
We found a negative significant effect of the householdlsquos size on WTP for pesticides-
free fruit As the number of members increases household become less likely to pay a
price premium for pesticides free fruit More mouths to feed reduces budget for best
quality fruits as noted previously by (Oyawole et al 2016 Ghorbani and Harnraz
2009) In another study Govindasamy et al (2001) findings suggests that each
member in a lager household has less discretionary income to spend compared to a
65
smaller household and may consider paying a premium for integrated pest management
a luxury
Table 411 Factors influencing consumersrsquo WTP (double-bounded dichotomous
choice model)
Variables Coefficient Std Error z-statistic Pgt|z|
Constant -8614601 3640408 -237 0018
Age 0294755 00638171 462 0000
Gender -0133885 - 4628428 003 0977
Education 04521878 01574002 287 0004
Income 00001208 00000284 426 0000
Householdlsquos
Size
-06690743 2499154 -268 0007
Health concern 6165207 1882292 328 0001
Environment
concern
6739389
2053786 328 0001
Awareness 8194937 1693789 484 0000
Urban Rural 02295739 1339268 017 0864
Source Authorrsquos calculation based on Survey Data 2016-17
Log likelihood = -61347 Number of observation = 600
Wald chi2 (9) = 27226 Probabilitygt chi2 = 0000
Note indicate statistical significance at 5
431 Householdsrsquo estimated Mean WTP
The estimated model was used to derive each householdlsquos willingness to pay price
premium for pesticides free fruits Table 412 and figure 42 presents the summary
statistics for the estimated price premium The Table shows that householdlsquos estimated
mean willingness to pay price premium is around 26 rupees with a standard deviation
of 106 and the estimated minimum and maximum price premium are 0 and 445
rupees respectively These statistics reveals that householdslsquo on average are willing to
pay 26 percent more price premium for pesticide-free fruits than the existed market
producing pesticide free fruits
66
2
125 115
38
325
35
-5
0
5
10
15
20
25
30
35
40
45
0 1-10 11-20 21-30 31-40 gt40
Fre
qu
en
cy o
f th
e h
ou
seh
old
s
WTP bins
Table 412 Households mean estimated WTP
Mean Std Dev Min Max
WTP 25798 10601 0 44511
Source Authorrsquos calculation based on Survey Data 2016-17
Figure 42 householdsrsquo estimate WTP bids
432 Households Response to First Bid (Amount)
Table 413 and figure 43 shows households response to first bid of the WTP question
The Table clearly show the sensitivity of a householdlsquos yes - no response to the bid
amount As the bid amount goes up the probability of acceptance is expected to
decrease Results show that higher bids reduced the likelihood of acceptance For
example for a bid amount of Rs10 as price premium for pesticides free fruits 8833
percent of the households are willing to pay while it dropped to 222 percent when the
bid amount is increased to Rs40 which is consistent with the standard theory
67
0
01
02
03
04
05
06
10 20 30 40
Table 413 Householdsrsquo Response to First Bid (Amount)
Households
with YesNo
response
First bid amount (PKR)
10 20 30 40
Households
with No
response
21 (1167) 24 (2581) 141 (5732) 63 (7778)
Households
with Yes
response
159 (8833) 69 (7419) 105 (4268) 18 (2222)
Total
Households
180 93 246 81
Source Authorrsquos calculation based on Survey Data 2016-17
Figure 43 Probability of WTP given bids
44 Post Estimation Diagnostic Test
The model was tested against Multicollinearity by using (variance inflating factor
criteria) and for Heteroskedasticty (Breusch-Pagan test) and the results are presented in
table 414 Rule of thumb for VIF is that if the value is ge 10 than the problem of
Multicollinearity is severe According to our findings the mean value of variance
inflating factor is 114 less than the critical value suggests that there is no
Multicollinearity problem in the model Breusch-Pagan test is used for detecting
Heteroskedasticty problem The (χ2) value is 066 and p- value is 041 This p-value
suggests that the probability of rejecting the presence of Heteroskedasticty is 41percent
68
Table 414 Diagnostic test results
Problems Diagnostic Test Mean value P-value
Multicollinearity VIF 112 _
Heteroskedasticty Breusch-Pagan 066 041
Source Authorrsquos calculation based on Survey Data 2016-17
441 Householdsrsquo willingness to pay by using linear regression model Results of householdlsquos willingness to pay for pesticides-free fruits using linear
regression model is shown in table 415 Variables such as age education awareness
income householdslsquo size and consumer perceptions regarding health and friendly
environment are significantly influencing consumerslsquo WTP for pesticide-free fruits
Age has a positive and significant influence on willingness to pay ie the result shows
that with an increase in age willingness to pay also increases This result is slightly
different from few findings of other researchers who reported a high WTP in young and
middle age consumerslsquo (30-40) years Govindasamy and Italia (1999) But there are
some logical reasons behind our findings As young people are not so much health
conscious but with getting older and older the disease of aging caught their minds and
they keep more care about their health Another reason with an increase in age
education and experience increases as a result an increase in WTP for pesticides free
fruits These results are supported by Muhammad et al (2015) found a positive and
significant association between age and consumer willingness to pay Their results was
supported by the fact that young individual health consciousness is a rare phenomena
but as the people get older and older many diseases related to health induce them to
pay more attention towards safe and healthy food such as pesticides free organic food
Education and monthly income are the other factors positively and significantly
influencing householdslsquo WTP Households with more formal education have more
concern and better understanding of the risk associated with consuming food
contaminated with pesticides So they better understand that fruits produced without the
use of chemicals pesticides could be beneficial for health Results show that a one year
increase in formal education householdslsquo WTP increases by rupees 025 for pesticides
free fruit as compared to those having no education In regards to income respondents
with higher income are willing to pay more price premium A one rupee increase in
income will increase householdlsquos WTP by 0001 Muhammad et al (2015) reported a
69
significant effect of income and education on householdslsquo stated willingness to pay for
organic food in Arab Emirates consumer
Householdslsquo size is usually reported as negative influence on WTP Findings of our
study show a negative significant influence on householdlsquos willingness to pay This is
likely due to larger households requiring additional funds to satisfy households demand
for pesticides free fruit which may induce households to buy conventional fruit Other
reason may be as with limited resources feeding more mouths is increasingly difficult
These results are in contrast with Muhammad et al (2015) conducted a study on
factors affecting consumerlsquos willingness to pay for certified organic food products in
United Arab Emirates and reported a positive relationship of willingness to pay and
householdlsquos size Usually householdslsquo size is large in Arab Emirates and hence more
earning resources compared to small households which support their findings Our
finding shows a decrease of 085 rupees by an addition of one member in a household
Other important variables are householdslsquo concern regarding health and environment
Results show that respondentslsquo are highly concerned about residual effect of pesticides
on human health and environment Our results support these findings by positive WTP
Table 415 shows householdslsquo concerned regarding health and environment Results
suggest that households with more concerned for health and environment are willing to
pay Rs582 and Rs020 respectively higher prices for pesticides free fruit compared to
those not concerned
Finally we found variable awareness positively and significantly influencing
householdslsquo WTP for pesticides free fruit in survey area The result shows that more
aware households are willing to pay more price premium compared to unaware
households Awareness usually increases with education and age as can be evidence
from our findings a positive and significant influence of education and income on
householdlsquos WTP When households education level and age increases their awareness
regarding pesticidelsquos negative impact on health increase and hence an increase in WTP
for pesticides free fruit
70
Table 415 Estimated parameters using liner regression model
Variables Coefficient Std Error t-Statistics P-value
Constant -6174109 - 4353038 142 0158
Age 02348861 00467651 502 0000
Gender -2828394 3096026 - 091 0362
Education 0243413 00772618 315 0002
Income 00001237 00000157 790 0000
Householdlsquos
size
-03936806 01755667 -224 0026
Health concern 5567941 1465789 380 0000
Environment
concern
02999708 2023651 015 0882
Awareness 3567843 1001883 356 0000
Urban rural 0587075 1047051 056 0576
Source Authorrsquos calculation based on Survey Data 2016-17
Note indicate statistical significance at 5
No of observation = 200 F (9) = 2859 Probgt F = 0000 R-squired adjusted = 055
45 Comparison of elicitation questions formats Mean WTP by using double dichotomous payment card and open ended elicitation
format are reported in table 416The willingness to pay evaluated using average values
for the explanatory variables are Rs2576 for double bounded 1632 is for payment
card and 1437 for linear regression Results indicated that householdslsquo evaluated
through double dichotomous choice payment card scenario and open ended format are
willing to pay 26 16 and 14 more price for pesticides free fruits in the study area
These results are in line with Ngo et al (2013) conducted a study on consumerslsquo
willingness to pay for organic vegetables in Vietnam and found 70 more price
premium Rodriguez et al (2008) carried out a research study in Argentina on
consumerslsquo willingness to pay for organic food products and reported that consumers
were willing to pay a higher premium of 87 for leafy vegetables Mean willingness to
pay for double dichotomous model was calculated by maximum likelihood estimation
mentioned in the model while for payment card and open ended format logit regression
of response on bid amount was used All mean WTP values are significantly different
71
from zero and are different across the three questions format The probability (Plt
0000) between double bounded open ended and payment card method shows a
significant difference in estimated mean values of all the three questions elicitation
formats A t-value of 1483 250 and 1222 means that the mean values calculated
through different methods are significantly different from each other
Table 416 Mean willingness to pay comparison from CV question format
CV questions format Open ended
Mean WTP (1437)
Payment card
Means WTP (1632)
Payment card
Mean WTP (1632)
MD (194)
t-value (250)
P-value (0006)
--------
Double bounded
Mean WTP (2576)
MD (1143)
t-value (1483)
P-value (0000)
MD (949)
t-value (1222)
P-value (0000) Source Authorrsquos calculation based on Survey Data 2016-17
1MD = Mean difference 1US$=105 PKR in 2017
451 Response rate for zero WTP
Table 417 shows householdlsquos response rate to different elicitation formats The
response rate of payment card format is more than both DC and OE questions formats
Results show that 87 of the respondents respond to the willingness to pay question for
payment card method For dichotomous choice the response rate is 58 and for open
ended respondentslsquo response rate is 46 Taken together these results suggest that the
payment card format is easy for valuation task faced by respondents and lead to
efficiency in data collection
Table 417 Comparison of response rates by CV question format
Percent Response
to WTP question
Double dichotomous
choice
Payment card
method
Open ended
method
Yes 5850 87 4650
No 4150 13 5350
Source Authorrsquos calculation based on Survey Data 2016-17
72
46 Discussion about Major Findings This study was design to explore householdlsquos preferences and willingness to pay for
pesticides free fruit in Khyber Pakhtunkhwa Pakistan For this study a detailed
questionnaire was designed to obtained information from the households on their socio-
demographic characteristics perception regarding pesticides used on conventional fruit
and their willingness to pay a price premium for pesticides free fruit The overall
objective of the study was to know householdslsquo willingness to pay a price premium for
pesticides free fruit such as Apple Peach and Mango In response to willingness to pay
question 93 percent of the households were willing to pay a price premium while a
negligible portion were unwilling to pay any premium for pesticides free fruit Out of
total WTP 35 percent of the households were willing to pay16-20 percent higher
amount for pesticides free fruit
With regards to gender status of the households findings of the research showed most
of the respondents in the study area were male and a minor portion were female
Variable gender was not significant in this study because of the area structure where
male households are the primary purchaser of householdlsquos food items In this research
we found that majority of the respondents were educated most of them were highly
educated while a negligible portion of the respondents had no formal education The
mean education in Mardan and Peshawar was almost 10 and 12 years of schooling
respectively A significant difference was observed in urban and rural householdslsquo
education level in both the districts
Householdslsquo expenditure on food and fresh fruits were also calculated The mean
expenditure on food in district Mardan was PKR- 49280 and in district Peshawar was
PKR- 34860 Based on t-test a significant difference was observed on the consumption
of fresh fruit in urban and rural areas of the two districts Total expenditure on fresh
fruits in Mardan and Peshawar was 3340 and 4671 respectively Based on findings of
the study it could be concluded that respondents in urban region spent more income on
fresh fruit and consume more fresh fruits compared to rural region
Householdslsquo awareness of pesticides use on locally produced fruit such as Apple
Peach and Mango and their health and environmental concerns over pesticides use
were estimated The results revealed that 61 percent of the respondents were agreed that
local farmers use intensive pesticides on fruit Around 88 percent of the respondents
perceived environmental and health concerns over pesticides residues in food
Similarly 91 percent of the respondents believed that farmer should engage in
73
environmental friendly agricultural production practices which have a minimum
adverse impact on health and the environment These results induced households to pay
higher prices for such pesticides free fruit if available in the market The overall results
indicated that sampled households were not fully aware of the intensive pesticides use
on local fruit however they were correctly perceived over the impacts of pesticides on
human health and environment
The empirical findings of the study revealed socio-demographic characteristics had a
significant influence on householdslsquo willingness to pay a price premium for pesticides
free fruit Results showed more aged householdslsquo head were willing to pay more price
premium This is supported by the fact that older people are more health concern
compared to young individual Householdslsquo head education level also played a positive
and significant role with high education consumers seems slightly more willing to pay
These results are in line with Haghjou et al (2013) Householdlsquos size was negatively
influencing householdlsquos WTP and accord with the expectation Due to income
constraint with increase a member in a household will decrease WTP for pesticides-
free fruit because feeding more mouths with limited resources would be difficult These
results are in line with Oyawole et al 2016 Many Conflicting results are also reported
regarding household size Some studies indicated the presence of more children
positively influencing WTP for organic food while some results reported an inverse
relationship between WTP and householdslsquo size Findings of our research revealed a
negative significant influence on householdslsquo willingness to pay for pesticides free
fruits These results were also according to our expectation With an increase in family
size the households do not care much about quality but mostly quantity
Income of the householdslsquo head was taken as continuous variable in this research study
In most cases especially in willingness to pay research studies a positive association of
income and households WTP was observed Any increase in householdslsquo income leads
to rise in their willingness to pay for safer healthier and pesticides free fruit Despite
high prices for pesticides free food products householdslsquo with high income showed
likelihood to pay a price premium Our findings also showed a positive effect of
income on householdslsquo WTP for pesticides free fruit An increase in income changes
householdslsquo purchasing behavior and choose better quality of food So with an increase
in income households were willing to pay more price premium Same results were
reported by Cranfield and Magnusson 2003
74
Variable awareness played a significant role while consuming better quality of food
Findings of our study also showed a positive and significant influence of variable
awareness on householdslsquo WTP for pesticides free fruit More than half of the
respondents were aware of the intensive use of pesticides on fruit Majority of the
households knew about the risk attached with fruits produced with agrochemicals The
more aware households were willing to pay more price premium for pesticides free
fruit compared to unaware households These results are also supported by Oyawole et
al2016
Moreover results of this study are also consistent with previous studies that health and
environmental concern are the important factors in householdlsquos preferences for
pesticides free food and reduced input food products We also found a positive
significant influence of health concern and environment concern on WTP These results
suggest that respondents in the study area are more conscious about health and
environment They are willing to pay more prices for such fruit free from pesticides
residues Based on above results most of socio-demographic characteristics have
positive influence on householdlsquos willingness to pay for pesticides-free fruit in the
study area On the basis of these findings we reject the null hypothesis and accept the
alternative hypothesis by concluding that socio-demographic characteristics have
influencing behavior on householdslsquo WTP
Willingness to pay across urban and rural regions shows no significant difference The
P-value of 0864 showed that WTP of households in urban regions were not statistically
different from those in rural regions Although we had expected a positive and
significant difference among urban and rural households willingness to pay for
pesticides free fruit and the difference in householdslsquo income education and
expenditure across urban and rural households support our expectation One of the
reasons for no significant difference is the selection of rural union councils which are
nearby urban union councils If the study is spread to more rural union councils than an
expected difference in urban and rural households may be observed Based on these
results the null hypothesis of no significant difference between urban and rural
households is accepted and can be concluded that no significant difference was found
in willingness to pay amount across rural and urban households
75
A Payment Card Approach
In this approach respondents are asked to select their WTP from a payment card given
in absolute value or in percentage of prices (Boccaletti amp Nardella 2000 Lacaze
Rodriguez and Lupin 2009) Payment card requires smaller sample sizes for the
efficient estimation of parameters than the double bounded model A recent research
found that payment card is to be free of range and centering biases when the
willingness to pay values on the payment card is sufficiently large and the respondents
are not constrained (Rowe et al 1996) However choosing an amount from payment
card may be more cognitively burdensome on the respondents and difficult than simply
yes or no response
B Open Ended Approach
In open ended question respondents are asked to state their WTP for a certain attribute
without suggesting them any value This technique does not require an interviewer and
does not result in any starting bias This approach is easy for the respondents to answer
Due to non provision of any value respondents find it difficult to answer and results
large non- response rate
C Double Bounded Approach
The dichotomous choice contingent valuation method is an important method in
contingent valuation surveys Due to simplicity this method is popular and widely used
for data collection Two questions formats are used in this method single bound and
double bounded questions are asked from the respondents For single bound question
format the respondentlsquos only reply in yes or no while in double bounded approach
second question contingent on the first response is asked
Hanemann et al (1991) recommended double bounded dichotomous choice model for
eliciting householdslsquo WTP In the double bounded formate each respondent is
presented with two bids The level of the second bid is contingent upon the response to
the first bid If an individual responds in ― yes to the first bid Bi the second bid (Bu) is
some amount greater than the first bid (Bi lt Bu) is askedIf the respondent responds
―no to the first bid the second bid (Bl) is some amount smaller than the first bid (B
llt
Bi) is asked
76
Henemann et al (1991) and Leon (1995) confirmed that double bounded model is more
effcient than single bound model For the correction of poor choice of the initial vector
double bounded model was suggested Researchers also found that double bounded
method produce more precise point estimates of parameters Double bounded model
requires more sample size due to the statistical inefficiency imposed by the data
compared to payment card and open ended model If sample size is large enough
double bounded model estimates accurate results
Due to its potttential inconsistency with response to the first binary question and larger
scope for biased results double bounded model is contravartial Bateman et al (2001)
concluded that the respondents feel fury and guilt when the second question is asked
making the response of the double bounded internally inconsistence One of the main
disadvantage of double bounded model is that response of the respondents may be
influenced by the first offered amount which is generally called starting point bias
(Flachaire and Hollard 2005)
There are few notable patterens while studying consumerlsquos willingness to pay by using
different elicitation formats Estimated willingess to pay based on double bounded
format and payment card format tend to be large compared to open ended questins
format Furthermore estimated willingness to pay from double bounded model would
be larger than payment card format
Not surprisingly as shown in table 416 the estimated mean willingness to pay for
pesticides free fruit based on the models were significantly different across the three
elicitation format Estimated WTP for double bounded format payment card format
and open ended was 25 percent 16 percent and 14 percent respectively The estimated
mean WTP for double dichotomous model is higher than twice the estimated mean
willingness to pay based on payment card and open ended data
When comparing response rate of households to the willingness to pay questions
format was different across the three elicitation methods In double bounded method
the question was whether the households were willing to pay a specific amount in
payment card method households were asked to select the amount from a specified
values provided on a card whereas in open ended question households were asked to
say how much extra they were willing to pay for pesticides free fruits The difference in
questions leads us to expect that more individual would respond positively to
willingness to pay question in payment card method because in this elicitation format
consumers had to select from payment level The response rate of payment card format
77
is more than both DC and OE questions formats Results show that 87 of the
respondents respond to the willingness to pay question for payment card method For
dichotomous choice the response rate is 58 and for open ended respondentslsquo response
rate is 46 Taken together these results suggest that the payment card format is easy
for valuation task faced by respondents and lead to efficiency in data collection
It has been remained an unresolved issue that which CV questions format is best to use
While the NOAA panel (Federal Register 1993) recommended using double bounded
dichotomous choice model due to its easy use and resemblances in day to day decision
making In this study we found that the response rate in double dichotomous choice
model is lower than payment card format and higher mean willingness to pay than both
open ended and payment card format In contrast payment card format has desirable
response properties
One elicitation format is not clearly better than the others on priority ground The
appropriateness of any elicitation format depends upon the circumstances of the study
For example payment card elicitation format better suits if the sample size is small If
the sample size is large enough double bounded elicitation format is preferred
78
V SUMMARY CONCLUSION AND RECOMMENDATION
This chapter presents findings of the research study as well as policy recommendations
This chapter also outlined limitation in this research and suggestion for further research
in future
51 Summary
Conventional agriculture has gained the power of providing food to majority of the
world population but at the cost of damaging the environment and human health While
pesticides free farming on the other side is environmental and human health friendly
farming that avoids the use of such hazardous chemicals which are harmful for human
plants and animal planet Pesticides free farming system is increasingly becoming
popular in producers as well as in consumer The term pesticides free denote production
of fruit without the use of pesticides and play a vital rule in future agriculture
commodities production It has been observed that fruit produced without the use of
chemicals pesticides are generally higher in prices than the conventional fruit
production in most part of the world However pesticides free farming and pesticides
free food is a relatively new phenomenon and very few people especially in developing
countries are aware about the beneficial impacts of such food on health and
environment Willingness to pay for pesticides free fruit is different from fruits
produced through the use of chemicals pesticides because pesticides free fruits are
relatively expansive
The main theme of this study was to investigate householdslsquo awareness and willingness
to pay for pesticides free fruit and to determine socio-economic and socio-demographic
characteristics in relation to their impact on willingness to pay a price premium This
study was carried out in two districts of Khyber Pakhtunkhwa (Pakistan) namely
Peshawar and Mardan The household level data employed in this study were obtained
from 1000 households through face to face interview by employing pretested
questionnaires Householdslsquo perception and attitude about pesticides free fruit were
also analyzed Three questionnaire elicitation formats ie dichotomous choice payment
card and open ended were used in this study For the estimation of dichotomous choice
data double bounded dichotomous choice model was used An ordered logit model was
used for the estimation of payment card type data and for the estimation of open ended
79
questionnaires linear regression model was used to estimate householdslsquo willingness to
pay price premium for pesticides free fruits
52 Conclusions
Adoption of technological advancement in agriculture has attracted considerable
attention in many developing countries because majority of population in less
developed countries derives its likelihood from agricultural production New
technologies provide farmers an opportunity to increase production and enhance
economic growth (Carvalho 2006) Although the green revolution spread across
developing countries in Asia and resultant in increased food production by adopting
technological inputs like fertilizer and pesticides However the high usage of these
chemicals to bring this spectacular growth in agriculture production is not without its
problems In most countries it has been observed that using commercial agricultural
practices causes many problems like environmental degradation and human health
effects (Wilson 2000) Coordinated efforts are needed to increase food production
with a view to enhance food safety and quality Although chemicals free agriculture is
gaining more and more support for safer food but still not providing enough food to
support need of the population in developing countries
Demand and markets for pesticides free fruit has gained a significant and valuable
interest of research scientist in all over the world Several research studies have been
identified price premium that consumers are willing to pay for pesticides free fruit and
also showed some socio-demographic factors influencing their decision to pay more
price premiums Different approaches are adopted in these studies depending on their
objectives These research studies mainly focused on attitudes and perception towards
these foods and not their actual purchase According to our knowledge studies on
householdlsquos willingness to pay and the most relevant factors influencing their decision
to pay more price premium are limited in developing countries such as Pakistan
The general objective of this survey was to study the socio-demographic and socio-
economic characteristics of the householdslsquo and to investigate factors influencing their
willingness to pay for pesticides free fruit A variety of factors including respondentlsquos
age gender householdlsquos size respondentlsquos income householdlsquos head education
awareness and certain attitudinal questions like health concern and environment
concern appear to influence householdlsquos willingness to pay a price premium Findings
80
of the study suggest health concern and environment concern has significant influence
on householdslsquo willingness to pay Hence it can be concluded that households in the
study area are more concern about their health and surrounding environment Results of
the study also indicated no significant difference in willingness to pay across rural and
urban regions of the study area
Study concluded that the most relevant explanatory variables positively influencing
householdslsquo willingness to pay for pesticides free fruit are age of the householdlsquo head
income of the household headlsquos education householdslsquo awareness health concern and
environmental concern while householdlsquos size is negatively significant which usually
reported that householdslsquo with more members do not care much about quality but more
quantity because feeding more people with limited resources are difficult Majority of
the households are willing to pay price premium for pesticides free fruit especially
those with high level of income household leads to high degree of willingness to pay
Education level also became an important factor in willingness to pay higher price for
pesticides free fruit More aged people have always been concern about their health As
the people get aged more and more the diseases of aging caught their minds so they
like to pay more for safer food While when it become to pay more price variable
gender shows insignificant affect due to the limited availability of female respondents
in the sample data
Results of the households awareness regarding pesticides used on conventional fruit
and its impact on health and natural environment are positive Most of the households
are highly concern about health and environment Results suggest that more than half of
the households are aware of the adverse impact of pesticides on health and
environment Survey suggested that more than half of the households are strongly
agreed that farmers should produce such an agricultural food product which has
minimum adverse impact on human health and natural environment Results of the
study are consistent with other findings conducted on consumerslsquo willingness to pay for
organic food and pesticides free food and reported that health and environmental
concern were the most important factors
Health and environmental concern is an important factor constituted a significant
influence which inclined households towards willingness to pay for pesticides free fruit
Krisoff (1998) reported that consumers perceived pesticides free food as healthier safer
and environmental friendly as compare to food produced by conventional method
81
From this study it is observed that households perceived pesticides free food as
healthier they are willing to pay more price premium
Results obtained from this study concluded that 93 percent of the households are
willing to pay more prices for pesticides free fruit Out of this proportion 35 percent of
households are willing to pay 16 to 20 percent more price above the regular price while
24 percent are willing to pay 6 to 10 percent higher price for pesticides free fruit
Households are willing to pay above than 20 percent comprised of 215 percent of the
sample data Results show that out of total willingness to pay 4 percent of the
households are willing to pay 1 to 5 percent price premium and 9 percent are willing to
pay 11 to 15 percent more price premium Results also show that only a minor portion
65 percent of the sampled respondents is unwilling to pay any more
Householdslsquo willingness to pay was also assessed The study revealed that on average
the respondents are willing to pay 26 percent higher price for pesticides free fruit than
the regular price which concluded that households in the study area are responsive
towards safer food and they like to pay higher premium for such fruit
53 Recommendations
This study is one of the first analytical attempts to measure householdslsquo willingness to
pay for pesticides free fruit in Pakistan Since not much research work is done on
pesticides free fruit in Pakistan so this study would contribute a little for future
researchers Findings of the survey suggest some recommendations for consumers and
producers Researchers may consider this study as basis for further research
An important task is to provide more information to consumers regarding
pesticides free fruit and the perceived benefits by consuming these fruit This
research study also provides information to consumers that how pesticides free
fruit is differ from fruit produced conventionally The sampled studied shows
that there is a potential for market growth of pesticides free fruit To identify
these potential consumers knowledge about their socio-demographic and socio-
economic characteristics is important
With potential demand and high price premium pesticides free fruit production
could be one of the lucrative strategies for producers to earn higher net margin
from their production so like other new technologies management practices
and production system pesticides free fruit production also needs government
82
assistance such as advertisement consumers awareness campaigns financial
aids as well as green subsides and loans to the producers to develop well
established market and efficient supply chain in Pakistan
By adopting new agricultural practices and comply with standards of World
Trade Organization (WTO) this will not only abridge the supply demand gap
for pesticide free fruit sat domestic level but also will boost the economy of the
country due to increase in fruit and vegetables exports
Contribution in the field of pesticides free fruit production from academics
research workers extension graduates scientist and other professionals are
necessary to brief producers as well as consumers about the negative impact of
pesticides due to incorrectly use of these hazardous chemicals on human and
animals health as well as effect on natural environment
Based on the findings from this research government non-government
organization and other stakeholders should formulate policies and would
promote and encourage the production of pesticides free fruit in Pakistan
Demonstration centers should be established within the agriculturist community
for the awareness of farmers regarding the production of pesticides free food
As the results identified householdlsquos willingness to pay is effected by
explanatory variables so more independent variables should be included in the
model to further explain willingness to pay for pesticides free fruit
In addition the area of sampling could be more spread and not be limited to only
two districts of Khyber Pakhtunkhwa If data are collected from different
provinces and districts all over Pakistan the results obtained might be a better
representation of the whole population
As this research study conducted only at few fruit such as Apple Peach and
Mango future research should focus on more fruit as well as on vegetables
54 Limitation and Suggestion for Future Envisage
A couple of limitations were encountered during this research study
This research study has investigated willingness to pay for fruit only due to
time and budget constraint In future a large scale research study should be
carried out both on fruit and vegetable
83
Second since only two districts of Khyber Pakhtunkhwa were examined in
the future such studies should be replicated to other districts and provinces of
Pakistan to determine householdslsquo willingness to pay for pesticides free fruit
Third some variables employed in this study were not statistically significant
presumably due to small sample size To overcome this problem in future
study large sample size should be taken into consideration in order to enhance
the degree of freedom
56 Suggestions
The future of pesticides free agriculture production is very bright To lead a healthy life
human being needs pure food and pollution free environment It has been proved that
pesticides free agriculture is the only solution to provide safe and healthy food to the
world population Chemicals free agricultural system is a natural phenomena and
human being can feel its importance By adopting pesticides free farming soil fertility
can also be maintained Farmers can provide healthy and safer environment by
strengthening the sustainable and pesticides free agriculture Now a daylsquos demand for
pesticides free food is increasing very fast and in the future it would be necessary to get
rid of food produced by using chemical fertilizer and pesticides
To inform consumers long term investment in promotion and education campaigns
would help to develop individual concern regarding the risk associated with pesticides
on food products This concern will translate individual willingness to pay towards a
positive price premium
84
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Veeman M and W Adamowicz 2000Consumerlsquos perceptions of environmental risks
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96
Appendix- 1 Questionnaire
Q1Socio-economic characteristics
1 Location
o Rural
o Urban
2 Name ____________________
3 Age ____________________(years)
4 Gender
o Male
o Female
5 Educational status ______________ Years
6 Household Size_________________ No
7 Monthly income _______________________________Rs
8 Monthly consumption expenditure _________________Rs
9 How much you spend on Fresh Fruits Rs __________month
10 How much you consume the following fruits
Fruits Quantity
Apple
Mango
Peaches
11 Local farmers are intensively using pesticides on Apple Peach and Mango fruits
o Aware
o Not aware
97
12 Attitudinal question responses
Householdrsquos Awareness Perceptions of Pesticides use
Questions Agreed Disagreed
Local farmers are intensively using pesticides on
Apple Peach and Mango fruits
I feel the use of pesticides in agriculture has negative
effect on the environment
I am concerned about pesticide residue in our food
supply
I believe farmer should engage in environmental
friendly agricultural production practices with
minimum impact on human health
The effect of pesticides residues on human health
The use of pesticides can badly affect the agro-ecological system as well as human
health Human health related problems may vary with the composition of chemicals
The most common problems are skin flue and headache while severe health hazards
include paralysis cancer etc Studies show that globally around 30 lakh people are
poisoned annually from consumption of pesticides contaminated food and 2 lakh of
them die from different heath problems caused by pesticides residues Most of the
pesticides used on agricultural crops are banned by the WHO
13 Householdrsquos willingness to pay for pesticide free fruit
Wording for Dichotomous choice question
Suppose your favorite fruit such as apple mango and peach regularly cost on average
Rs 100kg Assuming no difference in taste and nutritional content would you pay Rs
X more to consume pesticide free version of the same fruits
Yes No
Wording for open ended question
Suppose your favorite fruit such as apple mango and peach regularly cost on average
Rs 100kg Assuming no difference in taste and nutritional content how much would
you pay for pesticides-free version of the same fruits
Rs _________
98
Wording for payment card question
Suppose your favorite fruit such as apple mango and peaches regularly costs on
average Rs 100kg you purchase Assuming no difference in taste and nutritional
content would you pay slightly more for a pesticides free version of the same fruits
Yes No
If yes how much would you pay to consume pesticide free version of the same fruit
Select from the given payment card
1 WTP= 0
2 WTP= 1-5
3 WTP= 6-10
4 WTP= 11-15
5 WTP= 16-20
6 WTP= 21-25
7 WTP= 26-30
8 WTP= 31-35
9 WTP= 36-40
10 WTP= Above than 40
If no what are the reasons for not paying price premium for pesticide free
commodities (PFC) Please select the most relevant one
o I canlsquot afford to pay price premium on PFC
o The pesticide have no harmful effect on health
o We do not use fresh fruits
o Other reasons ___________________________
99
PLAGIRIASM UNDERTAKING
It is certified that the research work presented in the Ph D dissertation of Mr Jahangir
Khan C No 45 University Registration No2006-Agr-U-13234 Session 2014-2017
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar under the titled ―HOUSEHOLD
PREFRENCES AND WILLINGNESS TO PAY FOR PESTICIDES FREE FRUIT IN
KHYBER PAKHTUNKHAWA (KP) PAKISTAN was conducted under the
supervision of Dr Abbas Ullah Jan
I understand the zero-tolerance policy of HEC and the University of Agriculture
Peshawar towards plagiarism Therefore I as an author of the above titled research
thesis declared that no portion of my thesis has been plagiarized and the material used
for references is properly cited
I undertake that I found guilty at any time and any statement is found to be incorrect or
plagiarized in the above mentioned titled thesis even after my graduation the
University has the right to withdraw my Ph D degree and the HEC has the right to
publish my name on the HECUniversity website on the list of persons who submitted
plagiarized thesis of guilty under plagiarism policy
Jahangir Khan
100
AUTHORrsquoS DECLARATION
I Mr Jahangir Khan C No 45 Session 2014-2017 hereby stated that my Ph D
dissertation titled ―Household Preferences and Willingness to Pay for Pesticides free
Fruit in Khyber Pakhtunkhwa (KP) Pakistan is my own work and not been submitted
previously by me or anyone else for taking degree from The university of Agriculture
Peshawar or any other University in the country world At any time if any statement
found to be incorrect even after my graduation the university has the right to withdraw
my Ph D Degree
Jahangir khan
Date
101
CERTIFICATE OF APPROVAL
It is certified that the research work presented in the Ph D dissertation of Mr Jahangir
Khan C No 45 University Registration No 2006 -Agr-U-13234 Session 2014-2017
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar under the titled ―HOUSEHOLD
PREFRENCES AND WILLINGNESS TO PAY FOR PESTICIDES FREE FRUIT IN
KHYBER PAKHTUNKHAWA (KP) PAKISTAN was conducted under the
supervision of Dr Abbas Ullah Jan
No part of this dissertation has been submitted anywhere else for any degree The
dissertation is submitted for the award of degree of Doctor of Philosophy in the
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar
Ph D Scholar Jahangir Khan
APPROVED BY
1 External Examiner _________________ Lal K Almas Ph D
Associate Dean and Regents
Professor Agricultural Business amp
Economics University of West Texas
AampM USA
2 External Examiner ___________________ Prof Dr Harun Ucak
Alanya Alaadin Keykubat
University Turkey
Major Supervisor ___________________ Dr Abbas Ullah Jan
Head of Department ________________
Dr Ghaffar Ali
V SUMMARY CONCLUSION AND RECOMMENDATION 78
51 Summary 78
52 Conclusions 79
53 Recommendations 81
54 Limitation and Suggestion for Future Envisage 82
56 Suggestions 83
LITERATURE CITED 84
Appendix- 1 Questionnaire 96
i
LIST OF TABLE
Table No Title Page No
31 Total population and sampled households from selected UClsquos 32
32 Payment card format 41
33 Bid system for Pesticides free fruits 44
34 Description of explanatory variables 45
41 Age of the householdlsquos head (Years) 47
42 Educational Level of the Householdlsquos Head (Years) 48
43 Householdslsquo size of the Respondents (Member in Number) 48
44 Householdslsquo Income in Pakistanlsquos Rupee (PKR) 49
45 Households expenditure on food (PKR) 50
46 Householdlsquos monthly expenditure share on fresh fruits (PKR) 50
47 Householdlsquos Awareness and Perceptions of Pesticides use on Fruit
Grown 51
48 Factors influencing respondent householdlsquos WTP (Ordered logit model) 55
49 Predicted probabilities and marginal effects from the estimated ordered
logit model 61
410 Matrix of correlation coefficient between explanatory variables 62
411 Factors influencing consumerslsquo WTP (double-bounded dichotomous
choice model) 65
412 Households mean estimated WTP 66
413 Householdslsquo Response to First Bid (Amount) 67
414 Diagnostic test results 68
415 Estimated parameters using liner regression model 70
416 Mean willingness to pay comparison from CV question format 71
417 Comparison of response rates by CV question format 71
ii
ACKNOWLEDGEMENTS
I am grateful to Almighty Allah for blessing me with the potential of seeking
the light of knowledge the taste of gaining knowledge courage and for all the blessings
which enabled me to complete a stage of education
Doing a research is not an individual work Itlsquos indeed the result of efforts by
many people I would like to thanks all people who helped and supported me to
complete this research successfully
My whole hearted and profound thanks to my advisor Dr Abbas Ullah Jan
Department of agricultural amp Applied Economics for his support critical review
valuable suggestions and inspiration to make this research success
My most special thanks to Assistant Prof Dr Syed Attaullah Shah Department
of agricultural amp Applied Economics for his cooperation and valuable suggestions
providing me all facilities during the course of this research
My sincere thanks to Dr Ghaffar Dr Dawood Jan and all faculty members
Department of agricultural amp Applied Economics for their cooperation advices and
back-up to achieve my goals and their encouragement and instrumental support during
the research practical work
I would like to submit my admirations to my friends and foreign research expert
Dr Kar Ho Lim and Dr Aditya Khanal Department of Agricultural amp Environmental
Sciences College of Agriculture Tennessee State University USA for their help
especially in thesis write-up and paper publication
At last but the not least I wish to put across my deep admiration to my parents
friends relatives and family members who support me during my study
Jahangir Khan
iii
HOUSEHOLDrsquoS PREFRENCES AND WILLINGNESS TO PAY
FOR PESTICIDES FREE FRUIT IN KHYBER
PAKHTUNKHAWA PAKISTAN
Jahangir Khan and Abbas Ullah Jan
Department of Agricultural amp Applied Economics
Faculty of Rural Social Sciences
The University of Agriculture
Peshawar-Pakistan
May 2018
ABSTRACT
The over use of fertilizers and pesticides in agriculture are degrading natural ecosystem
and human health The substantial association of health risk with pesticide residues and
its adverse impact on environment has fetched attention of researchers across the globe
In this alarming scenario pesticide free farming is deemed as panacea to
environmental human and animal health friendly production system Pesticide free
fruit are considered to be superior in quality as compared to fruit produced
conventionally and helps in preventing several health and environmental hazards
Therefore the demand for pesticide free fruit is increasing throughout the world Given
this increasing demand for pesticide free fruit this study is designed to measure what
price premium household would be willing to pay (WTP) for fruit free from pesticides
such as apple peach and mango This study also aims to identify factors influencing
householdslsquo WTP decision of pesticide free fruit in Khyber Pakhtunkhwa (KP)
Pakistan The primary data was gleaned from 1000 sampled respondents through face
to face interview from two selected districts namely Peshawar and Mardan KP
Pakistan To elicit householdlsquos WTP information Contingent Valuation Method
(CVM) was employed Contingent valuation is a survey based method used for eliciting
willingness to pay of the householdslsquo for environmental and natural resources
Different elicitation techniques are used to design CV question scenario such as
payment card question double dichotomous choice question and open ended question
Consequently this study used the entire three payment format to elicit householdlsquos
WTP for pesticide free fruit The ordered logit model was employed to appraise the
payment card method However linear regression model was adopted to identify
factors influencing householdlsquos willingness to pay for pesticides free fruit
Nevertheless the double bounded dichotomous choice model was performed to
measure dichotomous choice questions The major results demonstrate that 935 percent
households were willing to pay higher prices for fruit pesticides free in the study area
Estimates remarkably reveal that around 35 percent households were willing to pay 16
to 20 percent higher prices and 24 percent households were willing to pay 6 to 10
percent higher prices for pesticides free fruit than the prevailing prices of conventional
produce It is reported by 61 percent of the households that local farmers use irrational
pesticides on fruit Major findings have also corroborated that 881 percent sampled
household have perceived health concerns over pesticides residues in food Similarly
911 percent of the households have supported the idea that farmer should be engaged
in environmental benign agricultural production practices which have a minimum
adverse impact on health and the environment Socio economic and demographic traits
have confirmed positive significant effects on householdlsquos willingness to pay The
iv
results of householdlsquos head awareness on WTP are according to the prior expectations
that awareness of householdlsquos head has significant contribution in willingness to pay
for pesticides free fruit While householdlsquos size has a significant but inverse effect on
willingness to pay for pesticides free fruit Furthermore householdlsquos perception
regarding health and environment concern has a propensity to positively influence the
willingness to pay for pesticides free fruit It is also depicted by the results that mean
WTP by using double dichotomous payment card and open ended elicitation format
validates consumer demand for pesticide free fruit in the study area Three separate
mean WTP were computed for each double dichotomous choice payment card and
open ended format which were figured as Rs2576 1632 and 1437 respectively
These results reveal market potential for pesticides free fruit in the study area This
research study is expected to contribute in the three different aspects Firstly this study
has figured out the potential for pesticides free markets in Pakistan This study has also
abridged the research gap regarding consumerlsquos preferences and willingness to pay for
pesticides free fruit which can be generalized and replicated to other areas In addition
results have provided insight to fruit producers helping them to strategize production
system decisions Based on the findings from this research government non-
government organization and other stakeholders should formulate policies and would
promote and encourage the production of pesticides free fruit in Pakistan
1
I INTRODUCTION
Pesticides are agrochemical formulated to cope with the severe problems diseases
caused by insects fungi virus and self-grown weeds The term pesticide can be defined
as any chemical or natural substance applied with the objective to repel destroy or
control pests and regulate plant growth (FAO 2002) In modern agriculture arena
pesticides are intensively used on crops before and after harvest The application of
pesticides surged with the passage of time due to an increase in the demand for
agricultural commodities by the burgeoning population of the world The overall
pesticidelsquos consumption across the globe is observed as about 2 million tons per year
While this massive pesticides consumption demonstrates that about 69 percent is used
by European countries and the remaining 31 percent is utilized by the rest of the world
as mentioned by Abhilash and Singh (2009) The more alarming situation is that the
aforementioned magnitude of pesticides consumption is increasing with the every
passing year as reported by FAO (2002)
The green revolution as well as a huge increase in the application of pesticides in the
agriculture realm had enhanced food and non-food crop production Resultantly the
significant surge in the economic growth of several agricultural based economies was
reported over the last few decades as demonstrated by Carvalho (2006) Despite the
substantial contribution of pesticides to diminish the food insecurity societies around
the world are cognizant and concerned about the food sanitation safety and
environmental externalities owing to irrational use of pesticides and other croplsquos input
(Wilson 2000) More categorically the food safety realization in developed countries
has been led to organic agriculture Whereas in many developing countries which
include but not limited to Pakistan the pesticides-free and organic food markets
remained underdeveloped due to several reasons One of the obvious reasons is the
uncertainty among consumerlsquos preference that led to their concern if an organic market
can be self-sustained Similarly a dearth of proper market structures and institutional
support failed to provide environment-friendly agriculture practices in developing
countries (Rehber and Turhan 2002) The current scenario of agriculture sector in
developing countries has raised several considerable questions to acquire the
anticipated implications for this sector However the most relevant query drifted that
2
―Is there sufficient consumerlsquos willingness to pay (WTP) available in a developing
country for grass-roots development of pesticide-free agriculture
11 Background of the Research Endeavor
Agriculture sector is the mainstay of Pakistanlsquos economy which significantly
contributes as 192 percent to overall Gross Domestic Product (GDP) of its economy
(GOP 2016-17) Despite many efforts and policy reforms still this sector is entangled
with insignificant growth momentum
Since the inception of this country in 1947 there wasnlsquot any notable crop and plant
protection policy adopted by concerned policy makers over a long span of time It is
evident from past timeline that ―Grow More slogan was initiated by the government of
Pakistan back in 1970s to address the escalating foodlsquos demand of rapidly increasing
population of Pakistan Subsequently Grow More policy resulted in ever increasing
pest problem which couldnlsquot be controlled with conventional crop management
practices Therefore the government started to provide the direct subsidy to Pesticides
Industry to provide panacea to croplsquos pest problem But unfortunately the colossal
surge in pesticides utilization had not only destroyed the pests but was also found lethal
for the environment benign organisms that include predators birds etc This irrational
use of pesticides and other crop inputs has caused huge economic loses and health
issues among the farming community
Pakistanlsquos agriculture is endowed with 11 (Eleven) different agro-ecological zones
providing the country an incredible exciting arena for experimentation and state of the
art for agriculture as reported by Altaf (2010) This diversified nature of ecological
zones can be utilized in a lucrative way to attain an optimal output The driving forces
of this sector are striving hard to curtail the gaps by ensuring the adequate production
and supplying the food to meet the demand of rapid growing population of the country
However the emerging challenges such as irrational use of croplsquos input and complying
with world trade organization (WTO) obligations are insisting the concerned policy
makers to focus on paradigm shift for significant contribution of agriculture towards
livelihood welfare and prosperity
3
These different agro ecological conditions provide the encouraging and conducive
environment for the production of cereal crops fruits vegetables and even for non-food
crops Fruits and vegetables grown in Pakistan have a wide domestic demand and have
also attracted the international consumer by exporting these edibles in the international
market Pakistan exports mango apple dates oranges guava and dry fruits like pine
nuts to different countries which include but not limited to Afghanistan UAE Saudi
Arabia and Europe (GOP 2014-15)
The relative importance of agricultural sector can be gauged with high growth rate of
exports of fruits and vegetables from Pakistan to different countries mainly South East
and the Middle East (Khalid Mustafa 2003) where low Sanitary and Phytosanitary
(SPS) standards are comply with Yet several more fruit grown in Pakistan have
enormous potential to be exported in the international market Specifically insect pest
infestation during pre- and post- harvest of fruit and vegetables is a significant problem
To protect from those many kinds of pesticides and agro-chemicals are widely used in
Pakistan These include different types of agro-chemicals which consist more than 100
types of insecticides almost 30 types of fungicides and approximately 39 different
types of herbicides (Zia et al 2009Anwar et al 2011) In 1960 the consumption of
chemical pesticides in Pakistan was 7000 tons per year which has risen to 78 232 tons
per year in 2003 (Syed and Malik 2011)With the development of pest resistance to
those chemicals over years each year new chemical compounds in large amount are
used to protect crops Overuse of these agro-chemicals has caused many adverse health
and environmental effects
However significant variation in consumer behavior in the developed countries has
excelled the demand of high quality food which had encouraged the organic
agriculture Thatlsquos why developing countries who have still adopted obsolete strategies
for pest control are out of race for agriculture export and are at venture to be considered
as ―dirty producer in an international market Similarly in Pakistan massive increase
in the pesticidelsquos use has escorted to two major harms to Pakistanlsquos economy Firstly
Pakistan imports a large quantity of pesticides incurring billions of costs on it and
second overuse of pesticides on agricultural commodities has created many health and
environmental hazards in the farming community of Pakistan Several research
endeavors such as Ahmad et al (2004) Rizwan et al (2005) Parveen and Masud
4
(2001) had divulged that individuals working in field under pesticides exposed
environment specifically women who worked long time in the cotton croplsquos field
sustained more health hazards These health hazard underscored skin irritation
headache nausea and gastroenteritis It is also evident that the hazardous chemical
residues of organo-chlorines organophosphate and synthetic pyrethroids pesticides
were found in 85 percent of the blood samples drawn from 75 sampled individuals
(male and female) in Pakistan
12 Pesticides free Food and Products
Pesticides free fruit and vegetable are those edibles that are grown without the use of
pesticides and can be deemed as major component of an organic farming Due to
awareness among people about advantages of Pesticides free fruit and vegetable which
upshot in food safety and benefit environment as well the production and consumption
of such food products is being highly valued With the consumption of food produced
without the use of pesticides can be helpful in the prevention of some of the health
hazards related with the consumption of conventional food (Nouhoheflin et al 2004)
The term ―Pesticides free was introduced for the first time in a book ―Look to the
Land in 1939 by Lord Northbourne The author narrates pesticides free farm as an
organization that making use of environment balance technique by adopting zero
pesticides In early 20th
century pesticides free food ideology was brought forward
while correspondingly there was an immense use of chemical in food products as well
Householdslsquo were having great concern about their health as well as soil condition and
they began to grow such food which was free from chemical residuals In the era of
70s a noteworthy change was reported in escalating the demand of pesticides free food
and pesticides free farming Therefore in year 1972 ―International Federation of
Pesticide free Agriculture Movement was formed In the same era the producers who
were producing pesticides free food individually commenced the certification process
The obvious aim of the process was to develop rules and to underpin the standards of
pesticides free production
In this modern era where food consumers are highly concerned about their health safety
and environment benign practices they prefer to buy pesticides free food products
This is because of their knowledge about the relationships between the production
practices and quality of food produced Consumers are becoming more conscious as
5
they are aware of the harmful effects of food produced with irrational pesticides use on
their health Many research endeavors have corroborated that fresh fruit and vegetables
confers health related benefits and provide protection against the risk associated with
different types of diseases like diabetes stroke and cancer(Van and Pivonka 2000 Stan
Kar Stoner Singh 2008) Likewise the world health organization (WHO) has
revealed in their research carried out in 2002 that the fruits and vegetables
contaminated with pesticides can cause about 31 percent of diseases related to heart and
11 percent stroke in all over the world However if best quality of fruit and vegetable
consumption is adequately increased it is projected that about 27 million of lives can
be protected each year Pesticides free food contains higher level of antioxidants which
fight against various diseases and provide different essential vitamins More
importantly pesticides free food products also aimed to prevent from some allergies
and diseases common in human being It is corroborated by other research studies that
chemical fertilizer free food are beneficial for human health as well as for the animals
wildlife and for the ecosystem To encourage such agricultural management techniques
in developing countries in general and Pakistan in particular still there is long way to
go but such research studies can provide the paved way to open new avenues for the
concerned policy makers and stakeholder in the realm of Agriculture
In addition locally grown pesticide free produce tends to fetch higher prices due to
sanitation concerns of the consumer and improved quality of the product Subsequently
such produce are preferred by the household and they are agree to pay a price premium
for such food produced free from pesticides compared to prevailing regular market
price of conventional food products Thus it is important to measure householdlsquos
willingness to pay for locally produced pesticide free fruit To acquire a good or
service consumerslsquo wants to sacrifice an extra amount of money which show their
willingness to pay Willingness to pay can also be defined more categorically as the
extra amount of money that an individual wants to pay for best quality of food (Lusk
and Hudson 2004) The commonly used model for eliciting householdlsquos willingness to
pay information is Contingent Valuation Method (CVM) Contingent valuation (CV) is
a survey-based method which is used to elicit householdlsquos willingness to pay for
environmental and natural resources
6
12 Justification of the Study
With the every passing year the demand for agriculture products is hiking due to rapid
increase in the worldlsquos population Pakistan being an agrarian country is striving hard
to fulfill the domestic and international demand for agricultural food To overcome the
escalating demand for agricultural product farmers mainly depend on chemical
technologies to manage pests and to provide enough food Besides their benefits now it
is clear that pesticides are negatively influencing human health and also the natural
environment The food that we are eating has gained more discussion in all over the
world including developing countries like Pakistan that whether this food is safer for
human health and for natural environment Consumers are facing with problemslsquo which
food is safe to eat and which is not safe Which food processing is beneficial for human
and environment and which is worse (Bold et al 2015 Chiew Shi Wee et al 2014
Sirieix 2011 and Butt et al 2015) Most of people are turning towards the production
and consumption of pesticides free food to resolve these issues
In developed countries consumers are highly concerned about the excessive use of
chemicals on food and its negative impact on health and natural environment thatlsquos
why the production of food produced without the use of pesticides Large numbers of
studies are conducted on consumerslsquo perception regarding pesticides- free food in
developed countries like Europe Australia United State and New Zealand but in
developing countries very little is known about consumerslsquo perception regarding
pesticides-free food
Despite the fact that food production without pesticides and other chemicals are safe for
health and environment its production and consumption is very low In Pakistan only
few farmers are using chemicals free technology for food production It has only 28
farms producing pesticides-free food which they just growing for their own
consumption not for commercial purpose In Pakistan there is high gape of information
about consumerlsquos perception and awareness regarding pesticides-free food and
consumerslsquo willingness to pay for pesticides-free food (Panhwar 2004)
Keeping in view the human health hazards and environmental vulnerability owing to
irrational use of pesticides alternative farming systems such as pesticides free farming
integrated pest management (IPM) and organic farming is becoming progressively
7
more popular in the global context However in the country like Pakistan where costly
input and lower output agriculture was a historic focus Following the Green
Revolution in 1960s adoption of certified organic production is expected to be fairly
low Nevertheless aforementioned agriculture practices could be an alternative system
in convincing farmers towards safe and sustainable agriculture and to comply with the
strict regulations and mandates of certified organic system and WTO Moreover due to
conducive and diversified weather and climatic condition of the country and relatively
cheaper labor force availability production of such safer food seems feasible
Pesticides free food is supposed to be having high prices however it is important to
examine whether households are willing to pay a higher price for these pesticides free
fruit According to the research study conducted in different countries of the world on
pesticides free food this study also focus to investigate a price premium that
households are willing to pay for pesticides-free fruit and factors influencing their
decision For this purpose Khyber Pakhtunkhwa (KP) is selected as a research area
Khyber Pakhtunkhwa (KP) is blessed with fertile soil and plenty of water for irrigation
and is famous for production of delicious fruit such as peach apple guava plum
mango Pear apricot date and citrus Fruit farming has been an important business of
Khyber Pakhtunkhwa and the total fruit production during 2015-16 was 411448 tons
from 44737 hectare (GOKP 2015-16) Given that the region is one of the important
fruit growing regions with relatively readily available agricultural labor growers has
the potential to produce pesticides free fruit in this region In this direction more
research work is required to estimate a price premium householdslsquo willing to pay for
fruit free of chemicals and pesticides Thatlsquos why this study is designed to measure
what price premium households would be willing to pay for pesticides free fruit and
improvement in apple peach and mango quality produced by farmers
14 Purpose and objectives of the Study
The irrational and overuse of pesticides in agricultural food production causes severe
damages to human as well as animal health and to the environment too Thus a new
production and new system is needed to overcome these problems and to limiting the
use of these hazardous chemicals during production process The risk of harmful effects
on health and environment are generally reduced with pesticides free farming compared
8
to conventional farming methods Hence pesticides-free farming has the potential to
provide a healthy and safer environment The purpose of conducting this study is to
understand the factors that influence householdlsquos behavior in purchasing pesticide free
food and their willingness to pay for such food The main theme to carry out this study
is to discuss on the variables which determines householdlsquos behavior in the buying
pattern of pesticide free food Besides this research also aims to increase the
understanding on householdlsquos awareness attitude and perceptions towards pesticide
free products
The general objective of this study was to investigate what price premium householdslsquo
are willing to pay for pesticides free fruit produced locally
The specific objectives of this research study are mentioned as below
To study socio-economic characteristics of household and their expenditure on
fruit
To investigate householdlsquos perception towards the use of pesticides on fruit
production
To identify factors influencing householdlsquos willingness to pay (WTP) for
pesticides free fruit
To compare householdlsquos willingness to pay across urban and rural regions of
the study area
To examine the effect of different contingent valuation elicitation format on
householdlsquos WTP
15 Research Questions
1 Do householdlsquos willingness to pay a price premium for pesticide free fruit
produced locally is affected by their socio-economic characteristics
2 Do householdslsquo willingness to pay price premium for pesticide free fruit
produced locally are different in rural and urban regions
3 Do householdslsquo willingness to pay price premium for pesticide free fruit
produced locally are affected by WTP question format
9
16 Hypotheses
Hypothesis is a proper statement that shows the expected association between an
exogenous and endogenous variable (Creswell 1994) Hypothesis is mainly of two
types the null (Ho) and the alternative (H1) hypothesis The null hypothesis is a
statement about the relationship between the dependent and independent variables
while the alternative hypothesis is tested for the acceptance or for the rejection of null
hypothesis through using different test-statistics and usually opposite to the null
hypothesis
161 Hypotheses to be tested
Hypothesis 1
H1 Socioeconomic characteristics have significant effect on householdlsquos WTP
for pesticides free fruit produced locally
Hypothesis 2
H1 Rural and urban locations have significant effect on householdlsquos WTP for
pesticides free fruit produced locally
Hypothesis 3
H1 WTP question format have significant effect on householdlsquos WTP for
pesticides free fruit produced locally
17 Contribution of the Study
The major findings of this research endeavor could be lucrative to pesticides-free food
industry players in designing and implementing programs relating to the production
marketing and consumer behavior regarding fruit and vegetable The study is providing
information regarding householdlsquos willingness to pay an extra amount for pesticides
free fruit at market place The identification of factors influencing purchase of
pesticides free food provides valuable information in formulating short and long term
marketing programs Also the outcomes of the study provide benefits to Government
in their policy making towards pesticides-free farming and pesticides free products
Pesticides free fruit could contribute significantly to wealth formation poverty
lessening and can assess to export market Pesticides free fruit provide healthy food and
natural environment to the society
10
18 Organization of thesis
This study is organized into five chapters In the first chapter background of the study
research questions study hypothesis research justification and contribution of this
study is discussed Chapter two is consist of review of literature related to consumerslsquo
perception market potential and market prospects empirical research studies on
consumerlsquos willingness to pay and consumer knowledge about pesticides free food
socio-demographic variables and their effects on willingness to pay price premium are
discussed Chapter three discuss in detail the study area conceptual and empirical
framework on consumerslsquo willingness to pay and contingent valuation methods are
discussed Chapter four presents descriptive analysis and results obtained from
empirical findings and Chapter five provide summary conclusion and recommendation
and future suggestions on the basis of research findings
11
II LITERATURE REVIEW
Literature review is a synthesis of previous study in the content of a thesis In this
chapter different past investigation are reviewed Mostly this chapter concern on the
methods adopted by different researchers while measuring willingness to pay It also
figure-out various explanatory variables which have been found influencing
householdslsquo willingness to pay an extra amount of money for pesticides-free food
Previous researches on perception questions are also discussed
21 Illustration of Contingent Valuation Method (CVM)
A number of research studies are undertaken across globe to investigate about
consumerslsquo WTP for safer foods such as organically produced pesticides free or
naturally grown Most of the WTP studies use contingent valuation methods where
hypothetical market scenario is developed and subjects are asked to name their WTP
price as compared to existing market price Different techniquesquestionnaires are
used in contingent valuation method where respondents are directly asked to state their
maximum amount of money they are willing to pay for specified improvements in
environmental or health quality The methods used in CVM includes personnel
interview mail and survey that elicit consumerlsquos WTP for those goods yet not available
in the market Survey questions include single bounded double bounded dichotomous
choice and open ended or closed ended (Lusk and Hudson 2004)
Misra et al (1991) studied consumer preferences and their willingness to pay for
pesticides free fresh produce by applying contingent valuation method An ordered
probit model was adopted to know householdlsquos stated willingness to pay for products
free from pesticides residual The study also aimed to know the factors affecting the
probability of householdslsquo WTP for a number of alternative price premiums The
results indicated that householdlsquos willingness to pay was different across different
factors The study concluded that testing and certification was the recommendation of
the households Results also showed that consumers in the study area opposed higher
prices for certified-FPR fresh produce
In another study Gil et al (2000) adopted contingent valuation method and studied
consumerslsquo willingness to pay for pesticides free fruit in Spanish regions Results
showed that consumerslsquo concern over health and environment was increased Results
12
also suggested that due to the adverse impact of conventional food on health and
environment demand for pesticides-free food has raised Results of the study also
showed that consumerslsquo were willing to pay more prices for fruits vegetables and
meats which were free of pesticides
Boccaletti and Nardella (2000) used contingent valuation method to assess householdlsquos
willingness to pay for pesticides free fresh fruit and vegetables To know the impacts of
explanatory variables on the probability of householdslsquo willingness to pay different
price premium an ordered logit model was used and results were reported A
significant and positive effect of income on householdlsquos willingness to pay was
observed Results of the study also suggest that householdlsquos education and associated
risk concern has an inverse relation with households WTP
In another study Millock et al (2002) conducted a research study by using contingent
valuation technique to estimate willingness to pay for pesticides free products through
panel data The information collected was based on weekly report of householdslsquo
purchases of 2000 Danish families Questionnaires were sent to households and asked
them to differentiate different food attributes The food product attributes were included
environmental issues animal welfare and food safety The result showed that
household had given high value to food free from pesticideslsquo residues
Similarly in a relevant study Cranfield and Magnussan (2003) studied willingness to
pay of the Canadian householdlsquos for those products which were free from pesticides
residuals by applying an Ordered Probit Analysis model A contingent valuation (CV)
study was attempted to know that if Canadian households would pay a price premium
for pesticides free food products About sixty five (65) percent of the householdlsquos were
willing to pay a 1 to 10 percent extra amount of compared to those products
contaminated with pesticides residuals About five percent of the total respondents were
willing to pay more than 20 percent price premium The main determinants that switch
over the households to pay higher premiums for pesticides free products were
householdslsquo health concern and environmental concern
In a relevant study John and Eric (2004) developed a survey based research to find out
householdlsquos choice of paying an extra amount for fresh and pesticides free products by
using a contingent valuation technique According to their research 65 percent of
13
households were willing to pay one to ten percent extra prices for pesticides-free
products as compare to conventionally produce one five percent respondents willing
to pay more than twenty percent Health and natural environmental issues youth and
grocery stores were the important factors influencing consumers to pay higher prices
Masias et al (2012) carried out a research study in Spain to analyze the level of
knowledge consumption and consumerlsquos willingness to pay for organic vegetables
such as organic tomatoes By using contingent valuation method three distinct
consumerslsquo groups were identified The results showed consumerlsquos lack of knowledge
regarding organic vegetable Result of the study revealed a clear relationship between
level of knowledge and organic food consumption and consumerslsquo potential willingness
to pay
Boys et al (2014) conduct a research study in Dominica to assess willingness of the
consumerslsquo and their opinion for organic or locally grown produce By adopting
contingent valuation method (CVM) maximum likelihood estimation (MLE) procedure
was applied Findings from the study reported that respondents in Dominica were
willing to pay 175 percent for organic and 12 percent price premium for locally
produced food Results of the study showed that consumer response towards
willingness to pay was different across socio-demographic characteristics family health
status and experience regarding adoption of organic food products
22 Crux of the Double bounded dichotomous choice model
Many recent research studies deployed double bounded dichotomous choice model to
study consumerslsquo willingness to pay for pesticides free organic and related food
Owusu (2010) studied and analyzed market possibility for new pesticides free lettuce
and water melon by using a double bounded dichotomous choice contingent valuation
technique in the city of Kumasi in Ghana The information of the respondents was
collected By applying a Tobit model householdslsquo willingness to pay was assessed
More than 50 percent price premium were paid by 71 percent of the respondents for
natural vegetables and 82 were willing to pay 1 to 50 percent higher premiums for
natural fruits Results showed that human capital food qualities and householdlsquos
recognition impact householdlsquos willingness to pay for pesticide free commodities The
14
evaluated market possibility for pesticide free fruits were (GHcent32117113 US$
26453433) for every annum and for naturally produced vegetable was GHcent1991224
(US$1640083) per year suggested an immense market possibility for naturally
produced fruits in Ghana
sum
(
)
(
)
Where
are binary valued (0 or 1) indicators and the formulas
for the corresponding response probabilities are given above The model was estimated
through maximum likelihood estimation method and the results were used to find out
the mean and individual WTP (s) for pesticides free fruits
Where ƒ(WTP) is a function X is a set of socio-economic characteristics are
coefficients and is error term
In another study Cerda et al (2012) investigated different markets regarding
respondentlsquos preferences and willingness pay a price premium for products free from
pesticide in Chile Conjoint analysis was also used to estimate the marginal willingness
to pay of the consumer for pesticide-free apple A total of 400 individuals were
interviewed to know householdlsquos willingness to pay and to determine different
attributes that consumer search when purchasing apple by using a logistic probability
function and single-bound dichotomous elicitation format The output showed sweet
apple lowest price and pesticides free production attributes were preferred by
households Results of the study revealed that consumers in the study area were willing
to pay about 130 Chilean pesos kilogram for pesticide free apple
By using double bounded dichotomous choice approach Minh et al (2013) conducted
a research study on consumption and willingness to pay a price premium for pesticides
free vegetables in Vietnam Under contingent valuation method 185 respondents were
surveyed and analyzed Results showed that about 15 percent of the consumers had
already used pesticides free vegetables and 88 percent sought to try and purchase such
products if available in the market Result revealed that consumerslsquo were willing to pay
15
on average 70 percent more amount for pesticides free vegetable than the convention
price Findings also showed that respondents with more concerned about pesticides free
food and high purchasing power were more likely to pay extra amount of money
Findings of the study showed most of the consumers were still worrying about safe
food because of chemical residues in vegetables Results suggest that control of
pesticides level was difficult for state agencies because of insufficient capabilities
Some recommendations were suggested based on findings of the study such as the
consumers should be informed regarding organic vegetables and information should be
publicized to consumers and to expand organic market share in the future new shops
should be open
Hai et al (2013) conducted a research study on consumption of organic vegetables and
consumer WTP for vegetables produced without the use of pesticides in Vietnam They
reported in their study that most of the consumers were still worrying about safe food
because of chemical residues in vegetables Control of pesticides level was difficult for
state agencies because of insufficient capabilities By using double bounded
dichotomous choice approach under contingent valuation method 185 respondents
were surveyed and analyzed The results showed that about 15 percent of the
consumers had already used pesticides-free vegetables and 88 percent of the total
respondents desired to try and purchase if such pesticides free products were available
in the market On average consumers were willing to pay 70 percent more price than
the convention price Findings of the study also showed that respondents with high
income and more concerned about pesticides-free food were more likely to pay price
premium
23 Overview of the Ordered Logit Model
Regarding discrete nature and ordinal ranking of the WTP variables in payment card
method an ordered logistic regression was applied in many research studies Ordered
logistic regression is the most appropriate choice in studying these issues (Green
2007) Under latent variable framework the willingness to pay model can be written as
follows
16
Where is an unobserved latent variable reflecting the WTP for pesticides-free fruits
for household i expressed in terms of utility to switch from the traditionally grown
fruits consumption to pesticide free fruits is a parameterlsquos vector reflecting the
relationship between WTP captures a set of socioeconomic and demographic
variables influencing WTP and is the unobserved disturbance term reflecting
stochastic differences between households not controlled for The relationship between
the unobserved and the observed outcome for household ( =0 1 2hellipj) can
be summarized as follows
It is presumed that ɛ is normally distributed across observation
With regards to ordered logistic model Valchovska S (2004) investigated Dutch
householdlsquos attitudes and behavioral intentions to purchase pesticides-free olive oil By
applying CVM to assess consumer willingness to pay a price premium for pesticides
free olive oil on the Dutch consumer an ordered logit regression model was used
Results suggested that willingness to pay did not depend on socio-demographic factors
but rather on consumers awareness and experience with the product Results also
showed that experience regarding the product was significantly related to purchase
intention and willingness to pay Most of the consumers considered pesticide-free olive
oil to be too expensive Results suggested high prices appeared the biggest constraint
on consumption Results clearly verified that consumerslsquo familiarity with pesticide-free
olive oil in the Netherlands was low at present This situation may however be
changed by a possible increased availability of the product in the supermarkets
17
Rodriguez et al (2008) carried out a research study to measure consumers WTP for the
available pesticides free products in Argentina domestic market The data was collected
through a survey from the consumers of Buenos Aires city For the analysis of data a
binomial multiple logistic regression model was applied Five different organic
products such as regular milk leafy vegetables whole wheat flour and fresh chicken
and aromatic herbs were selected for the research The method of contingent valuation
(CVM) was adopted to estimate consumerslsquo stated willingness to pay The result
revealed that pesticide free agriculture has undergone momentous expansion and
consumers in the study area were willing to pay a higher amount of money for such
organic products Research results suggest that along with price that play a significant
rule while consuming organic products non availability of stores for organic products
and a reliable regulatory system limits the consumption of pesticides free organic
products in the study area
According to Kalogeras et al (2009) carried out a research study that concentrates on
the identification of Dutch householdslsquo willingness to pay (WTP) for natural olive oil
The study was carried out in 5 biggest Dutch cities in Netherland To evaluate the
impact of explanatory variables on householdslsquo willingness to pay a price premium for
natural produced olive oil an ordered logit regression model was constructed Results
suggest that experience awareness and consumerslsquo personnel satisfaction were the
variables influencing consumerslsquo WTP for natural olive oil
Travis et al (2009) conduct a research on consumer purchasing behavior for pesticides
free fruits and vegetables To identify the impact of socio-economic and socio-
demographic characteristics on the probability of consumers belonging to certain
groups like devoted casual or nonuser an ordered logistic model was used Results
showed that factors like price and income were influencing householdlsquos willingness to
purchase pesticides-free fruits and vegetables to some extent The results also showed
that respondents with a college degree children aged more than six years and aged
above than fifty years were willing to purchase pesticides-free fruits and vegetables
Zeki and Zia (2009) carried out a research study to investigate consumerslsquo stated WTP
for tomatoes produced free from pesticides residues The study also aimed to measure
the impacts of socio-demographic and hazard variables on WTP Ordered Probit model
18
was used to figure out the likelihood of WTP for pesticide free tomatoes The
information was acquired from 666 respondents by survey method in Ankara and Tokat
regions at same occasion The study results revealed that 3423 percent of Turkish
households were not willing to pay 7702 percent willing to pay a 30 percent higher
amount of money and 22 97 percent would be willing to pay more than 30 percent
premium According to the results Turkish households were paying a little price
premium for tomatoes produced free from pesticides Furthermore the important
factors significantly influencing willingness to pay for pesticides free tomatoes were
gender education statue of mother recognizes for ecologic agriculture solid
sustenance and risk
Oyawole et al (2016) conducted a study in Nigeria to asseslsquo consumer awareness
benefits and willingness to pay for organic vegetables Descriptive statistics and logit
model was used for the analysis of data According to the research findings about 70
percent of consumers were aware of the benefits of organic agriculture and hence they
were willing to pay price premium Results showed that factors influencing willingness
to pay positively were higher education and consumer awareness regarding organic
food while age income and gender had no significant influence on consumer
willingness to pay
Hayati et al (2017) conducted a research study in Marand city to identify factors
effecting consumerslsquo WTP for pesticides-free fruits and vegetables To assess
respondentlsquos willingness to pay an ordered logistic regression model was applied By
using Contingent valuation method data was collected from 394 respondents The
results revealed that 33 of the respondents were willing to pay 20 more price
premium 64 showed 5 to 20 more price premium while only a small portion 3
of the total sample of the consumers were not willing to pay more price for pesticides
free fruits and vegetables Findings of the study also revealed that factors such as
income of the respondent environmental and health concern and consumerlsquos
knowledge regarding pesticides free fruits and vegetables were significantly affecting
respondentslsquo willingness to pay for vegetables and fruits free from pesticides residues
19
24 Factors influencing Householdsrsquo Willingness to Pay
Based on the literature review factors influencing households WTP a price premium
are discussed below
WTPj = β0 +β1Agej + β2Genj + β3Eduj+ β4Hsizej + β5Incj + β6Locj + β7Healthconj+
β8Envirconcernj +
Where
WTP = Willingness to pay for pesticides free fruit = Householdslsquo head age in years
= Gender status of the householdslsquo head = Education level of householdslsquo head in
years = Householdslsquo size = Income of the household = Householdslsquo
location = Health concerned = Environment concerned micro=Error term
Govindasamy and Italia (1991) investigated households in different grocery retail
markets in New Jersy to know their different opinion regarding pesticides free
products The main theme of the research study was to know demographic
characteristics that caused the household to pay a price premium for products free from
pesticides residues than the price prevailing in the market The result showed the
influencing factors that caused the individual to pay more price premium for pesticides
free products were demographics characteristics such as females those having higher
income and young individuals The result also showed that number of member in
households had an inverse relation with willingness to pay More individual in a house
were not willing to pay higher prices for pesticides free products
Piyasiri and Ariyawardana (2002) conduct a research study to identify market potential
and consumerslsquo expectations for pesticides free food in Kandy Sri Lanka The study
also aimed to identify factors influencing consumerslsquo willingness to pay price premium
for pesticides-free food Results revealed that most of consumers in the study area were
aware of the use of pesticides free food and this awareness influenced their
consumption of organic food and willingness to pay more for organic food Results
showed that socio-demographic characteristics like income education of the
respondents beside environment knowledge were the important factors influencing
consumerslsquo WTP for pesticides-free food Study suggested that market for organic food
could be enhanced by availability of organic food in easily accessible shops and market
20
should also direct awareness in consumer regarding demand and consumption of
organic food
Qingbin and Junjie (2003) conduct a study to identify market potential for pesticides
free apple and milk by adopting a conjoint analysis technique in Vermont State of
USA Results found that there was a significant niche market for pesticides free apple
and milk The results also suggested that especially those consumers who were
regularly purchased pesticides free products were willing to pay price premium for
apple and milk produced without the use of chemicals and certified by NOFA
Heo and Kim (2004) investigated green marketing strategies and willingness to pay for
environment-friendly agricultural products in the Metropolitan area The results
revealed consumerlsquos WTP for grain vegetables fruit and processed foodstuffs were
206 percent 202 percent 193 percent and 172 percent respectively higher than
agricultural products produced by conventional farming method
Gracia and Magistris (2007) conduct a research study to know consumerslsquo purchasing
behavior regarding pesticide-free food and also factors influencing food purchasing in
Iran A multivariate limited dependent variable model was used Results showed that
households purchasing pattern was more for pesticides free products and they
purchased such safer products in large quantity Findings of the study showed that
purchase of pesticide free products depends on householdlsquos behavior and information
regarding the product Moreover householdlsquos behavior regarding health concern and
environment concerns given by pesticides-free products were the factors that explained
both intension and final decision to purchase pesticide free products Income and
information about pesticide free products had a significant positive influence on the
decision of the consumer to purchase pesticides free products
Kamal et al (2009) studied householdlsquos willingness to pay a higher price for
pesticides-free products in Kathmandu valley About 180 respondents were interviewed
by using well designed questionnaires to find out their perception for pesticide-free
food commodities and asses their willingness to pay The study revealed that almost all
the respondents were willing to pay a higher price for such food but the level of
acceptability varied Up to 58 of the respondents were willing to pay 6- 20 more
price while 13 were willing to pay half premium The average price premium was
21
noted about 30 Over 39 of the respondents suggest the extra price is reasonable for
pesticide-free food while 27 suggest it a really higher price However results showed
that the consumption of pesticide free food had increased
Morteza et al (2009) conducted a study to examine consumerslsquo willingness to pay for
pesticides free fruits and vegetables The results showed that variables such as socio-
demographic characteristics and perception of the respondents regarding environment
and health concern were influencing consumerslsquo WTP for pesticides free food
Environment concern was the important factor of consumer willingness to pay but
results from this study showed that respondents in New Brunswick gave more priority
to health as compare to environment Results also indicated a positive influence of
income and health concern on consumer willingness to pay for organic food
Ghorbani and Harnraz (2009) carried out a research study on factors influencing
consumer WTP for pesticides free products in Iran By applying Tobit model the
results showed that physical look and information of consumerslsquo were the influencing
factors affecting willingness to pay higher price Consumerlsquos concern of chemicals
residues in diets were also positively affecting willingness to pay In demographic
characteristics such as education of the respondents had negative effect on WTP The
study suggested that farmers and consumers should be encouraged to produce and
consume pesticides-free food Study also suggests that marketing strategies should be
encouraged for the marketing of such organic food products
Akgungor et al (2010) carried out a research study to estimate consumerslsquo perception
regarding safe food and the trade-off that urban Turkish consumer made between good
quality and chemicallsquos free fresh fruits and vegetables The date was gathered from a
representative sample of urban consumers The results suggested higher income and
more educated respondents were highly interested and they had more knowledge
regarding organic products Results showed suggested reason for choosing organic
products was consumerslsquo perception regarding organic products of low health risk and
higher nutritional value Results showed 36 percent higher price premium consumers
were willing to pay for organic food that suggests urban Turkish consumerslsquo demand
for organic products
22
Oraman and Unakitan (2010) analyzed factors influencing Turkish consumerslsquo
purchasing decisions for fruits and vegetables The survey conducted in Istanbul by
applying logistic model Results of the survey showed that health and safety concern
were the important factors influencing consumerslsquo preferences regarding organic food
Findings of the study would help organic food producer in targeting factors that were
influencing consumerslsquo decisions to purchase organic food products
Bektas et al (2011) conducted a research study to determine level of consumerslsquo
awareness regarding food safety in Izmir Turkey by applying Probit model Results
revealed that consumerslsquo with high income and more education were more aware
regarding safer food Outcome of the study also identified aged respondents had more
probability for healthy and safe food products Results suggested that awareness for
safer food should be passed through informative campaign targeting especially low and
middle income groups as well as low education level population
Coulibaly et al (2011) studied the health risk caused by using large quantity of
chemicals and pesticides on vegetables By using a hedonic pricing model they
identified the determinants of the householdlsquos WTP for pesticide free products
Information was collected through a well designed questionnaire on householdlsquos
perception awareness and consumerslsquo willingness to pay for pesticide free vegetables
The perception of householdlsquos for good quality vegetables included color freshness no
external damage and firmness The most important factor effecting householdlsquos choice
to pay more for pesticide-free vegetables were awareness about the health hazards
caused by those chemical Households were willing to pay more than fifty percent for
those products free of such pesticides and chemicals
Joyce et al (2011) conduct a survey to examine consumerslsquo perceptions and to assess
their willingness to pay for pesticides-free product They surveyed 100 households in
Morogoro municipal The results presented showed that 78 of the respondents were
willing to pay a higher price for pesticides-free food The results revealed that
environment and health concern were the most important factors effecting householdlsquos
willingness to pay for organic food Results from the survey suggested that
consumption of pesticides free food were increasing but need certification labeling
processing and packaging to boost up the demand
23
Sangkumchaliang and Huang (2012) conducted a survey on consumerslsquo perception and
attitude towards organic food products Results showed that consumers were
purchasing organic food products because of the expectations that organic food is
healthier and safer to the environment Results also revealed that respondents with old
aged and more educated were more willing to purchase organic food products The
study suggested that consumerlsquos information needed to purchases organic food
Owusua and Anifori (2013) analyzed the willingness of householdlsquos to pay an extra
amount of money to watermelon and lettuce produced naturally or free from pesticides
by applying a (CV) contingent valuation information starting with urban Kumasi in
Ghana The impacts of the determinants of the householdlsquos willingness to pay a higher
price were examined with a Bivariate Tobit model Results showed socioeconomic
characteristics as well as freshness and cleanness of products had a great influence on
householdlsquos choice to pay a higher price than they pay for conventional products
While householdslsquo size has a negative impact on consumerslsquo willingness on paying
premium to natural lettuce The estimated mean householdlsquos willingness to pay for
pesticide free watermelon was Ghcent05554 (US$ 0 4575) and for natural lettuce was
GHcent12579 (US$1 0361)
Haghjou (2013) investigated that the demand for those products that was grown without
the use of pesticides has increased amazingly in the recent years The study was carried
out to assess the factors effecting householdlsquos willingness to pay a higher price for
organic products accessible in the Argentinean provincial market The output of the
study reveals that 95 of the respondents were willing to pay a higher price while 10
of the householdlsquos were like to pay about 35 percent higher price than the market
existed price for naturally grown products The results suggested that householdslsquo
income family size ecological problems including respondentslsquo knowledge has
enhanced their desire to pay higher price for pesticide-free products than the
conventional one The result also showed that female as well as house wives were
agreed to pay more price premium
HUI et al (2013) conduct a survey on householdslsquo WTP a price premium for
pesticides-free products in Klang valley The study was based on householdlsquos
purchases by 2012 on their demographic and social-economic characteristics To study
the householdlsquos perception and WTP for pesticide free products 500 households were
24
interviewed by using well designed questionnaires The data collected were analyzed to
find what determined the presence of pesticide-free products The main theme of the
research study was to know the determinants that playing rule in willingness to pay for
products free from pesticides residues The result revealed that majority of the
households were agreed to pay a higher price premium for pesticide free products
Different factors like environment psychology food free from pesticide residuals and
health conscious were related to explain household willingness to pay for organic
products However the result also showed that social demographic and level of
knowledge did not explain the WTP for products free from pesticide
Syed et al (2014) studied different level of pesticides in different vegetables and fruits
in Pakistan The results obtained showed that more than half of the collected samples
were contaminated with organophosphate pyrethroids and more organochlorines
pesticides Numerous research studies found that tomato apple melon mango grapes
and plum among fruits and vegetables has crossed the maximum residual levels of
FAO and World Health Organization (WHO) The comparison with other areas showed
that in 50 of the sample the residual level was above than the stated level but was in
agreement with neighboring countries like china and Bangladesh Higher hazard risk
index (HRI) values were calculated for dieldrin methamidophos op-DDT diazinon
and pp-DDT in apple mango banana melon potato and onion
Vidogbena et al (2015) carried out a research study in major cities in Benin to asseslsquo
consumer perceptions about cabbage produced by a physical barriers method to protect
cabbage from pesticides Results showed that consumers were aware of the impacts of
pesticides on health and environment but they were not able to differentiate between
cabbage produced conventionally and through this net method Results of the study
revealed that consumer were willing to pay higher price for cabbage produced with
minimum application of pesticides as compared to one produced with pesticides
application Consumers were willing to pay 38 more price than the existed market
price Results indicated that females more educated and aged respondents were willing
to pay more prices for better quality cabbage
Safdar et al (2015) studied pesticide free food consumption and consumerslsquo WTP in
the United Arab Emirates To recognize major determinants of respondentlsquos willing to
pay more price for products free from pesticides residues a regression model was used
25
Around 300 hundred respondents were interviewed and information was collected The
results showed that the consumption of such food was increased in the study area This
increment was due to high per person price premium more knowledge about nourished
food products and different household population Consumers were paid price premium
for the food free from pesticides residuals Results showed that majority of the
respondents respond when inquired as to whether they were willing to pay more for
pesticide-free products Age nationality instruction family size and salary were main
factors influencing consumerslsquo to pay higher price for the pesticides-free food products
Hiren et al (2016) carried out a survey in Tennessee State USA The data were
collected on a random sample from grocery shoppers to assess consumer general
knowledge about pesticides-free food and to know their willingness to pay For this
study binary logistic regression model was used The survey showed that most of the
consumer had a fair knowledge about pesticides free food Results indicated that
number of those respondents who had never been used organic food was higher than
those who usually used The results showed that income and environmental concern
were the factors that effectively determine to pay more for pesticides-free food
Aguiar et al (2016) studied factors influencing consumerslsquo purchasing behavior
regarding organic food in Brazil by using structural equation modeling (SEM)
approach Results revealed that most of the consumerslsquo were willing to buy organic
food Respondents were willing to pay 25 percent price premium for organic food as
compared to food produced conventionally Results suggest the main determinants of
consumerslsquo willingness to pay were their beliefs of positive effects of organic food on
health and environment
Mangan et al (2016) studied level of awareness and willingness to pay for organic
vegetables in Sindh province of Pakistan Result of the study reported that majority of
the respondents had knowledge about the beneficial effect of organic vegetables while
less than half of the respondents had never heard about organic vegetables Results also
showed that most of the respondents (82) were not aware of the benefits of organic
vegetables to the environment Majority of the respondents were willing to pay price
for organic vegetables
26
Nandi et al (2016) studied consumer willingness to pay for organic fruits and
vegetables and also factors influencing consumerslsquo WTP in India For the estimation of
respondentlsquos willingness to pay contingent valuation method (CVM) was used For the
data analysis 250 respondents were selected A binomial regression model was used to
know respondents willingness to pay and the factors influencing on WTP Results
revealed that most of the respondents were confronted with environment problem
health related issues and safe environment and food The respondents were increasingly
desired to have more healthier and environmental friendly food To acquire better
quality of fruits and vegetables about 90 percent of consumers were willing to pay a
price premium ranging from 5 percent to 100 percent Factors like income of
respondents householdlsquos size gender and other opinion variables such as pesticides
residues in food taste and environmental concern were significantly influencing
consumer willingness to pay a price premium
Slamet et al (2016) conducted a research study to identify factors influencing
consumerslsquo willingness to purchase pesticides free vegetables in Jabodetabek region
(Jakarta) Data was obtained through a householdlsquos survey Three methods binary logit
model descriptive analysis and factor analysis were used for analysis of data The
results showed that respondents with more income minimum householdlsquos size and
price tolerant were more likely to purchase pesticides-free vegetables The study also
indicated other factors determining consumerlsquos willingness to purchase for pesticides-
free vegetables were positive attitude health concern environment concern as well as
positive belief in pesticides-free vegetables
Gumber and Joyti (2017) conduct a research study in national capital region of India to
find out price premium and factors effecting consumerslsquo WTP for pesticides free food
Results of the study showed that consumerlsquo demographic characteristics like education
income of the respondents environmental concern and health related issues were the
important factors influencing consumers to pay higher price for organic food Besides
other variables like taste physical look certification packaging and promotion were
found to have no influence on consumer willingness to pay for pesticides-free food
Results suggested organic food producer to design communication strategies and
suitable pricing strategies in the study area
27
25 Essence of the Literature Reviewed
The above literature reported that several studies have been conducted on
consumerhouseholds willingness to pay for pesticides-free fruits with contingent
valuation method (Govindasamy and Italia 1999 Krystallis and Chryssohoidis 2005
Quagrainie 2006 Kimenju and De Groote 2008) In this type of models a
hypothetical market scenario is developed in which consumer are asked about their
stated WTP a price premium Misra et al (1991) and Boccaletti and Nardella (2000)
used contingent valuation method and analyzed household willingness to pay for
organic products in Italy and USA Gil et al (2000) also used the contingent valuation
model in Spain and reported that respondents in that study area were willing to pay a
price premium for pesticide-free fruits
Regarding the socio-demographic profile of pesticides-free products the above
underline research study showed that mostly female respondents were willing to pay
price premium more frequently than male respondents Age factors also played an
important role with older consumers observed more WTP due to their health concern
On the other hand income played a vital role while buying safer food Literature also
supported that more educated respondents are willing to pay more price premium for
healthier and environmental friendly food products
The preceding review presents valuable information on contingent valuation method
and consumer willingness to pay price premium for organic foods and environment
resources Since most of the work had done on consumer willingness to pay for
pesticide-free fruits in developed countries but not a few studied paid much attention to
conduct research on householdslsquo willingness to pay for pesticides-free fruits in
developing countries like Pakistan
A few facts emerge the literature review One the coverage of consumerslsquo WTP for
organic and pesticide-free food is rather thin in the literature The lack of this
information could inhibit governmental and developmental agencieslsquo decision Second
the consumer WTP is a factor demographics and consumerslsquo perception This study
uses CVM to explore Pakistani consumer WTP for pesticide-free fruit We found socio-
demographic factors such as age education income householdlsquos size householdlsquos
head education and perception significantly influencing householdslsquo WTP Findings of
28
WTP
Environmental
concern
Socio-demoghr
aphic characte
risitcs
consumer knowledge of PFF
Health
concern
this study almost showed 26 percent price premium that suggest a strong indication of
consumerslsquo demand for pesticide-free fruit This is a convincing message for
agriculture policymakers to encourage and educate farmers for production of pesticide-
free fruits Thus this study is timely relevant and provided additional information on
understanding consumerlsquos attitudinal behavior choice and factors effecting willingness
to pay for pesticide free fruits in Khyber Pakhtunkhwa (Pakistan)
Review of literature highlighted different influencing factors that affect the consumers
willingness to pay for pesticides-free food are shown in figure 1 It shows that
perception of consumers regarding human health and environment and socio-economic
and socio-demographic characteristics have an influential affect on consumer
willingness to pay
Figure 1 Factors effecting consumerrsquos WTP for pesticides free fruits
29
III MATERIALS AND METHODS
This chapter consists of two sections The first section describes the study area while
the second section presents the conceptual frame of the study The second section
provides a detailed discussion about the methodology being employed for the research
In the beginning of this section a brief debates provided on Contingent Valuation
Method (CVM) used to analyze householdslsquo willingness to pay (WTP) and later on
elaborate specification of the empirical models used for capturing the factors
influencing householdlsquos willingness to pay for pesticides-free fruit and vegetables is
given followed by a discussion on how the data was collected in the study area
31 Khyber Pakhtunkhwa
Khyber Pakhtunkhwa (KP) occupies a north-west position in Pakistan with a total area
of about 74521 square km Gilgit-Baltistan is situated on its northeast Punjab on the
southeast and Azad Kashmir on the east A long and narrow piece of land belongs to
the Federally Administered Tribal Areas (FATA) borders situated to its south and
Baluchistan directly below it On its west Federally Administered Tribal Areas are
situated and Afghanistan is situated on its northwest According to census report 1998
the total population of KP was 177 million According to the 2011 Census Bureau of
Pakistan house listing operation the population of KP was estimated to be more
than 268 million There are a total of 26 districts in KP Naturally KP has been
endowed with abundant cultural and tourism friendly environment It has the capability
to become a charming area for the tourist in the world Due to its beautiful and
attractive scenery geographical location climate and God gifted natural resources KP
is exceptionally abundant in terms of multitudes of tourist attraction The core of this
charm is clear from the striking natural picturesque consisting of beautiful rivers
attractive and splendid waterfalls spiral lakes mostly in the hilly areas and ever green
valleylsquos in most parts of the province TCKP (Tourism Corporation Khyber
Pakhtunkhwa(2015)Districts of KP is shown in figure31
30
Figure 31 District Peshawar and Mardan of Khyber Pakhtunkhwa
31
32 Sampling Technique
Three stage stratified sampling technique was used for the collection of data
from study area
321 Stage 1 _Selection of district Peshawar and Mardan
In the first stage as KP is comprised of 26 districts Peshawar and Mardan was
purposively selected The purpose behind this selection was huge population in these
two districts
322 Stage 2 _ Selection of Union Councils (UCs)
In the second stage from each selected district one urban and one rural union
council were randomly selected Thus a total of 4 union councils were taken as a
sample location from both districts
323 Stage 3 _Selection of households from each Union Council
In the third and final stage a list of households was obtained from local union
councillsquos health department (BHU) The following Yamanelsquos (1967) formula was
used to decide sample size of households
Where
- r is the sample size for households
- N is the total households in selected UCs and
- e is the minimum probability of error
The value of ―e was selected at e = 003 with the intension to keep the error at lowest
possible level and select a best representative sample from the given population of
10020 households
The Yamanelsquos formula suggests a sample size of 1000 households from two districts
After deciding sample size households was taken from selected union councils (UCs)
using proportional allocation sampling technique The allocation is said to be
32
proportional when the total sample size n is distributed among the different union
councils in proportion to the size of strata
=
____________________ (2)
Where
- = no of sampled respondents in each stratum
- Ni =population size of ith UCs
- N = the total number of households in selected UCs
- n = total number of households
The number of sampled households selected through proportional allocation method is
given in table 31
Table 31 Total population and sampled households from selected UCrsquos
District Union councils Total households Sampled
households
Mardan Urban 3090 309
Rural 1910 191
Peshawar Urban 3000 300
Rural 2020 202
Total 4UClsquos 10020 1000
Source Local Basic Health Unit (BHU) Peshawar and Mardan
33 Allocation of Sample Size for Different Models
A total of 1000 sampled respondents were selected for this research study from urban
and rural areas of the two districts namely Peshawar and Mardan of Khyber
Pakhtunkhwa Pakistan A sample of 600 respondents was reserved for double
bounded dichotomous choice model For the best estimation of parameters double
bounded model requires large sample size compared to open ended and payment card
model (Calia and Strazzera 2000) Out of total respondents a sample of 400
households were allocated for linear regression model and ordered logit model 200
for each model
33
34Contingent Valuation Survey Designing
CVM produces values contingent upon the description of the resource and the method
of payment The accurate measurement of any resource requires a detailed description
of the resource (Loomis et al 2000) The survey designed for this study started with the
description of the conventional food commodities and uses of different varieties of
chemical pesticides on fruit and vegetables before and after harvest After the
description of pesticides its harmful effects on human being as well as on environment
then pesticide free fruits were discussed with the households After describing the
benefits of pesticides free fruit respondents were asked to rank the relative importance
of each benefit The main reason for asking this question was to reveal householdlsquos
preferences their non-monetary value for use and nonuse benefits and to compare
them with their stated WTP response
Results in CVM are sensitive to the valuation question format and payment mechanism
(Carson and Hanemann 2005) The National Oceanic and Atmospheric Administration
(NOAA) Blue Ribbon Panel recommended the use of single bounded dichotomous
choice CV questions with mandatory payment vehicles (Arrow et al 1993) However
recent studies show that the single bounded dichotomous choice method provides
limited information about householdlsquos WTP and produces higher WTP compared to
open-ended question and payment card method (Zhongmin et al 2006) The single
question dichotomous choice method requires a large number of respondents to obtain
an accurate estimate of WTP (Carson and Hanemann 2005) People in the study area
were not familiar with CV Survey The use of an open-ended question format may
generate high zero WTP responses Consequently this study used the entire three
payment format to elicit householdlsquos WTP for pesticides-free products
35 Householdsrsquo Survey
This research mainly based on primary data The primary data was amassed through
interview schedule On the basis of objectives of the study a well-defined questionnaire
was prepared and was pre-tested in the field A small Pre-test was conducted before the
final data collection About 1000 households from Peshawar and Mardan were face to
face interviewed In contingent valuation studies face to face interview is more reliable
(Carson 2000) Socio-demographic characteristics attitudinal and behavioral
34
information of the households were collected Through this survey the data was
gathered both from rural and urban areas of the selected districts District Peshawar and
urban areas were taken equal to one and district Mardan and rural areas were taken
equal to zero Before asking the respondents for their willingness to pay a price
premium they were briefed about the differences among the conventional and
pesticides free fruit The attitudes of the consumers and knowledge about the minimum
use of pesticides on fruit were also gathered to better know how the respondents relate
different aspects of pesticides free fruit These attitudinal behavior questions were
posed using a modified Likert scale response (where a one equals agree and zero equals
disagree) Different values were assigned to each response according to a well-defined
method in the literature (Cranfield and Magnusson 2003)
36 Conceptual Framework
This section is devoted to the conceptual framework of the study Households utility
and willingness to pay willingness to pay and contingent valuation method and the
estimation of mean WTP are discussed The empirical discussion on the factors
influencing householdlsquos willingness to pay a price premium is also discussed
361 Householdrsquos Utility and Willingness to Pay
Willingness to pay could be analyzed as a householdlsquos choice problem Following
Canfield et al 2003 the study assumes that a household who buys and consumes a
conventionally produced food products encounters the same food products but in
pesticide free form on the market The household who decides to purchase pesticide-
free fruits instead of the conventional one does so because it is assumed that hisher
utility is higher for the pesticide-free food (Magnusson et al 2005) If the utility does
not change then a rational household will not be willing to pay as an increase in the
price results in a lower level of utility compared to the base level of utility Also if the
utility increases then the household may be willing to pay more for pesticides-free
food on the basis that the price increase does not lower the utility beyond the base level
(Cranfield et al 2003) The householdlsquos willingness to pay is therefore a function of
the change in utility arising from the consumption of pesticides-free food Thus
35
Where ∆U is the change in utility
Since the choice of one product over another is a discrete one it is convenient to look at
householdlsquos choice problem in a random utility setting Random utility models have
been used extensively in the valuation literature in the analysis of householdlsquos food
safety valuation and assessment of householdlsquos response to new (or different) products
(Eom 1994 Veeman and Adamowicz 2000 Kuperis et al 1999 Quagrainie et al
1998) Following the random utility framework proposed by Cranfield et al (2003) it
is assumed that a household faces a choice between buying either the conventional or
pesticides-free food variety of the same product The utility derived from consuming a
given product by a household is given as
Where
Where is the utility arising from choosing the ith alternative is the deterministic
component of the utility function is a vector of observable alternative specific
factors that influence utility is a vector of parameters and is the stochastic
component The households choose alternative if and only if for all (or
that without loss of generality
The utility of the household is however not observable What is observed is whether or
not the household chooses to pay a premium for the pesticide free product
362 WTP and CVM
On the basis of stated preferences consumer willingness to pay can be measured by
several methods To extensively elicit consumer preferences for food labels on different
attributes economist and market researchers have used contingent valuation (CV)
choice experiment (CE) and experimental auction (EA) or combination of all the three
methods (Fox et al 1994 Fox 1995 Huffman et al 1996 Hossain et al 2003
Loureiro and Umberger2003 2005) To estimate willingness to pay (WTP) economist
must turn to hypothetical due to unavailability of markets for the good or service
Historically Contingent Valuation Method (CVM) has been used for the evaluation of
consumerlsquos preferences for those goods not available in the market
36
Contingent Valuation Method is a survey based method where respondents are
presented with a hypothetical payment scenario for pesticide free products in this study
pesticides-free fruits Methods used in contingent valuation include face to face
interview surveys and mail to elicit consumerlsquos willingness to pay for organic and
pesticide-free food Contingent valuation method based on a survey approach was
presented by SVCiariacy-Wantrup (1947) however contingent valuation method was
first time empirically used by Davis (1963) Due to its proficiency most of the
researchers and policy makers used this technique to elicit consumerlsquos valuation for
those goods which are not available in the market such as research concerns to
environment health and recreation (Jakobsson ampDragun 1996)
The classification of framework to measure WTP based on the data collection methods
are as presented in Figure 32 We employed contingent valuation method (CVM) to
measure householdslsquo willingness to pay for pesticides-free fruits among the different
available alternative methods in the literature CVM was the most widely used
approach (Hanemann 1984)
Figure 32 Classification framework of methods to measure willingness-to-pay
Source (Breidert Hahsler ampReutterer 2006)
37 Elicitation Techniques
According to Portney(1994)to draw out the value of good and service different
elicitation techniques are used to design CV question scenario It is the important part
37
of any CVM study The elicitation used in contingent valuation methods are of various
types The most popular ones are bidding game approach open ended payment card
and dichotomous choice approach
371 Bidding Game Approach
In this approach a bid is randomly assigned to each respondent from a list of
predetermined bids The assigned bid may be a lower bid or higher bid Respondents
are to answer the bid and the process is continuous until the highest positive response is
recorded (Randall et al 1974 as cited in Venkatachalam 2004) Since this approach
provides market like situation and the respondents can research their preferences so the
results obtained through this approach are quite better
372 Open-ended Elicitation Method
In open ended questions format respondents are asked to identify a single amount
without suggesting them any value Respondents are asked to give their opinion on
―How much they willing to pay for a certain attribute Mitchell and Carson (1989)
found certain drawbacks in using this question format They reported that this method
provides maximum no response no answer and outliers In this method respondents do
not know what value heshe has to select
373 Payment Card Approach
Another technique in contingent valuation method is the payment card approach In this
question format respondents are asked to select an amount in willingness to pay from a
checklist given in absolute value or in percentage of prices (Boccaletti ampNardella
2000 Lacaze Rodriguez and Lupin 2009)This approach is used for small sample
size However it has been noted that the respondents could easily be confused if the
survey is not carefully designed (Wang and Whittington 2005)
374 Dichotomous Choice Model
In this format two choices are provided to respondents ―Yes or ―No This format
resembles the market choice behavior It included single bounded double bounded and
multiple bounded questions format
38
A Single Bounded Method
The single bounded format was first used by (Bishop and Heberlein 1979) The
consumers are asked whether they would be willing to pay a single amount for a certain
goods having an extra quality attribute The answer expected might be ―yes or ―no to
the given amount This format is easy to use but it provides limited information for
willingness to pay amount and the bidding game stop after a single information
provided
Most of the research work done on willingness to pay has suggested that respondents in
contingent valuation methods do not have a single value of price but they might have a
range of economic values in their mind (Cameron ampQiggim 1994 Dobourg Jones-lee
and Loomes 1994)
B Double Bounded Method
In double-bounded questions format respondents are presented with follow-up
questions after asking the first question For example if respondentlsquos answered to the
first question is ―yes willingness to pay a $X the next question might be whether
respondents willing to pay $Y (typically $Y gt $X) On the other hand if respondents
say ―No the first question than heshe might ask whether the respondents willing to
pay $Z (typically $Z lt $X) This questionlsquos approach is also called doubled-bounded
referendum approach (Cameron ampQiggim 1994) In comparison with single bounded
model more statistical efficiency can be seen by estimating doubled-bounded
willingness to pay data with the help of interval based econometric model (Heinemann
et al 1991) Figure 33 shows double bounded choice format
This study used all the three question scenarios to elicit WTP for pesticide free fruits
39
WTP
Yes
wtp
1st bid
yes
wtp 2nd
higher bid
yes No
No
wtp 2nd lower bid
yes No
No
Figure 33 Double Bounded Choice formats
38 Empirical Estimation of WTP by Payment Card using Ordered Logit Model
Regarding discrete nature and ordinal ranking of the WTP variables in payment card
method an ordered logistic regression was applied as the most appropriate choice in
studying these issues (Green 2007) The WTP model can be written under latent
variable framework as follows
Where is an unobserved latent variable reflecting the WTP for pesticides-free fruits
for household i expressed in terms of utility to switch from the traditionally grown
fruits consumption to pesticide free fruits is a vector of parameters reflecting the
relationship between WTP captures a set of socioeconomic and
demographicvariables influencing WTP and is the unobserved disturbance term
reflecting stochastic differences between households not controlled for The
40
relationship between the unobserved and the observedoutcome for household
( =0 12hellipj) can be summarized as follows
It is presumed that ɛ is normally distributed across observation By normalizing the
mean and variance of ɛ to zero and one the following probabilities can be calculated
Where F () indicates distribution function and microlsquos are unknown parameters to be
estimated with β
A natural question arises that when a variable influencing outcome changes than how
this variable influences the probabilities of different outcome For example if age is a
factor which influence consumer willingness to pay different choices then how would a
personlsquos probability of being WTP different choices be effected if heshe was a year
older Aldrich and Nelson stated that the estimated coefficients only determine the
direction of the effect but not the magnitude The magnitude of ordered logit cannot be
simply interpreted but signs and statistical significance agree with linear regression
(Wooldridge 2001) To answer the above question and take the idea marginal effects
can be calculated The marginal effects show that how a change in explanatory
variables affects the probability of willingness to pay that consumers are willing to pay
for different WTP classes In this model the coefficients are not equal to the marginal
41
effects of explanatory variables on probabilities Since the marginal effects can be
calculated by the following equation
There are two broad Cumulative density function (CDF) choices Logistic density
function and standard normal density function The model is said to be ordered logit if
the distribution is cumulative standard logistic (F) and the model is said to be ordered
Probit if the distribution is cumulative standard normal (Φ) Results obtained from
both of these models are same only the difference is in the tail The logistic distribution
has heavier tail than the standard normal distribution As Green (2000) reported ―It is
difficult to justify choice of one distribution over other on theoretical grounds in most
applications it seems not much difference The results obtained from both models
may be quite similar because of the similar distribution However an ordered logit
model is applied in this study
Empirically we estimated ordered logit model where WTPj is an ordered dependent
variable with ten WTP price premium categories
Table 32 Payment card format
Price premium classes (PKR)
WTP
= 0
WTP
1-5
WTP
6-10
WTP
11-15
WTP
16-20
WTP
21-25
WTP
26-30
WTP
31-35
WTP
36-40
Above
40
Source Pre- tested field survey (2017)
42
39 Empirical Estimation of WTP using Double Bounded Dichotomous Choice
Model
For Dichotomous choice question Following Chen et al (2002) and Kimenju et al
(2005) a double bounded dichotomous choice model was used in this study to assess
householdslsquo willingness to pay and the influence of explanatory variables on
householdlsquos WTP a price premium for pesticides-free fruits This model was used
because the dependent variable was double dichotomous whether the respondents
would be willing to pay or not so they provide answer with ―yes or ―no Many
researchers used double-bounded dichotomous choice method in their research such as
(Ara 2002 Rodriguez et al 2007 Abdullah and Jeanty 2011 and Claudy et al
2011)
The double-bounded method confronts each respondent with two dichotomous choice
WTP questions (bids) The 2nd
bid value is contingent on the respondentlsquos reply to 1st
bid If the respondent responds in ―yes to the first bid (B) than the second bid (Bu) is
some amount higher than the first bid (Bu
gt B) If the respondent says ―no to the first
bid the second bid (Bd) is then some lower amount (B
d lt B) Thus there are the
following four possible outcomes for the double-bounded WTP question ―yes-yes
―yes-no ―no-yes and ―no-no
According to Hanemann et al (1991) the probability of answering ―yes-yes (Pryy) is
= )
Where Pryy is the probability of answering ―yes-yes WTP is the respondentlsquos
willingness to pay for the product and F is the cumulative distribution function with
parameter vector Similarly the probability for each of the other three outcome
responses is
]
43
Where and are the probabilities for saying ―yes-no ―no-yes and ―no-
no to the double-bounded question respectively Thus the log-likelihood function for
the ith
respondent can be written as
sum
(
)
(
)
Where
are binary valued (0 or 1) indicators and the formulas
for the corresponding response probabilities are given above The model was estimated
through maximum likelihood estimation method and the results were used to find out
the mean and individual WTP (s) for pesticides free fruits
Where ƒ(WTP) is a function X is a set of socio-economic characteristics are
coefficients and is error term The models were estimated using maximum
likelihood estimation method
391 Factors which could Influence WTP
As Kimenju et al (2005) has indicated WTP is influenced by householdlsquos knowledge
and perception in addition to price and socio-economic factors Moreover
householdlsquos WTP may be influenced by individuals tastes and preferences income
and perceptions on the products in addition to household and socio-economic
characteristics (Cranfield and Magnusson 2003)
A number of different explanatory variables were included in the WTP model These
include demographic variables regional variables and perceptional variables The
variables that are included may depend on the manner by which the data is gathered
(ie contingent valuation surveys experimental methods etc) Factors which
influence householdlsquos willingness to pay for pesticides-free fruits are formally specified
as
44
392 Bids Design
In this study hypothetical prices (bids) for double-bounded dichotomous choice model
were designed based on the prices available for conventional fruit in the market On
average (Rs100kg) To minimize starting bids bias bidding system was used in table
31 Respondents were asked different bid
Table33 Bid system for Pesticides free fruits
First bid High bid Low bid
10 20 5
20 30 10
30 40 20
40 Above 30
Source Field Survey (2017)
310Empirical Estimation of WTP using Linear Regression Model
For open ended questions data a linear WTP model was used to estimate WTP and
identified its determinants
sum
Where
= is the WTP of the jth household for Pesticides-free fruits
= Set of socioeconomic characteristics of the jth household
Factors effecting consumerslsquo willingness to pay for pesticides free fruits can be written
as
Willingness to pay is actually represents the demand of the household The difference
in both is only the consumer surplus If we suppose zero consumerslsquo surplus than the
two identities are the same Therefore willingness to pay in the above model showed
percentage of expenditure on pesticides free fruit of the total food expenditure The
explanatory variables included were age gender education householdlsquos size income
45
location health concern environment concern and awareness Since the dependant
variable in the model is continuous so the appropriate method of estimation was
ordinary least square (OLS)
311Description of Variables
Table 34 presents a list of explanatory variables used in estimation of willingness to
pay a price premium for pesticides-free fruits
Table34 Description of explanatory variables
Respondents willingness to pay
WTP ( Price Premium)
0= Not willing to pay
1= Willingness to pay 1-5
2= Willingness to pay 6-10
3= willingness to pay 11-15
4= willingness to pay 16-20
5= willingness to pay 21-25
6= willingness to pay 26-30
7= willingness to pay 31-35
8= willingness to pay 36-40
9= willingness to pay above
Age of the householdlsquos head
Age Age of the householdlsquos head measured in years
Gender of respondents (Dummy variable)
Gender 0= Female
1= Male
Householdlsquos head education
Education Education of the householdlsquos head in years
Member in each household
Householdslsquo Size In number including all family members
Households location 0 = Rural households
1= Urban households
Awareness Household knowledge regarding pesticides uses on fruits
where 1 shows aware respondents and 0 shows unaware
respondents
Income Income of the households in Pakistani rupees
Consumer attitude towards impact of pesticides on health
Health concern 1 if respondents concern to health 0 if not concerned
Consumer attitude towards impact of pesticides on environment
Environment concern 1 if respondents concern to environment 0 if not
concerned
46
1V RESULTS AND DISCUSSION
This chapter illustrates the major finding of this research endeavor These findings are
computed in the light of major objectives and hypotheses constructed for this research
The collected primary data was punched into the computer and was estimated
encompassing double bounded dichotomous choice model ordered logit model and
linear regression model in the STATA econometric software This chapter is further
bifurcated into three sections In the first section a descriptive statistics is computed to
elaborate the respondentlsquos traits of the study area that includes socio-economic and
demographic aspects as well Followed by the analysis of major attributes such as
attitudinal behavior perception about pesticides free fruit and householdlsquos consumption
behavior that has attain the specific objectives of this study The empirical results on
willingness to pay are underscored in section two Moreover the three different
questionnaires ie dichotomous choice open ended and payment card are adopted and
their results are discussed and compared with each other in section three
41 Descriptive Analysis
Descriptive analysis is a statistical tool that is used to summarize the collected data in
tabulated form The range of data mean value median standard error and variance
coefficients are highlighted via statistical analysis This helps the researcher and readers
to get understanding about the pattern of data This section consists of the descriptive
part of the analysis Socio-demographic characteristics such as age gender education
and other attributes of the respondents are shown in the tabulated form Moreover
socio-economic portfolio that includes income consumption and certain perception
along their attitudinal trend regarding organic and conventional fruits are given and
discussed
411 Demographic and Socio-economic Characteristics
This section demonstrates the demographic and socio-economic characteristics of the
respondents The information was gathered from 1000 household of the study area
47
Age of the householdrsquos head
Householdslsquo age is an essential demographic characteristic and an important factor that
can influence householdslsquo willingness to pay An average age of the household in
district Peshawar and Mardan is computed and given in Table 41 The computation
depicts that an average age of the respondents in Peshawar is reported around 40 years
while in Mardan an average age is observed as 54 years Result reveals a significant
difference in the mean age of rural and urban location of Peshawar with a probability of
(0001) Whereas no significant difference was found in householdlsquos age in urban and
rural region of district Mardan
Table 41 Age of the householdrsquos head (Years)
District Age of the Respondents
Mean Rural Urban T-test
Peshawar 3997 35382 42333 7217
(0000)
Mardan 5402 53188 55870 1104
(0136)
All 46995 47310 46659
Source Authorrsquos calculation based on Survey Data 2016-17
Educational Level of the Householdrsquos Head
An individual entails modern education about developments in technology science and
an array of other managerial skills that drives consumerlsquos behavior Education can also
play a pivotal role in consumerlsquos awareness while choosing improved quality of food
Therefore education can be considered as an imperative factor influencing consumerlsquos
decision to pay higher price for pesticides free fruit Several research studies carried out
across the globe have corroborated that an educated households with higher
qualification are more conscious while making purchasing decision and prefer to
choose pesticides free fruit
Keeping in view an education as a substantial factor persuading consumer behavior the
householdlsquos head education level was analyzed and is presented in Table 42The
descriptive statistics divulged that the mean educational level was observed as 978 and
1138 years of schooling of the household head in Mardan and Peshawar respectively
Estimates of t-test further depicts a significant difference in educational level in rural
48
and urban region of both districts with a p-value of (0001) and (0000) for Mardan and
Peshawar respectively These findings suggest a higher level of education in urban
households compared to rural households These results are in line with Shah et al
(2016)
Table 42 Educational Level of the Householdrsquos Head (Years)
Districts Educational Level
Mean Rural Urban T-test
Mardan 978 8782 12012 3780
(0001)
Peshawar 1138 7735 13257 8016
(0000)
All 1058 8436 12855
Source Authorrsquos calculation based on Survey Data 2016-17
Households Size in the Study Area
Householdslsquo size is an important demographic characteristic which shape households
purchasing behavior Large householdslsquo size increases the consumption without taking
quality in consideration The probability of choosing an improved version of fruit
quality decreases with an increase a member in a household Small size households are
more concerned about good quality of fruit
An estimation of household size data illustrates that an average household size in
district Peshawar and district Mardan was reported as 06 and 09 members respectively
The results shown in Table 43 have suggested no significant difference in householdslsquo
size in urban and rural areas of both districts The average householdlsquos size was
computed as 715 members These results are consistent with Shah et al (2016) who
depicted similar findings for household size in KP
Table 43 Householdsrsquo size of the Respondents (Member in Number)
District
Mean Rural Urban T-test
Mardan 863 8666 8548 0965
(0400)
Peshawar 567 6029 5484 -2122
(0018)
All 715 7796 6463
Source Authorrsquos calculation based on Survey Data 2016-17
49
Income of the Households
The household income level is one of the driving aspects that manipulate the
consumption and saving behavior of an individual Those societies where individuals
earn high income are usually deemed as food secured societies across the globe
however low income group of the poor societies are generally reported as food
insecure It is worth-mentioning that surge in an income can subsequently leads to
choose high quality food (that includes cereals fruits vegetables pulses and their
byproducts) by individuals Likewise householdlsquos income has considered as an
important determinant of willingness to pay for quality attributes such as pesticides
free
An income status of the households in the study area is outlined in Table 44 The mean
income of the Household was calculated as Rs62130 and 42430 in district Mardan and
Peshawar respectively There was a significant difference in the mean income of
respondents from urban and rural areas of both the districts The T-value of Mardan
region was signified as 6018 and had a probability of (0000) while in Peshawar region
was 950 with P-value of (0000)
Table 44 Householdsrsquo Income in Pakistanrsquos Rupee (PKR)
District
Mean Rural Urban T-test
Mardan 63130 5489855 8145161 6018
(0000)
Peshawar 42430 2923529 4922727 9504
(0000)
All 52780 4642718 5952577
Source Authorrsquos calculation based on Survey Data 2016-17
Householdrsquos Expenditure on Food
Food consumption expenditure is the monetary expense incurred by household to
purchase food items Such food expenditure is the key component of current
expenditure to buy consumable goods The data regarding householdlsquos expenditure on
food is estimated and is shown in Table 45 The mean expenditure incurred on food by
the household in Mardan and Peshawar was determined as Rs 49280 and 34860
respectively A significant difference in rural and urban householdlsquos food expenditure
has been reported The computed t-value observed as 425 and 743 with a p-value
0000 which implies that householdlsquos expenditure in urban region was higher as
compared to rural households
50
Table 45 Households expenditure on food (PKR)
District
Mean Rural Urban T-test
Mardan 49280 4511594 5854839 4256
(0000)
Peshawar 34860 2544118 3971212 7435
(0000)
Total 42070 3862136 4573196
Source Authorrsquos calculation based on Survey Data 2016-17
Note Values in parenthesis is P-Value
Householdrsquos Monthly Expenditure Share on Fresh Fruit
Expenditure share is an amount of income that is incurred by an individual on certain
goods out of total spending Households in the study area have allocated their income
share to make an expense for fresh fruits which is shown in Table 46 It has been
observed that in districts Mardan an average spending for fresh fruit was computed as
4172 (PKR) per month by the household Whereas expenditure share for fresh fruit by
Peshawarlsquos household was 3800 (PKR) which was less as compared to Mardan The
given t-values of the estimates confirm a significant difference in expenditure share
incurred for fresh fruits by rural and urban region households of both the districts This
significant difference implies that householdlsquos expenditure share for fresh fruit in urban
area is higher as compared to rural households
Table 46 Householdrsquos monthly expenditure share on fresh fruits (PKR)
Respondents
Mean Rural Urban T-test
Mardan 4172 3798551 5003226 3055
(0000)
Peshawar 3800 2411765 4515152 5103
(0000)
All 3986 3340777 4671134
Source Authorrsquos calculation based on Survey Data 2016-17
51
412 Householdrsquos Awareness and Perceptions about Pesticides Application on
Fruit
This research endeavor was mainly designed to assess the consumer willingness to pay
for pesticides free fruit Therefore it was pertain to glean data about their awareness
about pesticide use on locally produced fruit in the study area These fruit include
Apple Peach and Mango Due to irrational use of pesticides environmental hazards are
also reported by previous research studies therefore there respondents were asked about
their perception about environmental hazards Major findings about the aforementioned
aspects are underscored in Table 47 which reveals that 61 percent of respondents have
a perception that there is an irrational and intensive use of pesticides on fruit by the
local fruitlsquos farmers Around 88 percent of the respondents perceived environmental
and health concerns over pesticides residues in food Similarly 91 percent of the
respondents believed that farmer should engage in environmental friendly agricultural
production practices which have a minimum adverse impact on health and the
environment
However the overall results indicate that sampled households were not entirely
cognizant about an intensive use of pesticide on local fruits however they were
correctly perceived over the impacts of pesticides on human health and environment
Table 47 Householdrsquos Awareness and Perceptions of Pesticides use on Fruit
Grown
Statements Agreed Disagreed
Local farmers are intensively using pesticides on
Apple Peach and Mango fruits
61 39
I feel the use of pesticides in agriculture has
negative effect on the environment
881
119
I am concerned about pesticide residue in our
food supply
876 124
I believe farmer should engage in environmental
friendly agricultural production practices with
minimum impact on human health
901
99
Source Authorrsquos calculation based on Survey Data 2016-17
52
42 Empirical Results of this Research Endeavour
The empirical analysis of the gleaned data was made to achieve the major objectives
and to address the research questions of this research endeavor Major estimates on
―willingness to pay for pesticide free fruits have been made and conferred in this
section Different elicitation techniques were employed to assess householdlsquos
willingness to pay price premium These estimation techniques encompassed double
bounded dichotomous choice model ordered logit model and linear regression model to
appraise dichotomous choice payment card and open ended question
421 Distribution of responses on householdsrsquo willingness to pay
(WTP)
Householdlsquos preferences to pay higher prices for pesticides free fruit were investigated
and highlighted in Figure 41 which demonstrates the distribution of response about
WTP price premium for pesticide free fruit in the survey area The households were
asked whether and how much they were willing to pay higher prices for pesticide free
fruit than conventional produced fruit The primary data estimates confirm that about
935 percent of respondents are willing to pay a higher price premium for pesticide free
fruit in the sampled districts These results are similar with the previous research study
undertaken by Hayati et al(2017) in Iran by using contingent valuation method
Furthermore an ordered logistic regression model was employed which depicts that out
of 394 respondents who were interviewed 97 percent of respondents were willing to
pay price premium for pesticides free fruits and vegetables These results are supported
by Nandi et al(2017) who conducted a study in India by using contingent valuation
method and applying binomial logistic regression model Data was obtained from 250
respondents and reported that more than 90 percent of the respondents were willing to
pay higher price for better quality fruits and vegetables Decomposing the responses 35
percent of the households are willing to pay 16 to 20 percent higher prices for
pesticides free fruits than the conventional 24 percent willing to pay 6 to 10 percent
higher price and 65 are not willing to pay higher price A plausible reason for higher
WTP for significant portion of the population is due to awareness As most of the
respondents in the study area were aware they may have some knowledge about
adverse effects of chemical pesticides Therefore they were willing to pay higher prices
for pesticide free fruits if available
53
NotWTP
1_5 6_10 11_15 16_20 21_25 26_30 31_35 36_40 Above40
650 4
24
9
35
6 550 150
550 3
Figure 41 Distribution of willingness to pay responses (Rskg)
422 Householdrsquos willingness to pay using ordered logit model
Estimated parameters and coefficients of ordered logit model are presented in table 48
Model is specified on the bases of R2 estimated from restricted and unrestricted
likelihood function The likelihood ratio test is used to test the null hypothesis that the
overall effect of coefficients is zero The p-value is 0000 shows that the model is
statistically significant at 95 level of significance The estimated model with a scaled
R2
about 022 which is in consist with the generally R2 value mostly observed in cross
sectional data In cross sectional data like the one used for this study the value of
Pseudo R2 is typically low The conventionally computed R
2 is of limited value in those
models having qualitative nature In most cases this value is low and use of coefficient
of determination as a summary statistics should be avoided in those cases where the
response variables are qualitative (Gujrati 1995)This pseudo R2 cannot be interpreted
separately or across the dataset but could be used when evaluating multiple models
which predict the same results on the same set of data It has only meaningful when
compared to some other pseudo R2 in the same data on the same type and predicting
the same results In this case pseudo R2 indicates which model better predict the results
(Bruin J 2006)This value pointed out overall ability of the model for the correct
prediction of willingness to pay of the consumer based on explanatory variables The
null hypothesis that the joint influence of explanatory variables was zero on the bases
of chi-squire value null hypothesis was rejected
Predicted probabilities and marginal effects are calculated separately because of the
non-linear behavior of logit model Most of the coefficients are statistically significant
54
The variables like householdlsquos age education level of the respondents awareness
income and health concern variables and household size are significant at five percent
The negative sign showed that as the size of numbers in a family increased the log
odds for willingness to pay decreased The same was reported in a relevant study by
Govindasamy and Italia 1999 carried out a research study in New Jearsy to provide
opinion on organic produce Objective of the study was to evaluate demographic
characteristics caused consumers to pay higher prices to obtained organic food
products Findings of the study showed female respondents consumer with higher
annual income and younger individual were more likely to pay higher premiums for
organic produce Our finding shows variables gender was not significant because most
of the respondents in the study area were male
Positive sign on income showed that consumer with higher income were more likely be
willing to pay higher prices for pesticides free fruit It has been also noted that with
increased in income purchasing power of the respondents increased that changed the
purchasing pattern of the respondents This was also confirmed by Roitner-
Schobesberger et al(2008) They conduct a study on consumerslsquo perception regarding
organic food in Bangkok and found that more than a third of the 848 respondents
reported having purchased organic fruits or vegetables and the main reason for buying
organic food was the expectation of the consumers that the food are healthier and
environmentally friendly The respondents who purchased organic vegetables were
those having more aged higher income and more education
Findings of our study also showed that respondents with friendly attitude regarding
environment would be willing to pay higher price for such fruit These results were in
line with Haghjou et al (2013) carried out a research study on factors effecting
consumerlsquos potential willingness to pay for organic food in Tabriz Iran By adapting an
ordered logistic regression model results showed that factors like income of the
respondent family dimension environmental concern and wholesome diet besides
consumerslsquo awareness were significantly increases consumerslsquo willingness to pay for
organic food Results revealed that consumers with higher care about their health were
more likely to be willing a higher price for such pesticides free fruit
55
Table 48 Factors influencing respondent householdrsquos WTP (Ordered logit
model)
Variables Estimated
Coefficient
Std Error Z-ratio P-value
Age 00698807 00147356 474 0000
Gender -02469171 08432503 -029 0770
Education 00821316 00223365 368 0000
Household size -00975395 00502583 -194 0052
Location
Urban
02783974 02961745 094 0347
Income 00000277 000000502 551 0000
Health concern 2600153 05346547 486 0000
Environment
concern
03993532 0574947 069 0487
Awareness 09595126 02836742 338 0001
Source Authorrsquos calculation based on Survey Data 2016-17
Log likelihood = -29863 Pseudo R-squared = 020 LR chi2 (9) = 15849
Number of observation = 200 Probability gt chi2 = 0000
Note indicate statistical significance at 5
56
423 Predicted probabilities and Marginal effects of ordered logit
model
Predicted probabilities and marginal effects of explanatory variables are underscored in
Table 49 These predicted probabilities indicate a strong likelihood that the average
respondent is willing to pay more prices for pesticides free fruit Producers usually
expect high price for their production so if they sought high premiums than marketing
efforts would be diverted to such fraction of consumer where they would probably
willing to pay high price than the conventional price Alone these predicted
probabilities are not too much informative what is more informative is the impact of a
change in predictors on the predicted probabilities (ie marginal effects)
Due to the non-linear behavior of ordered logit model to measure the impact of a
change in particular independent variable on householdslsquo willingness to pay marginal
effects of explanatory variables are calculated Marginal effects show the change in
predicted probabilities for different class of willingness to pay regarding an average
household concerning the particular variable For qualitative choice model estimated
coefficients affect marginal probabilities These marginal probabilities (probability
derivatives) were calculated from the estimated model They measure the change in the
probabilities of each willingness to pay outcome with respect to change in each
explanatory variable The sum of marginal probability is zero in each row because an
increase of the probability in one category must be set off a decrease in the other
category or categories
For continuous variables the interpretation is simple and straight forward Keeping all
other variables fixed a unit change in explanatory variable will results an increase or
decrease in the predicted probability equal to the degree of marginal effect of the stated
variable However in case of binary variable marginal effects shows change in
predicted probabilities based on whether the respondents falls in that category or not
Our results suggest some meaningful insight into the role of socio-economic and
demographic variables on householdlsquos WTP for pesticides-free fruit
Age has a positive and significant influence on householdlsquos WTP for pesticides free
fruit The results show that with an increase in age WTP also increases This finding is
consistent with other researchers who reported that WTP of organic and healthy food
57
increases with age beyond 30-40 years (Hayati et al 2017 Boccaletti and Nardella
2000 and Zellner and Denger 1989)With increase in age people are more concerned
about their health as they may perceive that they are prompt to low immunity and
higher risk for diseases With realization of aging they are more likely to pay higher
price premium for safer foods Our result suggests that the marginal effects of age is
negative for first three WTP classes (ie Not willing to pay WTP 1-5 percent WTP 6-
10 percent and WTP11-15 percent) while positive for the rest of the four classes in
upper tailsmdashindicating that higher age is associated with higher likelihood of paying
premium on upper tails The highest marginal effect of age 0007 is found for category
16-20 percent higher premium This indicates that an increase in age by one year is
associated with 07 percentage point increase in likelihood of paying 16-20 percent
higher premium for pesticides free fruits over conventional These results are in
contrast with Cranfield and Magnusson (2003) conducted a research study on
consumerlsquos willingness to pay for pesticides free food products in Canada by using
contingent valuation method and reported that younger consumers have the strongest
marginal effects (those consumers had an age less than 35 years younger) followed by
those consumers had an age less than 50 years Results showed younger consumers pay
more for healthy foods as compared to older in case of Canadian consumers However
our results are in consistent with several other studies (Hayati et al 2017 Zellner and
Denger 1989) finding a positive influence of age on consumerlsquos WTP for organic and
healthy foods In another study Boccaletti and Nardella (2000) conducted a study on
consumer willingness to pay for organic produce in Northern Italy By adapting an
ordered logit model the impacts of relevant explanatory variables were reported
Results suggests a positive impact of consumerlsquos age on WTP a price premium
The marginal effects for gender indicate female respondents are less likely to be willing
to pay more prices or likely to pay less amount for pesticides free fruit Female
respondents like to pay a price premium but less as compared to male respondents (no
premium or 1 to 5 percent premium) One can observe that most of the respondents in
the study area were male which support our findings These results are in contrast with
Cranfield and Magnusson (2003) The probability of marginal willingness to pay
decreased by (-0001 percent) for higher amount
58
Another significant variable affecting WTP in our study is the years of education of the
householdlsquos head Our result suggests a positive relationship of education on WTP for
pesticides free fruit Households with more formal education have better understanding
of the adverse effect of consuming fruit contaminated with pesticides So they may
better understand the benefits of pesticides free fruit Marginal effects of education are
positive as WTP progresses for higher classes (categories) beyond 16-20 percent (table
49) Among these the highest effect of education 0020 is shown for WTP category
36-40 percent which implies that an additional year of schooling of the household head
increases likelihood of paying 36-40 percent higher price premium for pesticides free
fruit over conventional by around 2 percentage These results are in line with the
findings of Haghjou et al (2013) who found a positive effect of education on WTP for
organic food products in Iran However these results are in contrast with Boccaletti and
Nardella (2000) who reported an inverse relation of consumer education with WTP a
price premium
We also found a significant effect of the household size and household income on WTP
for pesticides free fruit The effect of household size is negative Marginal effect in
table 49 shows that the highest negative effect of 012 is shown for 16-20 WTP
categories which indicate that an additional household member decreases the likelihood
of paying 16-20 percent higher premium for pesticides free fruits by 12 percent One of
the convincing reasons for this negative effect of household size can be the householdlsquos
budget constraint Budget constraint limits the extent to which consumer pay higher
prices for food products (Cranfield and Magnusson 2003) Our findings are consistent
with previous studies Ariyawardana et al (2009) conduct a study on consumerslsquo
willingness to pay for organic ethnic specialty produce in USA reported that marginal
effect of price premium decreases with an increase in householdslsquo member
In regards to income households with higher income are more willing to pay higher
premiums for pesticides free fruit Income always played a significant role in changing
consumerlsquos behavior to change hisher decision from not willing to pay or less willing
to pay to higher willing to pay for organic products Households in highest income
class showed a strong propensity to pay more prices Marginal effects of income for the
first four classes emerged negative Our results suggest a strong propensity to pay
higher prices as household income increases Our marginal effects of income show a
59
monotonic increase in the income effect as WTP premium level progresses beyond 16-
20 percent It implies that at low level of income households are unwilling to pay more
but with rise in income households are ready to pay higher premium for pesticides free
fruit a significantly higher magnitude is shown for the highest category (010 income
coefficient for more than 40 percent premium) Overall it clearly suggests that
household with higher level of income would pay more prices for pesticides free fruit
These results are in line with Hayati et al (2017) and Cranfield and Magnusson (2003)
who found that an increase in income increases purchasing power of consumer which
results a change in purchasing pattern Boccaletti and Nardella (2000) conducted a
study on consumerslsquo willingness to pay for pesticides free fresh fruits and vegetables in
Italy and found that willingness to pay is significantly and positively related to income
We also included variables indicating health and environmental concern of the
respondent Results indicated that the more the households were concerned about the
impact of pesticides in fruits on health and environment the more the probability of
willingness to pay The marginal effects for health concern is negative for first three
willingness to pay classes (ie not willingness to pay willingness to pay 1_5 wiliness
to pay 6_10 percent) and for environment concern it is negative for first four classes
while for the remaining WTP classes it is positive Strikingly the highest magnitude of
marginal effects up to 041 among all variables is found from the health concern
variable On one hand a significantly positive effect suggests that the health concerned
householdslsquo are more likely to pay higher premium for WTP than those not concerned
A magnitude of higher scale on marginal effect on the other hand strongly supports
the distinct difference in WTP between health concerned and non-concerned
individuals Overall this also highlights the importance of this variable on modeling
WTP for pesticides free fruits For example a 041 marginal effect of health concern
variable on 16-20 premium category of WTP suggest that health concerned individual
are 41 percent more likely to pay 16 to 20 percent higher premium for pesticides free
fruit as compared to non-concerned households The effect of health concern on WTP
is consistent and distinctly higher in magnitude from previous similar studies in other
countries For example Hayati et al (2017) found that health concerned individual were
26 percent more likely to pay 16 to 20 percent in Iran This indicates that health
concern factor is an important motivation to premium price for pesticides free fruits in
Pakistan
60
Finally we found a significant effect of awareness variable Recall that our awareness
variable is represented by dummies Our result suggests that the households in the study
area were aware of the fact that farmers are intensively using pesticides on fruits so
they were willing to pay more price premium for pesticides free fruits Marginal effects
show a negative signs for modest price premiums on WTP categories 1-5 and 6-10
while positive signs for all higher categories 16-20 21-25 26-30 31-35 36-40 and
above 40 This may indicate that households are more aware of the adverse impact of
pesticides on health and environment Probably awareness comes from education as our
results shows that the average years of education is higher in the study area
424 Matrix of Correlation Coefficient
Income is generally related with age and education of the households in the study area
(table 410) This result may indicate that more aged households have higher income
and advanced education Households in high income and more educated class shows
high propensity of willingness to pay for pesticides free fruit As the results indicated
that more aged people do care more about their health and high class income
respondents have more discretionary income to spend on fruit Overall the results show
that explanatory variables are not highly correlated hence no problem of
Multicollinearity was diagnosed in the data
61
Table 49 Predicted probabilities and marginal effects from the estimated ordered logit model
Not WTP
()
WTP 1-5
()
WTP 6-
10 ()
WTP 11-
15 ()
WTP 16-
20 ()
WTP 21-
25 ()
WTP 26-
30 ()
WTP 31-
35 ()
WTP 36-
40 ()
WTP
Above 40
()
Predicted Probabilities
00122 00179 02616 01183 04434 00620 00510 00110 00201 00026
Marginal effects
Age -0000 -0001 -0011 -0002 0007 0003 0003 0006 0001 0001
Gender 00039 00054 00623 0015 -0033 -0019 -0019 -0004 -0008 -0001
Education -0000 -0001 -0013 -0002 0010 0003 0003 0010 0020 0002
Household size 0002 0002 0012 0004 -0012 -0004 -0004 -0001 -0020 -0002
Urban rural -0003 -0004 -0049 -0009 0031 0013 0013 0002 0005 0001
Income -0003 -0004 -0004 -0010 0003 0001 0001 0002 0005 0010
Health concern -0103 -0113 -0372 0030 0410 0100 0100 0014 0030 0003
Environment
concern
-0005 -0007 -0072 -0010 0052 0017 0015 0003 0006 0008
Awareness -0014 -0020 -0120 -0030 0122 0045 0041 0010 0020 0002
Source Authorrsquos calculation based on Survey Data 2016-17
62
Table 410 Matrix of correlation coefficient between explanatory variables
Source Authorrsquos calculation based on Survey Data 2016-17
Variables Age Gender Education Location Households
size
Income Health
Concern
Environment
Concern
Age 10000
Gender -00193 10000
Education 00872 -00147 10000
Location 00725 00689 01047 10000
Households size -00294 00277 -00161 -01704 10000
Income 04123 -00690 02133 - 00405 01583 10000
Health Concern 01604 00224 02229 00660 - 00422 02102 10000
Environment Concern -00786 00944 -00245 00570 -00059 -00350 00118 10000
63
43 Householdrsquos willingness to pay using double bounded dichotomous
choice model
The double bounded dichotomous choice model was used to find out how much
households are willing to pay a price premium for pesticides free fruit The model has
been proved useful for the determination of the contribution of independent variables in
householdslsquo willingness to pay for pesticides free fruit Mainly those factors that
influenced the householdslsquo willingness to pay are age of the householdlsquos head
householdlsquos size gender awareness income head education and their perceptions
The Likelihood Ratio test statistic the Wald Chi2 value is 27228 with a p-value of lt
0001 confirmed that the model with all the explanatory variables has good prediction
power of householdslsquo choice and WTP for pesticides free fruit (table 411) The
estimated coefficients for most of the explanatory variables are statistically significant
and have signs consistent with prior expectations Headslsquo characteristics such as age
education level and awareness of pesticides use on fruits perception of health and
environmental concerns of pesticides are the most import determinants of the
householdlsquos WTP for pesticides free fruit Householdlsquos income and number of
individuals have significant effect on their price premium for fruits free of pesticide
residue
The coefficient for Age is positive and its value is 0294 which reveals that a one year
increase in headlsquos age would increase householdlsquos willingness to pay a price premium
of 0294 rupees for pesticides free fruit at constant level of other variables This
generally implies that household headed by an old individual has strong preferences
and high WTP for pesticides free fruits as compared to others These results are
supported by Vidogbena et al 2015 reported a positive significant effect of consumerslsquo
age WTP in Benin for minimized pesticides residues Results suggest older households
are more concerned about health benefits associated with fresh pesticides free food
This positive correlation of householdslsquo age and Willingness to pay a high price
premium for pesticides freeorganic food is also in agreement with findings of (Anifori
2013 Haghiri et al 2009 Misra et al 1991) However these findings are in contrast
with (Govindasamy and Italia 1999) carried out a research study on consumerslsquo
willingness to pay for organically produced fresh produce in New Jersey to find
64
opinion on organic produce and found that all the three age category younger people
like to pay a high price premium
Headlsquos education level has a positive significant association with householdlsquos
willingness to pay a price premium for pesticides free fruit A likely explanation is that
education increases consumerslsquo awareness regarding the adverse effect of pesticides on
human health and natural environment Consumerslsquo with a high level of education can
better understand the benefits attached to the consumption of food produced without the
use of pesticides These results are also in line with Vidogbena et al (2015) studied
consumerslsquo willingness to pay for cabbage with minimized pesticides residues in
Southern Benin and reported that consumers with high level of education were
positively affected WTP In some other related studies Darby et al (2008)Liu et al
(2009) and Misra et al(1991) also confirmed positive association of consumerlsquos
education and willingness to pay price premium for pesticides free organic fruits
Headlsquos awareness of pesticides use on local fruits production and their health and
environmental concerns over pesticides use are also the most important determinants of
householdlsquos willingness to pay for pesticides free fruits As discussed in the previous
section householdlsquos awareness and perception of pesticides use on fruits and their
education level are connected and have significant influence for creating market for
pesticides free organic fruits
Householdlsquos demand for best quality fruit is expected to rise with increase in their
income level The estimated coefficient for householdlsquos income is positive which
implies direct association with their price premium for pesticides free fruits and is
consistent with general theory and our prior expectations In future with economic
growth increased in per capita income is expected and this increase in per-capita
income will increase the demand for pesticides free fruits
We found a negative significant effect of the householdlsquos size on WTP for pesticides-
free fruit As the number of members increases household become less likely to pay a
price premium for pesticides free fruit More mouths to feed reduces budget for best
quality fruits as noted previously by (Oyawole et al 2016 Ghorbani and Harnraz
2009) In another study Govindasamy et al (2001) findings suggests that each
member in a lager household has less discretionary income to spend compared to a
65
smaller household and may consider paying a premium for integrated pest management
a luxury
Table 411 Factors influencing consumersrsquo WTP (double-bounded dichotomous
choice model)
Variables Coefficient Std Error z-statistic Pgt|z|
Constant -8614601 3640408 -237 0018
Age 0294755 00638171 462 0000
Gender -0133885 - 4628428 003 0977
Education 04521878 01574002 287 0004
Income 00001208 00000284 426 0000
Householdlsquos
Size
-06690743 2499154 -268 0007
Health concern 6165207 1882292 328 0001
Environment
concern
6739389
2053786 328 0001
Awareness 8194937 1693789 484 0000
Urban Rural 02295739 1339268 017 0864
Source Authorrsquos calculation based on Survey Data 2016-17
Log likelihood = -61347 Number of observation = 600
Wald chi2 (9) = 27226 Probabilitygt chi2 = 0000
Note indicate statistical significance at 5
431 Householdsrsquo estimated Mean WTP
The estimated model was used to derive each householdlsquos willingness to pay price
premium for pesticides free fruits Table 412 and figure 42 presents the summary
statistics for the estimated price premium The Table shows that householdlsquos estimated
mean willingness to pay price premium is around 26 rupees with a standard deviation
of 106 and the estimated minimum and maximum price premium are 0 and 445
rupees respectively These statistics reveals that householdslsquo on average are willing to
pay 26 percent more price premium for pesticide-free fruits than the existed market
producing pesticide free fruits
66
2
125 115
38
325
35
-5
0
5
10
15
20
25
30
35
40
45
0 1-10 11-20 21-30 31-40 gt40
Fre
qu
en
cy o
f th
e h
ou
seh
old
s
WTP bins
Table 412 Households mean estimated WTP
Mean Std Dev Min Max
WTP 25798 10601 0 44511
Source Authorrsquos calculation based on Survey Data 2016-17
Figure 42 householdsrsquo estimate WTP bids
432 Households Response to First Bid (Amount)
Table 413 and figure 43 shows households response to first bid of the WTP question
The Table clearly show the sensitivity of a householdlsquos yes - no response to the bid
amount As the bid amount goes up the probability of acceptance is expected to
decrease Results show that higher bids reduced the likelihood of acceptance For
example for a bid amount of Rs10 as price premium for pesticides free fruits 8833
percent of the households are willing to pay while it dropped to 222 percent when the
bid amount is increased to Rs40 which is consistent with the standard theory
67
0
01
02
03
04
05
06
10 20 30 40
Table 413 Householdsrsquo Response to First Bid (Amount)
Households
with YesNo
response
First bid amount (PKR)
10 20 30 40
Households
with No
response
21 (1167) 24 (2581) 141 (5732) 63 (7778)
Households
with Yes
response
159 (8833) 69 (7419) 105 (4268) 18 (2222)
Total
Households
180 93 246 81
Source Authorrsquos calculation based on Survey Data 2016-17
Figure 43 Probability of WTP given bids
44 Post Estimation Diagnostic Test
The model was tested against Multicollinearity by using (variance inflating factor
criteria) and for Heteroskedasticty (Breusch-Pagan test) and the results are presented in
table 414 Rule of thumb for VIF is that if the value is ge 10 than the problem of
Multicollinearity is severe According to our findings the mean value of variance
inflating factor is 114 less than the critical value suggests that there is no
Multicollinearity problem in the model Breusch-Pagan test is used for detecting
Heteroskedasticty problem The (χ2) value is 066 and p- value is 041 This p-value
suggests that the probability of rejecting the presence of Heteroskedasticty is 41percent
68
Table 414 Diagnostic test results
Problems Diagnostic Test Mean value P-value
Multicollinearity VIF 112 _
Heteroskedasticty Breusch-Pagan 066 041
Source Authorrsquos calculation based on Survey Data 2016-17
441 Householdsrsquo willingness to pay by using linear regression model Results of householdlsquos willingness to pay for pesticides-free fruits using linear
regression model is shown in table 415 Variables such as age education awareness
income householdslsquo size and consumer perceptions regarding health and friendly
environment are significantly influencing consumerslsquo WTP for pesticide-free fruits
Age has a positive and significant influence on willingness to pay ie the result shows
that with an increase in age willingness to pay also increases This result is slightly
different from few findings of other researchers who reported a high WTP in young and
middle age consumerslsquo (30-40) years Govindasamy and Italia (1999) But there are
some logical reasons behind our findings As young people are not so much health
conscious but with getting older and older the disease of aging caught their minds and
they keep more care about their health Another reason with an increase in age
education and experience increases as a result an increase in WTP for pesticides free
fruits These results are supported by Muhammad et al (2015) found a positive and
significant association between age and consumer willingness to pay Their results was
supported by the fact that young individual health consciousness is a rare phenomena
but as the people get older and older many diseases related to health induce them to
pay more attention towards safe and healthy food such as pesticides free organic food
Education and monthly income are the other factors positively and significantly
influencing householdslsquo WTP Households with more formal education have more
concern and better understanding of the risk associated with consuming food
contaminated with pesticides So they better understand that fruits produced without the
use of chemicals pesticides could be beneficial for health Results show that a one year
increase in formal education householdslsquo WTP increases by rupees 025 for pesticides
free fruit as compared to those having no education In regards to income respondents
with higher income are willing to pay more price premium A one rupee increase in
income will increase householdlsquos WTP by 0001 Muhammad et al (2015) reported a
69
significant effect of income and education on householdslsquo stated willingness to pay for
organic food in Arab Emirates consumer
Householdslsquo size is usually reported as negative influence on WTP Findings of our
study show a negative significant influence on householdlsquos willingness to pay This is
likely due to larger households requiring additional funds to satisfy households demand
for pesticides free fruit which may induce households to buy conventional fruit Other
reason may be as with limited resources feeding more mouths is increasingly difficult
These results are in contrast with Muhammad et al (2015) conducted a study on
factors affecting consumerlsquos willingness to pay for certified organic food products in
United Arab Emirates and reported a positive relationship of willingness to pay and
householdlsquos size Usually householdslsquo size is large in Arab Emirates and hence more
earning resources compared to small households which support their findings Our
finding shows a decrease of 085 rupees by an addition of one member in a household
Other important variables are householdslsquo concern regarding health and environment
Results show that respondentslsquo are highly concerned about residual effect of pesticides
on human health and environment Our results support these findings by positive WTP
Table 415 shows householdslsquo concerned regarding health and environment Results
suggest that households with more concerned for health and environment are willing to
pay Rs582 and Rs020 respectively higher prices for pesticides free fruit compared to
those not concerned
Finally we found variable awareness positively and significantly influencing
householdslsquo WTP for pesticides free fruit in survey area The result shows that more
aware households are willing to pay more price premium compared to unaware
households Awareness usually increases with education and age as can be evidence
from our findings a positive and significant influence of education and income on
householdlsquos WTP When households education level and age increases their awareness
regarding pesticidelsquos negative impact on health increase and hence an increase in WTP
for pesticides free fruit
70
Table 415 Estimated parameters using liner regression model
Variables Coefficient Std Error t-Statistics P-value
Constant -6174109 - 4353038 142 0158
Age 02348861 00467651 502 0000
Gender -2828394 3096026 - 091 0362
Education 0243413 00772618 315 0002
Income 00001237 00000157 790 0000
Householdlsquos
size
-03936806 01755667 -224 0026
Health concern 5567941 1465789 380 0000
Environment
concern
02999708 2023651 015 0882
Awareness 3567843 1001883 356 0000
Urban rural 0587075 1047051 056 0576
Source Authorrsquos calculation based on Survey Data 2016-17
Note indicate statistical significance at 5
No of observation = 200 F (9) = 2859 Probgt F = 0000 R-squired adjusted = 055
45 Comparison of elicitation questions formats Mean WTP by using double dichotomous payment card and open ended elicitation
format are reported in table 416The willingness to pay evaluated using average values
for the explanatory variables are Rs2576 for double bounded 1632 is for payment
card and 1437 for linear regression Results indicated that householdslsquo evaluated
through double dichotomous choice payment card scenario and open ended format are
willing to pay 26 16 and 14 more price for pesticides free fruits in the study area
These results are in line with Ngo et al (2013) conducted a study on consumerslsquo
willingness to pay for organic vegetables in Vietnam and found 70 more price
premium Rodriguez et al (2008) carried out a research study in Argentina on
consumerslsquo willingness to pay for organic food products and reported that consumers
were willing to pay a higher premium of 87 for leafy vegetables Mean willingness to
pay for double dichotomous model was calculated by maximum likelihood estimation
mentioned in the model while for payment card and open ended format logit regression
of response on bid amount was used All mean WTP values are significantly different
71
from zero and are different across the three questions format The probability (Plt
0000) between double bounded open ended and payment card method shows a
significant difference in estimated mean values of all the three questions elicitation
formats A t-value of 1483 250 and 1222 means that the mean values calculated
through different methods are significantly different from each other
Table 416 Mean willingness to pay comparison from CV question format
CV questions format Open ended
Mean WTP (1437)
Payment card
Means WTP (1632)
Payment card
Mean WTP (1632)
MD (194)
t-value (250)
P-value (0006)
--------
Double bounded
Mean WTP (2576)
MD (1143)
t-value (1483)
P-value (0000)
MD (949)
t-value (1222)
P-value (0000) Source Authorrsquos calculation based on Survey Data 2016-17
1MD = Mean difference 1US$=105 PKR in 2017
451 Response rate for zero WTP
Table 417 shows householdlsquos response rate to different elicitation formats The
response rate of payment card format is more than both DC and OE questions formats
Results show that 87 of the respondents respond to the willingness to pay question for
payment card method For dichotomous choice the response rate is 58 and for open
ended respondentslsquo response rate is 46 Taken together these results suggest that the
payment card format is easy for valuation task faced by respondents and lead to
efficiency in data collection
Table 417 Comparison of response rates by CV question format
Percent Response
to WTP question
Double dichotomous
choice
Payment card
method
Open ended
method
Yes 5850 87 4650
No 4150 13 5350
Source Authorrsquos calculation based on Survey Data 2016-17
72
46 Discussion about Major Findings This study was design to explore householdlsquos preferences and willingness to pay for
pesticides free fruit in Khyber Pakhtunkhwa Pakistan For this study a detailed
questionnaire was designed to obtained information from the households on their socio-
demographic characteristics perception regarding pesticides used on conventional fruit
and their willingness to pay a price premium for pesticides free fruit The overall
objective of the study was to know householdslsquo willingness to pay a price premium for
pesticides free fruit such as Apple Peach and Mango In response to willingness to pay
question 93 percent of the households were willing to pay a price premium while a
negligible portion were unwilling to pay any premium for pesticides free fruit Out of
total WTP 35 percent of the households were willing to pay16-20 percent higher
amount for pesticides free fruit
With regards to gender status of the households findings of the research showed most
of the respondents in the study area were male and a minor portion were female
Variable gender was not significant in this study because of the area structure where
male households are the primary purchaser of householdlsquos food items In this research
we found that majority of the respondents were educated most of them were highly
educated while a negligible portion of the respondents had no formal education The
mean education in Mardan and Peshawar was almost 10 and 12 years of schooling
respectively A significant difference was observed in urban and rural householdslsquo
education level in both the districts
Householdslsquo expenditure on food and fresh fruits were also calculated The mean
expenditure on food in district Mardan was PKR- 49280 and in district Peshawar was
PKR- 34860 Based on t-test a significant difference was observed on the consumption
of fresh fruit in urban and rural areas of the two districts Total expenditure on fresh
fruits in Mardan and Peshawar was 3340 and 4671 respectively Based on findings of
the study it could be concluded that respondents in urban region spent more income on
fresh fruit and consume more fresh fruits compared to rural region
Householdslsquo awareness of pesticides use on locally produced fruit such as Apple
Peach and Mango and their health and environmental concerns over pesticides use
were estimated The results revealed that 61 percent of the respondents were agreed that
local farmers use intensive pesticides on fruit Around 88 percent of the respondents
perceived environmental and health concerns over pesticides residues in food
Similarly 91 percent of the respondents believed that farmer should engage in
73
environmental friendly agricultural production practices which have a minimum
adverse impact on health and the environment These results induced households to pay
higher prices for such pesticides free fruit if available in the market The overall results
indicated that sampled households were not fully aware of the intensive pesticides use
on local fruit however they were correctly perceived over the impacts of pesticides on
human health and environment
The empirical findings of the study revealed socio-demographic characteristics had a
significant influence on householdslsquo willingness to pay a price premium for pesticides
free fruit Results showed more aged householdslsquo head were willing to pay more price
premium This is supported by the fact that older people are more health concern
compared to young individual Householdslsquo head education level also played a positive
and significant role with high education consumers seems slightly more willing to pay
These results are in line with Haghjou et al (2013) Householdlsquos size was negatively
influencing householdlsquos WTP and accord with the expectation Due to income
constraint with increase a member in a household will decrease WTP for pesticides-
free fruit because feeding more mouths with limited resources would be difficult These
results are in line with Oyawole et al 2016 Many Conflicting results are also reported
regarding household size Some studies indicated the presence of more children
positively influencing WTP for organic food while some results reported an inverse
relationship between WTP and householdslsquo size Findings of our research revealed a
negative significant influence on householdslsquo willingness to pay for pesticides free
fruits These results were also according to our expectation With an increase in family
size the households do not care much about quality but mostly quantity
Income of the householdslsquo head was taken as continuous variable in this research study
In most cases especially in willingness to pay research studies a positive association of
income and households WTP was observed Any increase in householdslsquo income leads
to rise in their willingness to pay for safer healthier and pesticides free fruit Despite
high prices for pesticides free food products householdslsquo with high income showed
likelihood to pay a price premium Our findings also showed a positive effect of
income on householdslsquo WTP for pesticides free fruit An increase in income changes
householdslsquo purchasing behavior and choose better quality of food So with an increase
in income households were willing to pay more price premium Same results were
reported by Cranfield and Magnusson 2003
74
Variable awareness played a significant role while consuming better quality of food
Findings of our study also showed a positive and significant influence of variable
awareness on householdslsquo WTP for pesticides free fruit More than half of the
respondents were aware of the intensive use of pesticides on fruit Majority of the
households knew about the risk attached with fruits produced with agrochemicals The
more aware households were willing to pay more price premium for pesticides free
fruit compared to unaware households These results are also supported by Oyawole et
al2016
Moreover results of this study are also consistent with previous studies that health and
environmental concern are the important factors in householdlsquos preferences for
pesticides free food and reduced input food products We also found a positive
significant influence of health concern and environment concern on WTP These results
suggest that respondents in the study area are more conscious about health and
environment They are willing to pay more prices for such fruit free from pesticides
residues Based on above results most of socio-demographic characteristics have
positive influence on householdlsquos willingness to pay for pesticides-free fruit in the
study area On the basis of these findings we reject the null hypothesis and accept the
alternative hypothesis by concluding that socio-demographic characteristics have
influencing behavior on householdslsquo WTP
Willingness to pay across urban and rural regions shows no significant difference The
P-value of 0864 showed that WTP of households in urban regions were not statistically
different from those in rural regions Although we had expected a positive and
significant difference among urban and rural households willingness to pay for
pesticides free fruit and the difference in householdslsquo income education and
expenditure across urban and rural households support our expectation One of the
reasons for no significant difference is the selection of rural union councils which are
nearby urban union councils If the study is spread to more rural union councils than an
expected difference in urban and rural households may be observed Based on these
results the null hypothesis of no significant difference between urban and rural
households is accepted and can be concluded that no significant difference was found
in willingness to pay amount across rural and urban households
75
A Payment Card Approach
In this approach respondents are asked to select their WTP from a payment card given
in absolute value or in percentage of prices (Boccaletti amp Nardella 2000 Lacaze
Rodriguez and Lupin 2009) Payment card requires smaller sample sizes for the
efficient estimation of parameters than the double bounded model A recent research
found that payment card is to be free of range and centering biases when the
willingness to pay values on the payment card is sufficiently large and the respondents
are not constrained (Rowe et al 1996) However choosing an amount from payment
card may be more cognitively burdensome on the respondents and difficult than simply
yes or no response
B Open Ended Approach
In open ended question respondents are asked to state their WTP for a certain attribute
without suggesting them any value This technique does not require an interviewer and
does not result in any starting bias This approach is easy for the respondents to answer
Due to non provision of any value respondents find it difficult to answer and results
large non- response rate
C Double Bounded Approach
The dichotomous choice contingent valuation method is an important method in
contingent valuation surveys Due to simplicity this method is popular and widely used
for data collection Two questions formats are used in this method single bound and
double bounded questions are asked from the respondents For single bound question
format the respondentlsquos only reply in yes or no while in double bounded approach
second question contingent on the first response is asked
Hanemann et al (1991) recommended double bounded dichotomous choice model for
eliciting householdslsquo WTP In the double bounded formate each respondent is
presented with two bids The level of the second bid is contingent upon the response to
the first bid If an individual responds in ― yes to the first bid Bi the second bid (Bu) is
some amount greater than the first bid (Bi lt Bu) is askedIf the respondent responds
―no to the first bid the second bid (Bl) is some amount smaller than the first bid (B
llt
Bi) is asked
76
Henemann et al (1991) and Leon (1995) confirmed that double bounded model is more
effcient than single bound model For the correction of poor choice of the initial vector
double bounded model was suggested Researchers also found that double bounded
method produce more precise point estimates of parameters Double bounded model
requires more sample size due to the statistical inefficiency imposed by the data
compared to payment card and open ended model If sample size is large enough
double bounded model estimates accurate results
Due to its potttential inconsistency with response to the first binary question and larger
scope for biased results double bounded model is contravartial Bateman et al (2001)
concluded that the respondents feel fury and guilt when the second question is asked
making the response of the double bounded internally inconsistence One of the main
disadvantage of double bounded model is that response of the respondents may be
influenced by the first offered amount which is generally called starting point bias
(Flachaire and Hollard 2005)
There are few notable patterens while studying consumerlsquos willingness to pay by using
different elicitation formats Estimated willingess to pay based on double bounded
format and payment card format tend to be large compared to open ended questins
format Furthermore estimated willingness to pay from double bounded model would
be larger than payment card format
Not surprisingly as shown in table 416 the estimated mean willingness to pay for
pesticides free fruit based on the models were significantly different across the three
elicitation format Estimated WTP for double bounded format payment card format
and open ended was 25 percent 16 percent and 14 percent respectively The estimated
mean WTP for double dichotomous model is higher than twice the estimated mean
willingness to pay based on payment card and open ended data
When comparing response rate of households to the willingness to pay questions
format was different across the three elicitation methods In double bounded method
the question was whether the households were willing to pay a specific amount in
payment card method households were asked to select the amount from a specified
values provided on a card whereas in open ended question households were asked to
say how much extra they were willing to pay for pesticides free fruits The difference in
questions leads us to expect that more individual would respond positively to
willingness to pay question in payment card method because in this elicitation format
consumers had to select from payment level The response rate of payment card format
77
is more than both DC and OE questions formats Results show that 87 of the
respondents respond to the willingness to pay question for payment card method For
dichotomous choice the response rate is 58 and for open ended respondentslsquo response
rate is 46 Taken together these results suggest that the payment card format is easy
for valuation task faced by respondents and lead to efficiency in data collection
It has been remained an unresolved issue that which CV questions format is best to use
While the NOAA panel (Federal Register 1993) recommended using double bounded
dichotomous choice model due to its easy use and resemblances in day to day decision
making In this study we found that the response rate in double dichotomous choice
model is lower than payment card format and higher mean willingness to pay than both
open ended and payment card format In contrast payment card format has desirable
response properties
One elicitation format is not clearly better than the others on priority ground The
appropriateness of any elicitation format depends upon the circumstances of the study
For example payment card elicitation format better suits if the sample size is small If
the sample size is large enough double bounded elicitation format is preferred
78
V SUMMARY CONCLUSION AND RECOMMENDATION
This chapter presents findings of the research study as well as policy recommendations
This chapter also outlined limitation in this research and suggestion for further research
in future
51 Summary
Conventional agriculture has gained the power of providing food to majority of the
world population but at the cost of damaging the environment and human health While
pesticides free farming on the other side is environmental and human health friendly
farming that avoids the use of such hazardous chemicals which are harmful for human
plants and animal planet Pesticides free farming system is increasingly becoming
popular in producers as well as in consumer The term pesticides free denote production
of fruit without the use of pesticides and play a vital rule in future agriculture
commodities production It has been observed that fruit produced without the use of
chemicals pesticides are generally higher in prices than the conventional fruit
production in most part of the world However pesticides free farming and pesticides
free food is a relatively new phenomenon and very few people especially in developing
countries are aware about the beneficial impacts of such food on health and
environment Willingness to pay for pesticides free fruit is different from fruits
produced through the use of chemicals pesticides because pesticides free fruits are
relatively expansive
The main theme of this study was to investigate householdslsquo awareness and willingness
to pay for pesticides free fruit and to determine socio-economic and socio-demographic
characteristics in relation to their impact on willingness to pay a price premium This
study was carried out in two districts of Khyber Pakhtunkhwa (Pakistan) namely
Peshawar and Mardan The household level data employed in this study were obtained
from 1000 households through face to face interview by employing pretested
questionnaires Householdslsquo perception and attitude about pesticides free fruit were
also analyzed Three questionnaire elicitation formats ie dichotomous choice payment
card and open ended were used in this study For the estimation of dichotomous choice
data double bounded dichotomous choice model was used An ordered logit model was
used for the estimation of payment card type data and for the estimation of open ended
79
questionnaires linear regression model was used to estimate householdslsquo willingness to
pay price premium for pesticides free fruits
52 Conclusions
Adoption of technological advancement in agriculture has attracted considerable
attention in many developing countries because majority of population in less
developed countries derives its likelihood from agricultural production New
technologies provide farmers an opportunity to increase production and enhance
economic growth (Carvalho 2006) Although the green revolution spread across
developing countries in Asia and resultant in increased food production by adopting
technological inputs like fertilizer and pesticides However the high usage of these
chemicals to bring this spectacular growth in agriculture production is not without its
problems In most countries it has been observed that using commercial agricultural
practices causes many problems like environmental degradation and human health
effects (Wilson 2000) Coordinated efforts are needed to increase food production
with a view to enhance food safety and quality Although chemicals free agriculture is
gaining more and more support for safer food but still not providing enough food to
support need of the population in developing countries
Demand and markets for pesticides free fruit has gained a significant and valuable
interest of research scientist in all over the world Several research studies have been
identified price premium that consumers are willing to pay for pesticides free fruit and
also showed some socio-demographic factors influencing their decision to pay more
price premiums Different approaches are adopted in these studies depending on their
objectives These research studies mainly focused on attitudes and perception towards
these foods and not their actual purchase According to our knowledge studies on
householdlsquos willingness to pay and the most relevant factors influencing their decision
to pay more price premium are limited in developing countries such as Pakistan
The general objective of this survey was to study the socio-demographic and socio-
economic characteristics of the householdslsquo and to investigate factors influencing their
willingness to pay for pesticides free fruit A variety of factors including respondentlsquos
age gender householdlsquos size respondentlsquos income householdlsquos head education
awareness and certain attitudinal questions like health concern and environment
concern appear to influence householdlsquos willingness to pay a price premium Findings
80
of the study suggest health concern and environment concern has significant influence
on householdslsquo willingness to pay Hence it can be concluded that households in the
study area are more concern about their health and surrounding environment Results of
the study also indicated no significant difference in willingness to pay across rural and
urban regions of the study area
Study concluded that the most relevant explanatory variables positively influencing
householdslsquo willingness to pay for pesticides free fruit are age of the householdlsquo head
income of the household headlsquos education householdslsquo awareness health concern and
environmental concern while householdlsquos size is negatively significant which usually
reported that householdslsquo with more members do not care much about quality but more
quantity because feeding more people with limited resources are difficult Majority of
the households are willing to pay price premium for pesticides free fruit especially
those with high level of income household leads to high degree of willingness to pay
Education level also became an important factor in willingness to pay higher price for
pesticides free fruit More aged people have always been concern about their health As
the people get aged more and more the diseases of aging caught their minds so they
like to pay more for safer food While when it become to pay more price variable
gender shows insignificant affect due to the limited availability of female respondents
in the sample data
Results of the households awareness regarding pesticides used on conventional fruit
and its impact on health and natural environment are positive Most of the households
are highly concern about health and environment Results suggest that more than half of
the households are aware of the adverse impact of pesticides on health and
environment Survey suggested that more than half of the households are strongly
agreed that farmers should produce such an agricultural food product which has
minimum adverse impact on human health and natural environment Results of the
study are consistent with other findings conducted on consumerslsquo willingness to pay for
organic food and pesticides free food and reported that health and environmental
concern were the most important factors
Health and environmental concern is an important factor constituted a significant
influence which inclined households towards willingness to pay for pesticides free fruit
Krisoff (1998) reported that consumers perceived pesticides free food as healthier safer
and environmental friendly as compare to food produced by conventional method
81
From this study it is observed that households perceived pesticides free food as
healthier they are willing to pay more price premium
Results obtained from this study concluded that 93 percent of the households are
willing to pay more prices for pesticides free fruit Out of this proportion 35 percent of
households are willing to pay 16 to 20 percent more price above the regular price while
24 percent are willing to pay 6 to 10 percent higher price for pesticides free fruit
Households are willing to pay above than 20 percent comprised of 215 percent of the
sample data Results show that out of total willingness to pay 4 percent of the
households are willing to pay 1 to 5 percent price premium and 9 percent are willing to
pay 11 to 15 percent more price premium Results also show that only a minor portion
65 percent of the sampled respondents is unwilling to pay any more
Householdslsquo willingness to pay was also assessed The study revealed that on average
the respondents are willing to pay 26 percent higher price for pesticides free fruit than
the regular price which concluded that households in the study area are responsive
towards safer food and they like to pay higher premium for such fruit
53 Recommendations
This study is one of the first analytical attempts to measure householdslsquo willingness to
pay for pesticides free fruit in Pakistan Since not much research work is done on
pesticides free fruit in Pakistan so this study would contribute a little for future
researchers Findings of the survey suggest some recommendations for consumers and
producers Researchers may consider this study as basis for further research
An important task is to provide more information to consumers regarding
pesticides free fruit and the perceived benefits by consuming these fruit This
research study also provides information to consumers that how pesticides free
fruit is differ from fruit produced conventionally The sampled studied shows
that there is a potential for market growth of pesticides free fruit To identify
these potential consumers knowledge about their socio-demographic and socio-
economic characteristics is important
With potential demand and high price premium pesticides free fruit production
could be one of the lucrative strategies for producers to earn higher net margin
from their production so like other new technologies management practices
and production system pesticides free fruit production also needs government
82
assistance such as advertisement consumers awareness campaigns financial
aids as well as green subsides and loans to the producers to develop well
established market and efficient supply chain in Pakistan
By adopting new agricultural practices and comply with standards of World
Trade Organization (WTO) this will not only abridge the supply demand gap
for pesticide free fruit sat domestic level but also will boost the economy of the
country due to increase in fruit and vegetables exports
Contribution in the field of pesticides free fruit production from academics
research workers extension graduates scientist and other professionals are
necessary to brief producers as well as consumers about the negative impact of
pesticides due to incorrectly use of these hazardous chemicals on human and
animals health as well as effect on natural environment
Based on the findings from this research government non-government
organization and other stakeholders should formulate policies and would
promote and encourage the production of pesticides free fruit in Pakistan
Demonstration centers should be established within the agriculturist community
for the awareness of farmers regarding the production of pesticides free food
As the results identified householdlsquos willingness to pay is effected by
explanatory variables so more independent variables should be included in the
model to further explain willingness to pay for pesticides free fruit
In addition the area of sampling could be more spread and not be limited to only
two districts of Khyber Pakhtunkhwa If data are collected from different
provinces and districts all over Pakistan the results obtained might be a better
representation of the whole population
As this research study conducted only at few fruit such as Apple Peach and
Mango future research should focus on more fruit as well as on vegetables
54 Limitation and Suggestion for Future Envisage
A couple of limitations were encountered during this research study
This research study has investigated willingness to pay for fruit only due to
time and budget constraint In future a large scale research study should be
carried out both on fruit and vegetable
83
Second since only two districts of Khyber Pakhtunkhwa were examined in
the future such studies should be replicated to other districts and provinces of
Pakistan to determine householdslsquo willingness to pay for pesticides free fruit
Third some variables employed in this study were not statistically significant
presumably due to small sample size To overcome this problem in future
study large sample size should be taken into consideration in order to enhance
the degree of freedom
56 Suggestions
The future of pesticides free agriculture production is very bright To lead a healthy life
human being needs pure food and pollution free environment It has been proved that
pesticides free agriculture is the only solution to provide safe and healthy food to the
world population Chemicals free agricultural system is a natural phenomena and
human being can feel its importance By adopting pesticides free farming soil fertility
can also be maintained Farmers can provide healthy and safer environment by
strengthening the sustainable and pesticides free agriculture Now a daylsquos demand for
pesticides free food is increasing very fast and in the future it would be necessary to get
rid of food produced by using chemical fertilizer and pesticides
To inform consumers long term investment in promotion and education campaigns
would help to develop individual concern regarding the risk associated with pesticides
on food products This concern will translate individual willingness to pay towards a
positive price premium
84
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Breidert C M Hahsler and T Reutterer 2006 A review of methods for
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Calia P and Strazzera E 2000 Bias and efficiency of single versus double bound
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Dettmann R L 2008 Organic produce Wholsquos eating it A demographic profile of
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Annual Meeting Orlando (pp 27-29)
Darby K M T Batte S Ernest and B Roe 2008Decomposing local a conjoint
analysis of locally produced foods American Journal of Agricultural
Economics 90(2) 476-486 httpsdoiorg101111j1467-8276200701111
Dubourg W R M W Jones and G Loomes 1994Imprecise preferences and the
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Davis R K 1963 The value of outdoor recreation an economic study of Maine
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Economic Survey of Pakistan 2014 Finance Division Government of Pakistan
Islamabad httpwwwfinancegovpksurveysur_chap
Economic Survey of Pakistan 2006 Finance division government of Pakistan
Islamabad httpwwwfinancegovpksurveysur_chap_ 05-0602-Agriculture
Eom Y 1994 Pesticide residue risk and food safety valuation A random utility
approach American Journal of Agricultural Economics 76(4) 760-771
Flachaire E ampHollard G 2006 Controlling starting-point bias in double-bounded
contingent valuation surveys Land economics 82(1) 103-111
88
Food and AgricltureOrganization 2006Fertilizer use by Crop Fertilizer and Plant
Nutrition Bulletin VialedelleTermepp 1ndash61
Food and Agriculture Organization2002Submission and evaluation of pesticide
residues data for the estimation of maximum residue levels in food and feed
FAO Rome 1ndash279
Fox J A1995 Determinants of consumer acceptability of bovine
somatotropin Review of Agricultural Economics 51-62
Fox J A D J Hayes J B Kliebenstein and J F Shogren1994 Consumer
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Federal Register 1993Natural resource damage assessments under the oil pollution act
of1990Department of commerce national oceanic and atmospheric
administration 58(10)
Gumber G and J Rana 2017 Factors Influencing Willingness to Pay Price Premium
forOrganic Food in IndiaInternational Journal of Emerging Research in
Management ampTechnology 6 (2)
Government of Pakistan 2016 Fruit vegetables and condiments statistics of Pakistan
Provincial Agricultiural Marketing Departments
GhorbaniM and S Hamraz 2009A survey on consumerlsquos potential willingness to pay
for organic products in Iran Trends in Agricultural Economics2(1)10-16
Griffith R and L Nesheim 2008 Consumer willingness to pay for organic products
CEPR Discussion Paper No DP6905 Available at
SSRN httpsssrncomabstract=1240215
GraciaA and TDMagistris 2007 Pesticide free good product purchase behavior
Spanish journel of agriculture research 5(4) 439-451
89
Gil J M A Gracia M Sanchez 2000 Market segmentation and willingness to pay
for organic products in SpainThe International Food and Agribusiness
Management Review 3(2) 207-226
Govindasamy R and J Italia 1999Predicting willingness to pay a premium for
organically grown fresh produce Journal of Food Distribution
Research30(2)0044
HayatiB M Haghjou and E Peshbahar 2017Effecting factors on consumerslsquo
willingness to pay a premium for pesticide-free fruit and vegetables in Iran
MOJFoodProcessingampTechnology4(5)00105Availablehttpmedcraveonline
comMOJFPTMOJFPT-04-php
HUICL C W MAY and W K LI 2013 Research on householdlsquoslsquo willingness to
pay for pesticide free productsUniversity Tunku Abdul RahmanFaculty of
Accountancy and Management Department of Economics
Hai M N M Moritaka and S Fukuda 2013 Willingness to pay for organic
vegetables in Vietnam An empirical analysis in Hanoi capital J Fac Agr
Kyushu Univ58 (2) 449-458
Haghjou M B Hayati E Pishbahar RMohammadrezaei GDashti2013 Factors
affecting consumerslsquo potential willingness to pay for organic food products in
Iran Case study of Tabriz Journal of Agricultural Science and Technology
15(2) 191-202
Haghiri M J E Hobbs and M LMcnamara 2009 Assessing consumer preferences
for organically grown fresh fruits and vegetables in Eastern New Brunswick
International Food and Agribusiness Management Review Volume 12( 4)81
HeoSW and H Kim 2004 Green marketing strategies and willingness to pay for
environment-friendly agricultural products in the metropolitan area Korean
Journal of Organic Agriculture
90
HossainF B Onyango B Schilling W Hallman and AAdelaja2003 Product
attributes consumer benefits and public approval of genetically modified
foods International Journal of Consumer Studies 27(5) 353-365
Hanemann M J Loomis and B Kanninen 1991Statistical efficiency of double-
bounded dichotomous choice contingent valuationAmerican Agricultural
Economics 73(4)1255-1263
HanemannWM 1984Welfare evaluations in contingent valuation experiments with
discrete responses Am J Agric Econ 66(3) 332ndash341
Jakobsson K M and A K Dragun 1996 Contingent valuation and endangered
species methodological issues and applications Edward Elgar Publishing
Khan J M M S Zia and M Qasim 2010 Use of pesticides and their rule in
environmental pollution International Journal of Environmental and Ecological
Engineering4 12-25
KalogerasN S Valchovska G Baourakis and P Kalaitzis2009Dutch householdlsquos
willingness to pay for pesticide free olive oilJournal of International Food amp
Agribusiness Marketing 21(4) 286-311
Kimenju S C and HD Groote 2008 Householdlsquos willingness to pay for genetically
modified food in Kenya Agricultural economics 38(1) 35-46
Krystallis A and G Chryssoidis 2005 Consumers willingness to pay for organic
food Factors that affect it and variation per organic product type British Food
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Kuperis A P M MVeeman and W L Adamowicz 1999 Householdlsquosresponse to
the potential use of Bovine Somatotrophin in Canadian dairy production
Canadian Journal of Agricultural Economics47(2) 151-163
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edition
91
Lusk JL and Hudson D 2004 Willingness-to-pay estimates and their relevance to
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169
Liu Y Y Zeng and X Yu 2009Consumer willingness to pay for food safety in
Beijing a case study of food additives In Contributed paper prepared for
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conference Beijing China (pp 16-22)
Loureiro M L and W J Umberger 2005 Assessing consumer preferences for
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Economics 37(1) 49-63
Loureiro M L and W JUmberger 2003 Estimating consumer willingness to pay for
country-of-origin labeling Journal of Agricultural and Resource
Economics28(2) 287-301
Loomis J P Kent L Strange K Fausch and A Covich 2000 Measuring the total
economic value of restoring ecosystem services in an impaired river basin
results from a contingent valuation survey Ecological Economics 33(1) 103ndash
117
MuhammadS E Fathelrahman and RUT Ullah 2015 Factors affecting
householdlsquoslsquo willingness to pay for certified pesticide free food products in
United Arab Emirates Journal of Food Distribution Research 46(1)37-45
MagnussonE and J A L Cranfield 2005 Householdlsquos demand for pesticide free food
products in Canada A Probit Analysis Canadian Journal of Agricultural
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MagnussonK MA Arvola UKKHursti L Aringberg PO Sjoumldeacuten 2003 Choice
oforganic foods is related to perceived consequences for human health and to
environmentallyfriendly behavior Appetite40 (2)109ndash117
92
Millock K H and L G Hansen 2002 Willingness to pay for pesticide-freefoods A
Comparison between Survey Data and Panel Data from Denmark Available at
httpmpraubuni-muenchende47588
Mitchell R C and R T Carson 1989 Using surveys to value public goods the
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Nandi R W Bokelmann N VGowdruand G Dias2017 Factors influencing
consumerslsquo willingness to pay for organic fruits and vegetables Empirical
evidence from a consumer survey in India Journal of Food Products
Marketing 23(4) 430-451
Ngo Minh H M Masahiro andF Susumu 2013 Willingness to pay for organic
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Kyushu Univ 58(2) 449-458
NouhoheflinT O Coulibaly A J Cherry R A Hassan and PYAdegbola2004
Consumerslsquo perception and willingness to pay for pesticide free vegetable in
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Oyawole F P D Akerele and A O Dipeolu 2016 Factors influencing willingness to
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OwusuV and M OAnifori2013Consumerwillingness to pay a premium for pesticide
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OwusuV and A M Owusu 2010Measuring market potential for fresh pesticide free
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OramanY and G Unakitan 2010Analysis of factors influencing organic fruit and
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PiyasiriAGSA and A Ariyawardan2011 Market potentials and willingness to pay
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RodriacuteguezE V Lacaze and B Lupiacuten 2008Contingent valuation of householdslsquo
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European Association of Agricultural Economists
Roitner-Schobesberger B I Darnhofer SSomsook and C R Vogl2008Consumer
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Randall A B Ives and C Eastman1974 Bidding games for valuation of
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Salmet A S A k Nakayasu and H Bai 2016The determinants of organic vegetables
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SyedJ H A Alamdar A Muhammad K Ahad Z Shabir HAhmad SM Ali SG
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SangkumchaliangP and W C Huang 2012 Consumerslsquo perceptions and attitudes of
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Smith A T C L Hung and B H Lin 2009 Does Price or Income Affect Organic
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Vidogbena F A Adeacutegbidi R Tossou F A KomlanAnselme T Martin M
Ngouajio S Simon L Parrot and K K Zander 2015Consumerslsquo
Willingness to Pay for Cabbage with minimized pesticide residues in Southern
Benin Environments 2(4) 449-470
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Tanzania (SAT)
95
Veeman M and W Adamowicz 2000Consumerlsquos perceptions of environmental risks
and the demand for food safety httpsdoiorg107939R3ZS2KG11
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press London
Wang Q and J Sun 2003 Consumer preference and demand for organic food
Evidence from a Vermont survey Paper prepared for American Agricultural
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Zia M S M J Khan M QasimandARehman 2009Pesticide residue in the food
chain and human body inside Pakistan J Chem Soc Pak 31(2) 284ndash291
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performance of different willingness to pay question formats for valuing
environmental restoration in rural ChinaEnvironment and Development
Economics 11(5) 585ndash601 httpsdoiorg101017S1355770X06003147
Zellner JA and RL Degner1989Consumer willingness to pay for food safety Paper
presented at the Southern Agricultural Economics Meeting Nashville TN
96
Appendix- 1 Questionnaire
Q1Socio-economic characteristics
1 Location
o Rural
o Urban
2 Name ____________________
3 Age ____________________(years)
4 Gender
o Male
o Female
5 Educational status ______________ Years
6 Household Size_________________ No
7 Monthly income _______________________________Rs
8 Monthly consumption expenditure _________________Rs
9 How much you spend on Fresh Fruits Rs __________month
10 How much you consume the following fruits
Fruits Quantity
Apple
Mango
Peaches
11 Local farmers are intensively using pesticides on Apple Peach and Mango fruits
o Aware
o Not aware
97
12 Attitudinal question responses
Householdrsquos Awareness Perceptions of Pesticides use
Questions Agreed Disagreed
Local farmers are intensively using pesticides on
Apple Peach and Mango fruits
I feel the use of pesticides in agriculture has negative
effect on the environment
I am concerned about pesticide residue in our food
supply
I believe farmer should engage in environmental
friendly agricultural production practices with
minimum impact on human health
The effect of pesticides residues on human health
The use of pesticides can badly affect the agro-ecological system as well as human
health Human health related problems may vary with the composition of chemicals
The most common problems are skin flue and headache while severe health hazards
include paralysis cancer etc Studies show that globally around 30 lakh people are
poisoned annually from consumption of pesticides contaminated food and 2 lakh of
them die from different heath problems caused by pesticides residues Most of the
pesticides used on agricultural crops are banned by the WHO
13 Householdrsquos willingness to pay for pesticide free fruit
Wording for Dichotomous choice question
Suppose your favorite fruit such as apple mango and peach regularly cost on average
Rs 100kg Assuming no difference in taste and nutritional content would you pay Rs
X more to consume pesticide free version of the same fruits
Yes No
Wording for open ended question
Suppose your favorite fruit such as apple mango and peach regularly cost on average
Rs 100kg Assuming no difference in taste and nutritional content how much would
you pay for pesticides-free version of the same fruits
Rs _________
98
Wording for payment card question
Suppose your favorite fruit such as apple mango and peaches regularly costs on
average Rs 100kg you purchase Assuming no difference in taste and nutritional
content would you pay slightly more for a pesticides free version of the same fruits
Yes No
If yes how much would you pay to consume pesticide free version of the same fruit
Select from the given payment card
1 WTP= 0
2 WTP= 1-5
3 WTP= 6-10
4 WTP= 11-15
5 WTP= 16-20
6 WTP= 21-25
7 WTP= 26-30
8 WTP= 31-35
9 WTP= 36-40
10 WTP= Above than 40
If no what are the reasons for not paying price premium for pesticide free
commodities (PFC) Please select the most relevant one
o I canlsquot afford to pay price premium on PFC
o The pesticide have no harmful effect on health
o We do not use fresh fruits
o Other reasons ___________________________
99
PLAGIRIASM UNDERTAKING
It is certified that the research work presented in the Ph D dissertation of Mr Jahangir
Khan C No 45 University Registration No2006-Agr-U-13234 Session 2014-2017
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar under the titled ―HOUSEHOLD
PREFRENCES AND WILLINGNESS TO PAY FOR PESTICIDES FREE FRUIT IN
KHYBER PAKHTUNKHAWA (KP) PAKISTAN was conducted under the
supervision of Dr Abbas Ullah Jan
I understand the zero-tolerance policy of HEC and the University of Agriculture
Peshawar towards plagiarism Therefore I as an author of the above titled research
thesis declared that no portion of my thesis has been plagiarized and the material used
for references is properly cited
I undertake that I found guilty at any time and any statement is found to be incorrect or
plagiarized in the above mentioned titled thesis even after my graduation the
University has the right to withdraw my Ph D degree and the HEC has the right to
publish my name on the HECUniversity website on the list of persons who submitted
plagiarized thesis of guilty under plagiarism policy
Jahangir Khan
100
AUTHORrsquoS DECLARATION
I Mr Jahangir Khan C No 45 Session 2014-2017 hereby stated that my Ph D
dissertation titled ―Household Preferences and Willingness to Pay for Pesticides free
Fruit in Khyber Pakhtunkhwa (KP) Pakistan is my own work and not been submitted
previously by me or anyone else for taking degree from The university of Agriculture
Peshawar or any other University in the country world At any time if any statement
found to be incorrect even after my graduation the university has the right to withdraw
my Ph D Degree
Jahangir khan
Date
101
CERTIFICATE OF APPROVAL
It is certified that the research work presented in the Ph D dissertation of Mr Jahangir
Khan C No 45 University Registration No 2006 -Agr-U-13234 Session 2014-2017
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar under the titled ―HOUSEHOLD
PREFRENCES AND WILLINGNESS TO PAY FOR PESTICIDES FREE FRUIT IN
KHYBER PAKHTUNKHAWA (KP) PAKISTAN was conducted under the
supervision of Dr Abbas Ullah Jan
No part of this dissertation has been submitted anywhere else for any degree The
dissertation is submitted for the award of degree of Doctor of Philosophy in the
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar
Ph D Scholar Jahangir Khan
APPROVED BY
1 External Examiner _________________ Lal K Almas Ph D
Associate Dean and Regents
Professor Agricultural Business amp
Economics University of West Texas
AampM USA
2 External Examiner ___________________ Prof Dr Harun Ucak
Alanya Alaadin Keykubat
University Turkey
Major Supervisor ___________________ Dr Abbas Ullah Jan
Head of Department ________________
Dr Ghaffar Ali
i
LIST OF TABLE
Table No Title Page No
31 Total population and sampled households from selected UClsquos 32
32 Payment card format 41
33 Bid system for Pesticides free fruits 44
34 Description of explanatory variables 45
41 Age of the householdlsquos head (Years) 47
42 Educational Level of the Householdlsquos Head (Years) 48
43 Householdslsquo size of the Respondents (Member in Number) 48
44 Householdslsquo Income in Pakistanlsquos Rupee (PKR) 49
45 Households expenditure on food (PKR) 50
46 Householdlsquos monthly expenditure share on fresh fruits (PKR) 50
47 Householdlsquos Awareness and Perceptions of Pesticides use on Fruit
Grown 51
48 Factors influencing respondent householdlsquos WTP (Ordered logit model) 55
49 Predicted probabilities and marginal effects from the estimated ordered
logit model 61
410 Matrix of correlation coefficient between explanatory variables 62
411 Factors influencing consumerslsquo WTP (double-bounded dichotomous
choice model) 65
412 Households mean estimated WTP 66
413 Householdslsquo Response to First Bid (Amount) 67
414 Diagnostic test results 68
415 Estimated parameters using liner regression model 70
416 Mean willingness to pay comparison from CV question format 71
417 Comparison of response rates by CV question format 71
ii
ACKNOWLEDGEMENTS
I am grateful to Almighty Allah for blessing me with the potential of seeking
the light of knowledge the taste of gaining knowledge courage and for all the blessings
which enabled me to complete a stage of education
Doing a research is not an individual work Itlsquos indeed the result of efforts by
many people I would like to thanks all people who helped and supported me to
complete this research successfully
My whole hearted and profound thanks to my advisor Dr Abbas Ullah Jan
Department of agricultural amp Applied Economics for his support critical review
valuable suggestions and inspiration to make this research success
My most special thanks to Assistant Prof Dr Syed Attaullah Shah Department
of agricultural amp Applied Economics for his cooperation and valuable suggestions
providing me all facilities during the course of this research
My sincere thanks to Dr Ghaffar Dr Dawood Jan and all faculty members
Department of agricultural amp Applied Economics for their cooperation advices and
back-up to achieve my goals and their encouragement and instrumental support during
the research practical work
I would like to submit my admirations to my friends and foreign research expert
Dr Kar Ho Lim and Dr Aditya Khanal Department of Agricultural amp Environmental
Sciences College of Agriculture Tennessee State University USA for their help
especially in thesis write-up and paper publication
At last but the not least I wish to put across my deep admiration to my parents
friends relatives and family members who support me during my study
Jahangir Khan
iii
HOUSEHOLDrsquoS PREFRENCES AND WILLINGNESS TO PAY
FOR PESTICIDES FREE FRUIT IN KHYBER
PAKHTUNKHAWA PAKISTAN
Jahangir Khan and Abbas Ullah Jan
Department of Agricultural amp Applied Economics
Faculty of Rural Social Sciences
The University of Agriculture
Peshawar-Pakistan
May 2018
ABSTRACT
The over use of fertilizers and pesticides in agriculture are degrading natural ecosystem
and human health The substantial association of health risk with pesticide residues and
its adverse impact on environment has fetched attention of researchers across the globe
In this alarming scenario pesticide free farming is deemed as panacea to
environmental human and animal health friendly production system Pesticide free
fruit are considered to be superior in quality as compared to fruit produced
conventionally and helps in preventing several health and environmental hazards
Therefore the demand for pesticide free fruit is increasing throughout the world Given
this increasing demand for pesticide free fruit this study is designed to measure what
price premium household would be willing to pay (WTP) for fruit free from pesticides
such as apple peach and mango This study also aims to identify factors influencing
householdslsquo WTP decision of pesticide free fruit in Khyber Pakhtunkhwa (KP)
Pakistan The primary data was gleaned from 1000 sampled respondents through face
to face interview from two selected districts namely Peshawar and Mardan KP
Pakistan To elicit householdlsquos WTP information Contingent Valuation Method
(CVM) was employed Contingent valuation is a survey based method used for eliciting
willingness to pay of the householdslsquo for environmental and natural resources
Different elicitation techniques are used to design CV question scenario such as
payment card question double dichotomous choice question and open ended question
Consequently this study used the entire three payment format to elicit householdlsquos
WTP for pesticide free fruit The ordered logit model was employed to appraise the
payment card method However linear regression model was adopted to identify
factors influencing householdlsquos willingness to pay for pesticides free fruit
Nevertheless the double bounded dichotomous choice model was performed to
measure dichotomous choice questions The major results demonstrate that 935 percent
households were willing to pay higher prices for fruit pesticides free in the study area
Estimates remarkably reveal that around 35 percent households were willing to pay 16
to 20 percent higher prices and 24 percent households were willing to pay 6 to 10
percent higher prices for pesticides free fruit than the prevailing prices of conventional
produce It is reported by 61 percent of the households that local farmers use irrational
pesticides on fruit Major findings have also corroborated that 881 percent sampled
household have perceived health concerns over pesticides residues in food Similarly
911 percent of the households have supported the idea that farmer should be engaged
in environmental benign agricultural production practices which have a minimum
adverse impact on health and the environment Socio economic and demographic traits
have confirmed positive significant effects on householdlsquos willingness to pay The
iv
results of householdlsquos head awareness on WTP are according to the prior expectations
that awareness of householdlsquos head has significant contribution in willingness to pay
for pesticides free fruit While householdlsquos size has a significant but inverse effect on
willingness to pay for pesticides free fruit Furthermore householdlsquos perception
regarding health and environment concern has a propensity to positively influence the
willingness to pay for pesticides free fruit It is also depicted by the results that mean
WTP by using double dichotomous payment card and open ended elicitation format
validates consumer demand for pesticide free fruit in the study area Three separate
mean WTP were computed for each double dichotomous choice payment card and
open ended format which were figured as Rs2576 1632 and 1437 respectively
These results reveal market potential for pesticides free fruit in the study area This
research study is expected to contribute in the three different aspects Firstly this study
has figured out the potential for pesticides free markets in Pakistan This study has also
abridged the research gap regarding consumerlsquos preferences and willingness to pay for
pesticides free fruit which can be generalized and replicated to other areas In addition
results have provided insight to fruit producers helping them to strategize production
system decisions Based on the findings from this research government non-
government organization and other stakeholders should formulate policies and would
promote and encourage the production of pesticides free fruit in Pakistan
1
I INTRODUCTION
Pesticides are agrochemical formulated to cope with the severe problems diseases
caused by insects fungi virus and self-grown weeds The term pesticide can be defined
as any chemical or natural substance applied with the objective to repel destroy or
control pests and regulate plant growth (FAO 2002) In modern agriculture arena
pesticides are intensively used on crops before and after harvest The application of
pesticides surged with the passage of time due to an increase in the demand for
agricultural commodities by the burgeoning population of the world The overall
pesticidelsquos consumption across the globe is observed as about 2 million tons per year
While this massive pesticides consumption demonstrates that about 69 percent is used
by European countries and the remaining 31 percent is utilized by the rest of the world
as mentioned by Abhilash and Singh (2009) The more alarming situation is that the
aforementioned magnitude of pesticides consumption is increasing with the every
passing year as reported by FAO (2002)
The green revolution as well as a huge increase in the application of pesticides in the
agriculture realm had enhanced food and non-food crop production Resultantly the
significant surge in the economic growth of several agricultural based economies was
reported over the last few decades as demonstrated by Carvalho (2006) Despite the
substantial contribution of pesticides to diminish the food insecurity societies around
the world are cognizant and concerned about the food sanitation safety and
environmental externalities owing to irrational use of pesticides and other croplsquos input
(Wilson 2000) More categorically the food safety realization in developed countries
has been led to organic agriculture Whereas in many developing countries which
include but not limited to Pakistan the pesticides-free and organic food markets
remained underdeveloped due to several reasons One of the obvious reasons is the
uncertainty among consumerlsquos preference that led to their concern if an organic market
can be self-sustained Similarly a dearth of proper market structures and institutional
support failed to provide environment-friendly agriculture practices in developing
countries (Rehber and Turhan 2002) The current scenario of agriculture sector in
developing countries has raised several considerable questions to acquire the
anticipated implications for this sector However the most relevant query drifted that
2
―Is there sufficient consumerlsquos willingness to pay (WTP) available in a developing
country for grass-roots development of pesticide-free agriculture
11 Background of the Research Endeavor
Agriculture sector is the mainstay of Pakistanlsquos economy which significantly
contributes as 192 percent to overall Gross Domestic Product (GDP) of its economy
(GOP 2016-17) Despite many efforts and policy reforms still this sector is entangled
with insignificant growth momentum
Since the inception of this country in 1947 there wasnlsquot any notable crop and plant
protection policy adopted by concerned policy makers over a long span of time It is
evident from past timeline that ―Grow More slogan was initiated by the government of
Pakistan back in 1970s to address the escalating foodlsquos demand of rapidly increasing
population of Pakistan Subsequently Grow More policy resulted in ever increasing
pest problem which couldnlsquot be controlled with conventional crop management
practices Therefore the government started to provide the direct subsidy to Pesticides
Industry to provide panacea to croplsquos pest problem But unfortunately the colossal
surge in pesticides utilization had not only destroyed the pests but was also found lethal
for the environment benign organisms that include predators birds etc This irrational
use of pesticides and other crop inputs has caused huge economic loses and health
issues among the farming community
Pakistanlsquos agriculture is endowed with 11 (Eleven) different agro-ecological zones
providing the country an incredible exciting arena for experimentation and state of the
art for agriculture as reported by Altaf (2010) This diversified nature of ecological
zones can be utilized in a lucrative way to attain an optimal output The driving forces
of this sector are striving hard to curtail the gaps by ensuring the adequate production
and supplying the food to meet the demand of rapid growing population of the country
However the emerging challenges such as irrational use of croplsquos input and complying
with world trade organization (WTO) obligations are insisting the concerned policy
makers to focus on paradigm shift for significant contribution of agriculture towards
livelihood welfare and prosperity
3
These different agro ecological conditions provide the encouraging and conducive
environment for the production of cereal crops fruits vegetables and even for non-food
crops Fruits and vegetables grown in Pakistan have a wide domestic demand and have
also attracted the international consumer by exporting these edibles in the international
market Pakistan exports mango apple dates oranges guava and dry fruits like pine
nuts to different countries which include but not limited to Afghanistan UAE Saudi
Arabia and Europe (GOP 2014-15)
The relative importance of agricultural sector can be gauged with high growth rate of
exports of fruits and vegetables from Pakistan to different countries mainly South East
and the Middle East (Khalid Mustafa 2003) where low Sanitary and Phytosanitary
(SPS) standards are comply with Yet several more fruit grown in Pakistan have
enormous potential to be exported in the international market Specifically insect pest
infestation during pre- and post- harvest of fruit and vegetables is a significant problem
To protect from those many kinds of pesticides and agro-chemicals are widely used in
Pakistan These include different types of agro-chemicals which consist more than 100
types of insecticides almost 30 types of fungicides and approximately 39 different
types of herbicides (Zia et al 2009Anwar et al 2011) In 1960 the consumption of
chemical pesticides in Pakistan was 7000 tons per year which has risen to 78 232 tons
per year in 2003 (Syed and Malik 2011)With the development of pest resistance to
those chemicals over years each year new chemical compounds in large amount are
used to protect crops Overuse of these agro-chemicals has caused many adverse health
and environmental effects
However significant variation in consumer behavior in the developed countries has
excelled the demand of high quality food which had encouraged the organic
agriculture Thatlsquos why developing countries who have still adopted obsolete strategies
for pest control are out of race for agriculture export and are at venture to be considered
as ―dirty producer in an international market Similarly in Pakistan massive increase
in the pesticidelsquos use has escorted to two major harms to Pakistanlsquos economy Firstly
Pakistan imports a large quantity of pesticides incurring billions of costs on it and
second overuse of pesticides on agricultural commodities has created many health and
environmental hazards in the farming community of Pakistan Several research
endeavors such as Ahmad et al (2004) Rizwan et al (2005) Parveen and Masud
4
(2001) had divulged that individuals working in field under pesticides exposed
environment specifically women who worked long time in the cotton croplsquos field
sustained more health hazards These health hazard underscored skin irritation
headache nausea and gastroenteritis It is also evident that the hazardous chemical
residues of organo-chlorines organophosphate and synthetic pyrethroids pesticides
were found in 85 percent of the blood samples drawn from 75 sampled individuals
(male and female) in Pakistan
12 Pesticides free Food and Products
Pesticides free fruit and vegetable are those edibles that are grown without the use of
pesticides and can be deemed as major component of an organic farming Due to
awareness among people about advantages of Pesticides free fruit and vegetable which
upshot in food safety and benefit environment as well the production and consumption
of such food products is being highly valued With the consumption of food produced
without the use of pesticides can be helpful in the prevention of some of the health
hazards related with the consumption of conventional food (Nouhoheflin et al 2004)
The term ―Pesticides free was introduced for the first time in a book ―Look to the
Land in 1939 by Lord Northbourne The author narrates pesticides free farm as an
organization that making use of environment balance technique by adopting zero
pesticides In early 20th
century pesticides free food ideology was brought forward
while correspondingly there was an immense use of chemical in food products as well
Householdslsquo were having great concern about their health as well as soil condition and
they began to grow such food which was free from chemical residuals In the era of
70s a noteworthy change was reported in escalating the demand of pesticides free food
and pesticides free farming Therefore in year 1972 ―International Federation of
Pesticide free Agriculture Movement was formed In the same era the producers who
were producing pesticides free food individually commenced the certification process
The obvious aim of the process was to develop rules and to underpin the standards of
pesticides free production
In this modern era where food consumers are highly concerned about their health safety
and environment benign practices they prefer to buy pesticides free food products
This is because of their knowledge about the relationships between the production
practices and quality of food produced Consumers are becoming more conscious as
5
they are aware of the harmful effects of food produced with irrational pesticides use on
their health Many research endeavors have corroborated that fresh fruit and vegetables
confers health related benefits and provide protection against the risk associated with
different types of diseases like diabetes stroke and cancer(Van and Pivonka 2000 Stan
Kar Stoner Singh 2008) Likewise the world health organization (WHO) has
revealed in their research carried out in 2002 that the fruits and vegetables
contaminated with pesticides can cause about 31 percent of diseases related to heart and
11 percent stroke in all over the world However if best quality of fruit and vegetable
consumption is adequately increased it is projected that about 27 million of lives can
be protected each year Pesticides free food contains higher level of antioxidants which
fight against various diseases and provide different essential vitamins More
importantly pesticides free food products also aimed to prevent from some allergies
and diseases common in human being It is corroborated by other research studies that
chemical fertilizer free food are beneficial for human health as well as for the animals
wildlife and for the ecosystem To encourage such agricultural management techniques
in developing countries in general and Pakistan in particular still there is long way to
go but such research studies can provide the paved way to open new avenues for the
concerned policy makers and stakeholder in the realm of Agriculture
In addition locally grown pesticide free produce tends to fetch higher prices due to
sanitation concerns of the consumer and improved quality of the product Subsequently
such produce are preferred by the household and they are agree to pay a price premium
for such food produced free from pesticides compared to prevailing regular market
price of conventional food products Thus it is important to measure householdlsquos
willingness to pay for locally produced pesticide free fruit To acquire a good or
service consumerslsquo wants to sacrifice an extra amount of money which show their
willingness to pay Willingness to pay can also be defined more categorically as the
extra amount of money that an individual wants to pay for best quality of food (Lusk
and Hudson 2004) The commonly used model for eliciting householdlsquos willingness to
pay information is Contingent Valuation Method (CVM) Contingent valuation (CV) is
a survey-based method which is used to elicit householdlsquos willingness to pay for
environmental and natural resources
6
12 Justification of the Study
With the every passing year the demand for agriculture products is hiking due to rapid
increase in the worldlsquos population Pakistan being an agrarian country is striving hard
to fulfill the domestic and international demand for agricultural food To overcome the
escalating demand for agricultural product farmers mainly depend on chemical
technologies to manage pests and to provide enough food Besides their benefits now it
is clear that pesticides are negatively influencing human health and also the natural
environment The food that we are eating has gained more discussion in all over the
world including developing countries like Pakistan that whether this food is safer for
human health and for natural environment Consumers are facing with problemslsquo which
food is safe to eat and which is not safe Which food processing is beneficial for human
and environment and which is worse (Bold et al 2015 Chiew Shi Wee et al 2014
Sirieix 2011 and Butt et al 2015) Most of people are turning towards the production
and consumption of pesticides free food to resolve these issues
In developed countries consumers are highly concerned about the excessive use of
chemicals on food and its negative impact on health and natural environment thatlsquos
why the production of food produced without the use of pesticides Large numbers of
studies are conducted on consumerslsquo perception regarding pesticides- free food in
developed countries like Europe Australia United State and New Zealand but in
developing countries very little is known about consumerslsquo perception regarding
pesticides-free food
Despite the fact that food production without pesticides and other chemicals are safe for
health and environment its production and consumption is very low In Pakistan only
few farmers are using chemicals free technology for food production It has only 28
farms producing pesticides-free food which they just growing for their own
consumption not for commercial purpose In Pakistan there is high gape of information
about consumerlsquos perception and awareness regarding pesticides-free food and
consumerslsquo willingness to pay for pesticides-free food (Panhwar 2004)
Keeping in view the human health hazards and environmental vulnerability owing to
irrational use of pesticides alternative farming systems such as pesticides free farming
integrated pest management (IPM) and organic farming is becoming progressively
7
more popular in the global context However in the country like Pakistan where costly
input and lower output agriculture was a historic focus Following the Green
Revolution in 1960s adoption of certified organic production is expected to be fairly
low Nevertheless aforementioned agriculture practices could be an alternative system
in convincing farmers towards safe and sustainable agriculture and to comply with the
strict regulations and mandates of certified organic system and WTO Moreover due to
conducive and diversified weather and climatic condition of the country and relatively
cheaper labor force availability production of such safer food seems feasible
Pesticides free food is supposed to be having high prices however it is important to
examine whether households are willing to pay a higher price for these pesticides free
fruit According to the research study conducted in different countries of the world on
pesticides free food this study also focus to investigate a price premium that
households are willing to pay for pesticides-free fruit and factors influencing their
decision For this purpose Khyber Pakhtunkhwa (KP) is selected as a research area
Khyber Pakhtunkhwa (KP) is blessed with fertile soil and plenty of water for irrigation
and is famous for production of delicious fruit such as peach apple guava plum
mango Pear apricot date and citrus Fruit farming has been an important business of
Khyber Pakhtunkhwa and the total fruit production during 2015-16 was 411448 tons
from 44737 hectare (GOKP 2015-16) Given that the region is one of the important
fruit growing regions with relatively readily available agricultural labor growers has
the potential to produce pesticides free fruit in this region In this direction more
research work is required to estimate a price premium householdslsquo willing to pay for
fruit free of chemicals and pesticides Thatlsquos why this study is designed to measure
what price premium households would be willing to pay for pesticides free fruit and
improvement in apple peach and mango quality produced by farmers
14 Purpose and objectives of the Study
The irrational and overuse of pesticides in agricultural food production causes severe
damages to human as well as animal health and to the environment too Thus a new
production and new system is needed to overcome these problems and to limiting the
use of these hazardous chemicals during production process The risk of harmful effects
on health and environment are generally reduced with pesticides free farming compared
8
to conventional farming methods Hence pesticides-free farming has the potential to
provide a healthy and safer environment The purpose of conducting this study is to
understand the factors that influence householdlsquos behavior in purchasing pesticide free
food and their willingness to pay for such food The main theme to carry out this study
is to discuss on the variables which determines householdlsquos behavior in the buying
pattern of pesticide free food Besides this research also aims to increase the
understanding on householdlsquos awareness attitude and perceptions towards pesticide
free products
The general objective of this study was to investigate what price premium householdslsquo
are willing to pay for pesticides free fruit produced locally
The specific objectives of this research study are mentioned as below
To study socio-economic characteristics of household and their expenditure on
fruit
To investigate householdlsquos perception towards the use of pesticides on fruit
production
To identify factors influencing householdlsquos willingness to pay (WTP) for
pesticides free fruit
To compare householdlsquos willingness to pay across urban and rural regions of
the study area
To examine the effect of different contingent valuation elicitation format on
householdlsquos WTP
15 Research Questions
1 Do householdlsquos willingness to pay a price premium for pesticide free fruit
produced locally is affected by their socio-economic characteristics
2 Do householdslsquo willingness to pay price premium for pesticide free fruit
produced locally are different in rural and urban regions
3 Do householdslsquo willingness to pay price premium for pesticide free fruit
produced locally are affected by WTP question format
9
16 Hypotheses
Hypothesis is a proper statement that shows the expected association between an
exogenous and endogenous variable (Creswell 1994) Hypothesis is mainly of two
types the null (Ho) and the alternative (H1) hypothesis The null hypothesis is a
statement about the relationship between the dependent and independent variables
while the alternative hypothesis is tested for the acceptance or for the rejection of null
hypothesis through using different test-statistics and usually opposite to the null
hypothesis
161 Hypotheses to be tested
Hypothesis 1
H1 Socioeconomic characteristics have significant effect on householdlsquos WTP
for pesticides free fruit produced locally
Hypothesis 2
H1 Rural and urban locations have significant effect on householdlsquos WTP for
pesticides free fruit produced locally
Hypothesis 3
H1 WTP question format have significant effect on householdlsquos WTP for
pesticides free fruit produced locally
17 Contribution of the Study
The major findings of this research endeavor could be lucrative to pesticides-free food
industry players in designing and implementing programs relating to the production
marketing and consumer behavior regarding fruit and vegetable The study is providing
information regarding householdlsquos willingness to pay an extra amount for pesticides
free fruit at market place The identification of factors influencing purchase of
pesticides free food provides valuable information in formulating short and long term
marketing programs Also the outcomes of the study provide benefits to Government
in their policy making towards pesticides-free farming and pesticides free products
Pesticides free fruit could contribute significantly to wealth formation poverty
lessening and can assess to export market Pesticides free fruit provide healthy food and
natural environment to the society
10
18 Organization of thesis
This study is organized into five chapters In the first chapter background of the study
research questions study hypothesis research justification and contribution of this
study is discussed Chapter two is consist of review of literature related to consumerslsquo
perception market potential and market prospects empirical research studies on
consumerlsquos willingness to pay and consumer knowledge about pesticides free food
socio-demographic variables and their effects on willingness to pay price premium are
discussed Chapter three discuss in detail the study area conceptual and empirical
framework on consumerslsquo willingness to pay and contingent valuation methods are
discussed Chapter four presents descriptive analysis and results obtained from
empirical findings and Chapter five provide summary conclusion and recommendation
and future suggestions on the basis of research findings
11
II LITERATURE REVIEW
Literature review is a synthesis of previous study in the content of a thesis In this
chapter different past investigation are reviewed Mostly this chapter concern on the
methods adopted by different researchers while measuring willingness to pay It also
figure-out various explanatory variables which have been found influencing
householdslsquo willingness to pay an extra amount of money for pesticides-free food
Previous researches on perception questions are also discussed
21 Illustration of Contingent Valuation Method (CVM)
A number of research studies are undertaken across globe to investigate about
consumerslsquo WTP for safer foods such as organically produced pesticides free or
naturally grown Most of the WTP studies use contingent valuation methods where
hypothetical market scenario is developed and subjects are asked to name their WTP
price as compared to existing market price Different techniquesquestionnaires are
used in contingent valuation method where respondents are directly asked to state their
maximum amount of money they are willing to pay for specified improvements in
environmental or health quality The methods used in CVM includes personnel
interview mail and survey that elicit consumerlsquos WTP for those goods yet not available
in the market Survey questions include single bounded double bounded dichotomous
choice and open ended or closed ended (Lusk and Hudson 2004)
Misra et al (1991) studied consumer preferences and their willingness to pay for
pesticides free fresh produce by applying contingent valuation method An ordered
probit model was adopted to know householdlsquos stated willingness to pay for products
free from pesticides residual The study also aimed to know the factors affecting the
probability of householdslsquo WTP for a number of alternative price premiums The
results indicated that householdlsquos willingness to pay was different across different
factors The study concluded that testing and certification was the recommendation of
the households Results also showed that consumers in the study area opposed higher
prices for certified-FPR fresh produce
In another study Gil et al (2000) adopted contingent valuation method and studied
consumerslsquo willingness to pay for pesticides free fruit in Spanish regions Results
showed that consumerslsquo concern over health and environment was increased Results
12
also suggested that due to the adverse impact of conventional food on health and
environment demand for pesticides-free food has raised Results of the study also
showed that consumerslsquo were willing to pay more prices for fruits vegetables and
meats which were free of pesticides
Boccaletti and Nardella (2000) used contingent valuation method to assess householdlsquos
willingness to pay for pesticides free fresh fruit and vegetables To know the impacts of
explanatory variables on the probability of householdslsquo willingness to pay different
price premium an ordered logit model was used and results were reported A
significant and positive effect of income on householdlsquos willingness to pay was
observed Results of the study also suggest that householdlsquos education and associated
risk concern has an inverse relation with households WTP
In another study Millock et al (2002) conducted a research study by using contingent
valuation technique to estimate willingness to pay for pesticides free products through
panel data The information collected was based on weekly report of householdslsquo
purchases of 2000 Danish families Questionnaires were sent to households and asked
them to differentiate different food attributes The food product attributes were included
environmental issues animal welfare and food safety The result showed that
household had given high value to food free from pesticideslsquo residues
Similarly in a relevant study Cranfield and Magnussan (2003) studied willingness to
pay of the Canadian householdlsquos for those products which were free from pesticides
residuals by applying an Ordered Probit Analysis model A contingent valuation (CV)
study was attempted to know that if Canadian households would pay a price premium
for pesticides free food products About sixty five (65) percent of the householdlsquos were
willing to pay a 1 to 10 percent extra amount of compared to those products
contaminated with pesticides residuals About five percent of the total respondents were
willing to pay more than 20 percent price premium The main determinants that switch
over the households to pay higher premiums for pesticides free products were
householdslsquo health concern and environmental concern
In a relevant study John and Eric (2004) developed a survey based research to find out
householdlsquos choice of paying an extra amount for fresh and pesticides free products by
using a contingent valuation technique According to their research 65 percent of
13
households were willing to pay one to ten percent extra prices for pesticides-free
products as compare to conventionally produce one five percent respondents willing
to pay more than twenty percent Health and natural environmental issues youth and
grocery stores were the important factors influencing consumers to pay higher prices
Masias et al (2012) carried out a research study in Spain to analyze the level of
knowledge consumption and consumerlsquos willingness to pay for organic vegetables
such as organic tomatoes By using contingent valuation method three distinct
consumerslsquo groups were identified The results showed consumerlsquos lack of knowledge
regarding organic vegetable Result of the study revealed a clear relationship between
level of knowledge and organic food consumption and consumerslsquo potential willingness
to pay
Boys et al (2014) conduct a research study in Dominica to assess willingness of the
consumerslsquo and their opinion for organic or locally grown produce By adopting
contingent valuation method (CVM) maximum likelihood estimation (MLE) procedure
was applied Findings from the study reported that respondents in Dominica were
willing to pay 175 percent for organic and 12 percent price premium for locally
produced food Results of the study showed that consumer response towards
willingness to pay was different across socio-demographic characteristics family health
status and experience regarding adoption of organic food products
22 Crux of the Double bounded dichotomous choice model
Many recent research studies deployed double bounded dichotomous choice model to
study consumerslsquo willingness to pay for pesticides free organic and related food
Owusu (2010) studied and analyzed market possibility for new pesticides free lettuce
and water melon by using a double bounded dichotomous choice contingent valuation
technique in the city of Kumasi in Ghana The information of the respondents was
collected By applying a Tobit model householdslsquo willingness to pay was assessed
More than 50 percent price premium were paid by 71 percent of the respondents for
natural vegetables and 82 were willing to pay 1 to 50 percent higher premiums for
natural fruits Results showed that human capital food qualities and householdlsquos
recognition impact householdlsquos willingness to pay for pesticide free commodities The
14
evaluated market possibility for pesticide free fruits were (GHcent32117113 US$
26453433) for every annum and for naturally produced vegetable was GHcent1991224
(US$1640083) per year suggested an immense market possibility for naturally
produced fruits in Ghana
sum
(
)
(
)
Where
are binary valued (0 or 1) indicators and the formulas
for the corresponding response probabilities are given above The model was estimated
through maximum likelihood estimation method and the results were used to find out
the mean and individual WTP (s) for pesticides free fruits
Where ƒ(WTP) is a function X is a set of socio-economic characteristics are
coefficients and is error term
In another study Cerda et al (2012) investigated different markets regarding
respondentlsquos preferences and willingness pay a price premium for products free from
pesticide in Chile Conjoint analysis was also used to estimate the marginal willingness
to pay of the consumer for pesticide-free apple A total of 400 individuals were
interviewed to know householdlsquos willingness to pay and to determine different
attributes that consumer search when purchasing apple by using a logistic probability
function and single-bound dichotomous elicitation format The output showed sweet
apple lowest price and pesticides free production attributes were preferred by
households Results of the study revealed that consumers in the study area were willing
to pay about 130 Chilean pesos kilogram for pesticide free apple
By using double bounded dichotomous choice approach Minh et al (2013) conducted
a research study on consumption and willingness to pay a price premium for pesticides
free vegetables in Vietnam Under contingent valuation method 185 respondents were
surveyed and analyzed Results showed that about 15 percent of the consumers had
already used pesticides free vegetables and 88 percent sought to try and purchase such
products if available in the market Result revealed that consumerslsquo were willing to pay
15
on average 70 percent more amount for pesticides free vegetable than the convention
price Findings also showed that respondents with more concerned about pesticides free
food and high purchasing power were more likely to pay extra amount of money
Findings of the study showed most of the consumers were still worrying about safe
food because of chemical residues in vegetables Results suggest that control of
pesticides level was difficult for state agencies because of insufficient capabilities
Some recommendations were suggested based on findings of the study such as the
consumers should be informed regarding organic vegetables and information should be
publicized to consumers and to expand organic market share in the future new shops
should be open
Hai et al (2013) conducted a research study on consumption of organic vegetables and
consumer WTP for vegetables produced without the use of pesticides in Vietnam They
reported in their study that most of the consumers were still worrying about safe food
because of chemical residues in vegetables Control of pesticides level was difficult for
state agencies because of insufficient capabilities By using double bounded
dichotomous choice approach under contingent valuation method 185 respondents
were surveyed and analyzed The results showed that about 15 percent of the
consumers had already used pesticides-free vegetables and 88 percent of the total
respondents desired to try and purchase if such pesticides free products were available
in the market On average consumers were willing to pay 70 percent more price than
the convention price Findings of the study also showed that respondents with high
income and more concerned about pesticides-free food were more likely to pay price
premium
23 Overview of the Ordered Logit Model
Regarding discrete nature and ordinal ranking of the WTP variables in payment card
method an ordered logistic regression was applied in many research studies Ordered
logistic regression is the most appropriate choice in studying these issues (Green
2007) Under latent variable framework the willingness to pay model can be written as
follows
16
Where is an unobserved latent variable reflecting the WTP for pesticides-free fruits
for household i expressed in terms of utility to switch from the traditionally grown
fruits consumption to pesticide free fruits is a parameterlsquos vector reflecting the
relationship between WTP captures a set of socioeconomic and demographic
variables influencing WTP and is the unobserved disturbance term reflecting
stochastic differences between households not controlled for The relationship between
the unobserved and the observed outcome for household ( =0 1 2hellipj) can
be summarized as follows
It is presumed that ɛ is normally distributed across observation
With regards to ordered logistic model Valchovska S (2004) investigated Dutch
householdlsquos attitudes and behavioral intentions to purchase pesticides-free olive oil By
applying CVM to assess consumer willingness to pay a price premium for pesticides
free olive oil on the Dutch consumer an ordered logit regression model was used
Results suggested that willingness to pay did not depend on socio-demographic factors
but rather on consumers awareness and experience with the product Results also
showed that experience regarding the product was significantly related to purchase
intention and willingness to pay Most of the consumers considered pesticide-free olive
oil to be too expensive Results suggested high prices appeared the biggest constraint
on consumption Results clearly verified that consumerslsquo familiarity with pesticide-free
olive oil in the Netherlands was low at present This situation may however be
changed by a possible increased availability of the product in the supermarkets
17
Rodriguez et al (2008) carried out a research study to measure consumers WTP for the
available pesticides free products in Argentina domestic market The data was collected
through a survey from the consumers of Buenos Aires city For the analysis of data a
binomial multiple logistic regression model was applied Five different organic
products such as regular milk leafy vegetables whole wheat flour and fresh chicken
and aromatic herbs were selected for the research The method of contingent valuation
(CVM) was adopted to estimate consumerslsquo stated willingness to pay The result
revealed that pesticide free agriculture has undergone momentous expansion and
consumers in the study area were willing to pay a higher amount of money for such
organic products Research results suggest that along with price that play a significant
rule while consuming organic products non availability of stores for organic products
and a reliable regulatory system limits the consumption of pesticides free organic
products in the study area
According to Kalogeras et al (2009) carried out a research study that concentrates on
the identification of Dutch householdslsquo willingness to pay (WTP) for natural olive oil
The study was carried out in 5 biggest Dutch cities in Netherland To evaluate the
impact of explanatory variables on householdslsquo willingness to pay a price premium for
natural produced olive oil an ordered logit regression model was constructed Results
suggest that experience awareness and consumerslsquo personnel satisfaction were the
variables influencing consumerslsquo WTP for natural olive oil
Travis et al (2009) conduct a research on consumer purchasing behavior for pesticides
free fruits and vegetables To identify the impact of socio-economic and socio-
demographic characteristics on the probability of consumers belonging to certain
groups like devoted casual or nonuser an ordered logistic model was used Results
showed that factors like price and income were influencing householdlsquos willingness to
purchase pesticides-free fruits and vegetables to some extent The results also showed
that respondents with a college degree children aged more than six years and aged
above than fifty years were willing to purchase pesticides-free fruits and vegetables
Zeki and Zia (2009) carried out a research study to investigate consumerslsquo stated WTP
for tomatoes produced free from pesticides residues The study also aimed to measure
the impacts of socio-demographic and hazard variables on WTP Ordered Probit model
18
was used to figure out the likelihood of WTP for pesticide free tomatoes The
information was acquired from 666 respondents by survey method in Ankara and Tokat
regions at same occasion The study results revealed that 3423 percent of Turkish
households were not willing to pay 7702 percent willing to pay a 30 percent higher
amount of money and 22 97 percent would be willing to pay more than 30 percent
premium According to the results Turkish households were paying a little price
premium for tomatoes produced free from pesticides Furthermore the important
factors significantly influencing willingness to pay for pesticides free tomatoes were
gender education statue of mother recognizes for ecologic agriculture solid
sustenance and risk
Oyawole et al (2016) conducted a study in Nigeria to asseslsquo consumer awareness
benefits and willingness to pay for organic vegetables Descriptive statistics and logit
model was used for the analysis of data According to the research findings about 70
percent of consumers were aware of the benefits of organic agriculture and hence they
were willing to pay price premium Results showed that factors influencing willingness
to pay positively were higher education and consumer awareness regarding organic
food while age income and gender had no significant influence on consumer
willingness to pay
Hayati et al (2017) conducted a research study in Marand city to identify factors
effecting consumerslsquo WTP for pesticides-free fruits and vegetables To assess
respondentlsquos willingness to pay an ordered logistic regression model was applied By
using Contingent valuation method data was collected from 394 respondents The
results revealed that 33 of the respondents were willing to pay 20 more price
premium 64 showed 5 to 20 more price premium while only a small portion 3
of the total sample of the consumers were not willing to pay more price for pesticides
free fruits and vegetables Findings of the study also revealed that factors such as
income of the respondent environmental and health concern and consumerlsquos
knowledge regarding pesticides free fruits and vegetables were significantly affecting
respondentslsquo willingness to pay for vegetables and fruits free from pesticides residues
19
24 Factors influencing Householdsrsquo Willingness to Pay
Based on the literature review factors influencing households WTP a price premium
are discussed below
WTPj = β0 +β1Agej + β2Genj + β3Eduj+ β4Hsizej + β5Incj + β6Locj + β7Healthconj+
β8Envirconcernj +
Where
WTP = Willingness to pay for pesticides free fruit = Householdslsquo head age in years
= Gender status of the householdslsquo head = Education level of householdslsquo head in
years = Householdslsquo size = Income of the household = Householdslsquo
location = Health concerned = Environment concerned micro=Error term
Govindasamy and Italia (1991) investigated households in different grocery retail
markets in New Jersy to know their different opinion regarding pesticides free
products The main theme of the research study was to know demographic
characteristics that caused the household to pay a price premium for products free from
pesticides residues than the price prevailing in the market The result showed the
influencing factors that caused the individual to pay more price premium for pesticides
free products were demographics characteristics such as females those having higher
income and young individuals The result also showed that number of member in
households had an inverse relation with willingness to pay More individual in a house
were not willing to pay higher prices for pesticides free products
Piyasiri and Ariyawardana (2002) conduct a research study to identify market potential
and consumerslsquo expectations for pesticides free food in Kandy Sri Lanka The study
also aimed to identify factors influencing consumerslsquo willingness to pay price premium
for pesticides-free food Results revealed that most of consumers in the study area were
aware of the use of pesticides free food and this awareness influenced their
consumption of organic food and willingness to pay more for organic food Results
showed that socio-demographic characteristics like income education of the
respondents beside environment knowledge were the important factors influencing
consumerslsquo WTP for pesticides-free food Study suggested that market for organic food
could be enhanced by availability of organic food in easily accessible shops and market
20
should also direct awareness in consumer regarding demand and consumption of
organic food
Qingbin and Junjie (2003) conduct a study to identify market potential for pesticides
free apple and milk by adopting a conjoint analysis technique in Vermont State of
USA Results found that there was a significant niche market for pesticides free apple
and milk The results also suggested that especially those consumers who were
regularly purchased pesticides free products were willing to pay price premium for
apple and milk produced without the use of chemicals and certified by NOFA
Heo and Kim (2004) investigated green marketing strategies and willingness to pay for
environment-friendly agricultural products in the Metropolitan area The results
revealed consumerlsquos WTP for grain vegetables fruit and processed foodstuffs were
206 percent 202 percent 193 percent and 172 percent respectively higher than
agricultural products produced by conventional farming method
Gracia and Magistris (2007) conduct a research study to know consumerslsquo purchasing
behavior regarding pesticide-free food and also factors influencing food purchasing in
Iran A multivariate limited dependent variable model was used Results showed that
households purchasing pattern was more for pesticides free products and they
purchased such safer products in large quantity Findings of the study showed that
purchase of pesticide free products depends on householdlsquos behavior and information
regarding the product Moreover householdlsquos behavior regarding health concern and
environment concerns given by pesticides-free products were the factors that explained
both intension and final decision to purchase pesticide free products Income and
information about pesticide free products had a significant positive influence on the
decision of the consumer to purchase pesticides free products
Kamal et al (2009) studied householdlsquos willingness to pay a higher price for
pesticides-free products in Kathmandu valley About 180 respondents were interviewed
by using well designed questionnaires to find out their perception for pesticide-free
food commodities and asses their willingness to pay The study revealed that almost all
the respondents were willing to pay a higher price for such food but the level of
acceptability varied Up to 58 of the respondents were willing to pay 6- 20 more
price while 13 were willing to pay half premium The average price premium was
21
noted about 30 Over 39 of the respondents suggest the extra price is reasonable for
pesticide-free food while 27 suggest it a really higher price However results showed
that the consumption of pesticide free food had increased
Morteza et al (2009) conducted a study to examine consumerslsquo willingness to pay for
pesticides free fruits and vegetables The results showed that variables such as socio-
demographic characteristics and perception of the respondents regarding environment
and health concern were influencing consumerslsquo WTP for pesticides free food
Environment concern was the important factor of consumer willingness to pay but
results from this study showed that respondents in New Brunswick gave more priority
to health as compare to environment Results also indicated a positive influence of
income and health concern on consumer willingness to pay for organic food
Ghorbani and Harnraz (2009) carried out a research study on factors influencing
consumer WTP for pesticides free products in Iran By applying Tobit model the
results showed that physical look and information of consumerslsquo were the influencing
factors affecting willingness to pay higher price Consumerlsquos concern of chemicals
residues in diets were also positively affecting willingness to pay In demographic
characteristics such as education of the respondents had negative effect on WTP The
study suggested that farmers and consumers should be encouraged to produce and
consume pesticides-free food Study also suggests that marketing strategies should be
encouraged for the marketing of such organic food products
Akgungor et al (2010) carried out a research study to estimate consumerslsquo perception
regarding safe food and the trade-off that urban Turkish consumer made between good
quality and chemicallsquos free fresh fruits and vegetables The date was gathered from a
representative sample of urban consumers The results suggested higher income and
more educated respondents were highly interested and they had more knowledge
regarding organic products Results showed suggested reason for choosing organic
products was consumerslsquo perception regarding organic products of low health risk and
higher nutritional value Results showed 36 percent higher price premium consumers
were willing to pay for organic food that suggests urban Turkish consumerslsquo demand
for organic products
22
Oraman and Unakitan (2010) analyzed factors influencing Turkish consumerslsquo
purchasing decisions for fruits and vegetables The survey conducted in Istanbul by
applying logistic model Results of the survey showed that health and safety concern
were the important factors influencing consumerslsquo preferences regarding organic food
Findings of the study would help organic food producer in targeting factors that were
influencing consumerslsquo decisions to purchase organic food products
Bektas et al (2011) conducted a research study to determine level of consumerslsquo
awareness regarding food safety in Izmir Turkey by applying Probit model Results
revealed that consumerslsquo with high income and more education were more aware
regarding safer food Outcome of the study also identified aged respondents had more
probability for healthy and safe food products Results suggested that awareness for
safer food should be passed through informative campaign targeting especially low and
middle income groups as well as low education level population
Coulibaly et al (2011) studied the health risk caused by using large quantity of
chemicals and pesticides on vegetables By using a hedonic pricing model they
identified the determinants of the householdlsquos WTP for pesticide free products
Information was collected through a well designed questionnaire on householdlsquos
perception awareness and consumerslsquo willingness to pay for pesticide free vegetables
The perception of householdlsquos for good quality vegetables included color freshness no
external damage and firmness The most important factor effecting householdlsquos choice
to pay more for pesticide-free vegetables were awareness about the health hazards
caused by those chemical Households were willing to pay more than fifty percent for
those products free of such pesticides and chemicals
Joyce et al (2011) conduct a survey to examine consumerslsquo perceptions and to assess
their willingness to pay for pesticides-free product They surveyed 100 households in
Morogoro municipal The results presented showed that 78 of the respondents were
willing to pay a higher price for pesticides-free food The results revealed that
environment and health concern were the most important factors effecting householdlsquos
willingness to pay for organic food Results from the survey suggested that
consumption of pesticides free food were increasing but need certification labeling
processing and packaging to boost up the demand
23
Sangkumchaliang and Huang (2012) conducted a survey on consumerslsquo perception and
attitude towards organic food products Results showed that consumers were
purchasing organic food products because of the expectations that organic food is
healthier and safer to the environment Results also revealed that respondents with old
aged and more educated were more willing to purchase organic food products The
study suggested that consumerlsquos information needed to purchases organic food
Owusua and Anifori (2013) analyzed the willingness of householdlsquos to pay an extra
amount of money to watermelon and lettuce produced naturally or free from pesticides
by applying a (CV) contingent valuation information starting with urban Kumasi in
Ghana The impacts of the determinants of the householdlsquos willingness to pay a higher
price were examined with a Bivariate Tobit model Results showed socioeconomic
characteristics as well as freshness and cleanness of products had a great influence on
householdlsquos choice to pay a higher price than they pay for conventional products
While householdslsquo size has a negative impact on consumerslsquo willingness on paying
premium to natural lettuce The estimated mean householdlsquos willingness to pay for
pesticide free watermelon was Ghcent05554 (US$ 0 4575) and for natural lettuce was
GHcent12579 (US$1 0361)
Haghjou (2013) investigated that the demand for those products that was grown without
the use of pesticides has increased amazingly in the recent years The study was carried
out to assess the factors effecting householdlsquos willingness to pay a higher price for
organic products accessible in the Argentinean provincial market The output of the
study reveals that 95 of the respondents were willing to pay a higher price while 10
of the householdlsquos were like to pay about 35 percent higher price than the market
existed price for naturally grown products The results suggested that householdslsquo
income family size ecological problems including respondentslsquo knowledge has
enhanced their desire to pay higher price for pesticide-free products than the
conventional one The result also showed that female as well as house wives were
agreed to pay more price premium
HUI et al (2013) conduct a survey on householdslsquo WTP a price premium for
pesticides-free products in Klang valley The study was based on householdlsquos
purchases by 2012 on their demographic and social-economic characteristics To study
the householdlsquos perception and WTP for pesticide free products 500 households were
24
interviewed by using well designed questionnaires The data collected were analyzed to
find what determined the presence of pesticide-free products The main theme of the
research study was to know the determinants that playing rule in willingness to pay for
products free from pesticides residues The result revealed that majority of the
households were agreed to pay a higher price premium for pesticide free products
Different factors like environment psychology food free from pesticide residuals and
health conscious were related to explain household willingness to pay for organic
products However the result also showed that social demographic and level of
knowledge did not explain the WTP for products free from pesticide
Syed et al (2014) studied different level of pesticides in different vegetables and fruits
in Pakistan The results obtained showed that more than half of the collected samples
were contaminated with organophosphate pyrethroids and more organochlorines
pesticides Numerous research studies found that tomato apple melon mango grapes
and plum among fruits and vegetables has crossed the maximum residual levels of
FAO and World Health Organization (WHO) The comparison with other areas showed
that in 50 of the sample the residual level was above than the stated level but was in
agreement with neighboring countries like china and Bangladesh Higher hazard risk
index (HRI) values were calculated for dieldrin methamidophos op-DDT diazinon
and pp-DDT in apple mango banana melon potato and onion
Vidogbena et al (2015) carried out a research study in major cities in Benin to asseslsquo
consumer perceptions about cabbage produced by a physical barriers method to protect
cabbage from pesticides Results showed that consumers were aware of the impacts of
pesticides on health and environment but they were not able to differentiate between
cabbage produced conventionally and through this net method Results of the study
revealed that consumer were willing to pay higher price for cabbage produced with
minimum application of pesticides as compared to one produced with pesticides
application Consumers were willing to pay 38 more price than the existed market
price Results indicated that females more educated and aged respondents were willing
to pay more prices for better quality cabbage
Safdar et al (2015) studied pesticide free food consumption and consumerslsquo WTP in
the United Arab Emirates To recognize major determinants of respondentlsquos willing to
pay more price for products free from pesticides residues a regression model was used
25
Around 300 hundred respondents were interviewed and information was collected The
results showed that the consumption of such food was increased in the study area This
increment was due to high per person price premium more knowledge about nourished
food products and different household population Consumers were paid price premium
for the food free from pesticides residuals Results showed that majority of the
respondents respond when inquired as to whether they were willing to pay more for
pesticide-free products Age nationality instruction family size and salary were main
factors influencing consumerslsquo to pay higher price for the pesticides-free food products
Hiren et al (2016) carried out a survey in Tennessee State USA The data were
collected on a random sample from grocery shoppers to assess consumer general
knowledge about pesticides-free food and to know their willingness to pay For this
study binary logistic regression model was used The survey showed that most of the
consumer had a fair knowledge about pesticides free food Results indicated that
number of those respondents who had never been used organic food was higher than
those who usually used The results showed that income and environmental concern
were the factors that effectively determine to pay more for pesticides-free food
Aguiar et al (2016) studied factors influencing consumerslsquo purchasing behavior
regarding organic food in Brazil by using structural equation modeling (SEM)
approach Results revealed that most of the consumerslsquo were willing to buy organic
food Respondents were willing to pay 25 percent price premium for organic food as
compared to food produced conventionally Results suggest the main determinants of
consumerslsquo willingness to pay were their beliefs of positive effects of organic food on
health and environment
Mangan et al (2016) studied level of awareness and willingness to pay for organic
vegetables in Sindh province of Pakistan Result of the study reported that majority of
the respondents had knowledge about the beneficial effect of organic vegetables while
less than half of the respondents had never heard about organic vegetables Results also
showed that most of the respondents (82) were not aware of the benefits of organic
vegetables to the environment Majority of the respondents were willing to pay price
for organic vegetables
26
Nandi et al (2016) studied consumer willingness to pay for organic fruits and
vegetables and also factors influencing consumerslsquo WTP in India For the estimation of
respondentlsquos willingness to pay contingent valuation method (CVM) was used For the
data analysis 250 respondents were selected A binomial regression model was used to
know respondents willingness to pay and the factors influencing on WTP Results
revealed that most of the respondents were confronted with environment problem
health related issues and safe environment and food The respondents were increasingly
desired to have more healthier and environmental friendly food To acquire better
quality of fruits and vegetables about 90 percent of consumers were willing to pay a
price premium ranging from 5 percent to 100 percent Factors like income of
respondents householdlsquos size gender and other opinion variables such as pesticides
residues in food taste and environmental concern were significantly influencing
consumer willingness to pay a price premium
Slamet et al (2016) conducted a research study to identify factors influencing
consumerslsquo willingness to purchase pesticides free vegetables in Jabodetabek region
(Jakarta) Data was obtained through a householdlsquos survey Three methods binary logit
model descriptive analysis and factor analysis were used for analysis of data The
results showed that respondents with more income minimum householdlsquos size and
price tolerant were more likely to purchase pesticides-free vegetables The study also
indicated other factors determining consumerlsquos willingness to purchase for pesticides-
free vegetables were positive attitude health concern environment concern as well as
positive belief in pesticides-free vegetables
Gumber and Joyti (2017) conduct a research study in national capital region of India to
find out price premium and factors effecting consumerslsquo WTP for pesticides free food
Results of the study showed that consumerlsquo demographic characteristics like education
income of the respondents environmental concern and health related issues were the
important factors influencing consumers to pay higher price for organic food Besides
other variables like taste physical look certification packaging and promotion were
found to have no influence on consumer willingness to pay for pesticides-free food
Results suggested organic food producer to design communication strategies and
suitable pricing strategies in the study area
27
25 Essence of the Literature Reviewed
The above literature reported that several studies have been conducted on
consumerhouseholds willingness to pay for pesticides-free fruits with contingent
valuation method (Govindasamy and Italia 1999 Krystallis and Chryssohoidis 2005
Quagrainie 2006 Kimenju and De Groote 2008) In this type of models a
hypothetical market scenario is developed in which consumer are asked about their
stated WTP a price premium Misra et al (1991) and Boccaletti and Nardella (2000)
used contingent valuation method and analyzed household willingness to pay for
organic products in Italy and USA Gil et al (2000) also used the contingent valuation
model in Spain and reported that respondents in that study area were willing to pay a
price premium for pesticide-free fruits
Regarding the socio-demographic profile of pesticides-free products the above
underline research study showed that mostly female respondents were willing to pay
price premium more frequently than male respondents Age factors also played an
important role with older consumers observed more WTP due to their health concern
On the other hand income played a vital role while buying safer food Literature also
supported that more educated respondents are willing to pay more price premium for
healthier and environmental friendly food products
The preceding review presents valuable information on contingent valuation method
and consumer willingness to pay price premium for organic foods and environment
resources Since most of the work had done on consumer willingness to pay for
pesticide-free fruits in developed countries but not a few studied paid much attention to
conduct research on householdslsquo willingness to pay for pesticides-free fruits in
developing countries like Pakistan
A few facts emerge the literature review One the coverage of consumerslsquo WTP for
organic and pesticide-free food is rather thin in the literature The lack of this
information could inhibit governmental and developmental agencieslsquo decision Second
the consumer WTP is a factor demographics and consumerslsquo perception This study
uses CVM to explore Pakistani consumer WTP for pesticide-free fruit We found socio-
demographic factors such as age education income householdlsquos size householdlsquos
head education and perception significantly influencing householdslsquo WTP Findings of
28
WTP
Environmental
concern
Socio-demoghr
aphic characte
risitcs
consumer knowledge of PFF
Health
concern
this study almost showed 26 percent price premium that suggest a strong indication of
consumerslsquo demand for pesticide-free fruit This is a convincing message for
agriculture policymakers to encourage and educate farmers for production of pesticide-
free fruits Thus this study is timely relevant and provided additional information on
understanding consumerlsquos attitudinal behavior choice and factors effecting willingness
to pay for pesticide free fruits in Khyber Pakhtunkhwa (Pakistan)
Review of literature highlighted different influencing factors that affect the consumers
willingness to pay for pesticides-free food are shown in figure 1 It shows that
perception of consumers regarding human health and environment and socio-economic
and socio-demographic characteristics have an influential affect on consumer
willingness to pay
Figure 1 Factors effecting consumerrsquos WTP for pesticides free fruits
29
III MATERIALS AND METHODS
This chapter consists of two sections The first section describes the study area while
the second section presents the conceptual frame of the study The second section
provides a detailed discussion about the methodology being employed for the research
In the beginning of this section a brief debates provided on Contingent Valuation
Method (CVM) used to analyze householdslsquo willingness to pay (WTP) and later on
elaborate specification of the empirical models used for capturing the factors
influencing householdlsquos willingness to pay for pesticides-free fruit and vegetables is
given followed by a discussion on how the data was collected in the study area
31 Khyber Pakhtunkhwa
Khyber Pakhtunkhwa (KP) occupies a north-west position in Pakistan with a total area
of about 74521 square km Gilgit-Baltistan is situated on its northeast Punjab on the
southeast and Azad Kashmir on the east A long and narrow piece of land belongs to
the Federally Administered Tribal Areas (FATA) borders situated to its south and
Baluchistan directly below it On its west Federally Administered Tribal Areas are
situated and Afghanistan is situated on its northwest According to census report 1998
the total population of KP was 177 million According to the 2011 Census Bureau of
Pakistan house listing operation the population of KP was estimated to be more
than 268 million There are a total of 26 districts in KP Naturally KP has been
endowed with abundant cultural and tourism friendly environment It has the capability
to become a charming area for the tourist in the world Due to its beautiful and
attractive scenery geographical location climate and God gifted natural resources KP
is exceptionally abundant in terms of multitudes of tourist attraction The core of this
charm is clear from the striking natural picturesque consisting of beautiful rivers
attractive and splendid waterfalls spiral lakes mostly in the hilly areas and ever green
valleylsquos in most parts of the province TCKP (Tourism Corporation Khyber
Pakhtunkhwa(2015)Districts of KP is shown in figure31
30
Figure 31 District Peshawar and Mardan of Khyber Pakhtunkhwa
31
32 Sampling Technique
Three stage stratified sampling technique was used for the collection of data
from study area
321 Stage 1 _Selection of district Peshawar and Mardan
In the first stage as KP is comprised of 26 districts Peshawar and Mardan was
purposively selected The purpose behind this selection was huge population in these
two districts
322 Stage 2 _ Selection of Union Councils (UCs)
In the second stage from each selected district one urban and one rural union
council were randomly selected Thus a total of 4 union councils were taken as a
sample location from both districts
323 Stage 3 _Selection of households from each Union Council
In the third and final stage a list of households was obtained from local union
councillsquos health department (BHU) The following Yamanelsquos (1967) formula was
used to decide sample size of households
Where
- r is the sample size for households
- N is the total households in selected UCs and
- e is the minimum probability of error
The value of ―e was selected at e = 003 with the intension to keep the error at lowest
possible level and select a best representative sample from the given population of
10020 households
The Yamanelsquos formula suggests a sample size of 1000 households from two districts
After deciding sample size households was taken from selected union councils (UCs)
using proportional allocation sampling technique The allocation is said to be
32
proportional when the total sample size n is distributed among the different union
councils in proportion to the size of strata
=
____________________ (2)
Where
- = no of sampled respondents in each stratum
- Ni =population size of ith UCs
- N = the total number of households in selected UCs
- n = total number of households
The number of sampled households selected through proportional allocation method is
given in table 31
Table 31 Total population and sampled households from selected UCrsquos
District Union councils Total households Sampled
households
Mardan Urban 3090 309
Rural 1910 191
Peshawar Urban 3000 300
Rural 2020 202
Total 4UClsquos 10020 1000
Source Local Basic Health Unit (BHU) Peshawar and Mardan
33 Allocation of Sample Size for Different Models
A total of 1000 sampled respondents were selected for this research study from urban
and rural areas of the two districts namely Peshawar and Mardan of Khyber
Pakhtunkhwa Pakistan A sample of 600 respondents was reserved for double
bounded dichotomous choice model For the best estimation of parameters double
bounded model requires large sample size compared to open ended and payment card
model (Calia and Strazzera 2000) Out of total respondents a sample of 400
households were allocated for linear regression model and ordered logit model 200
for each model
33
34Contingent Valuation Survey Designing
CVM produces values contingent upon the description of the resource and the method
of payment The accurate measurement of any resource requires a detailed description
of the resource (Loomis et al 2000) The survey designed for this study started with the
description of the conventional food commodities and uses of different varieties of
chemical pesticides on fruit and vegetables before and after harvest After the
description of pesticides its harmful effects on human being as well as on environment
then pesticide free fruits were discussed with the households After describing the
benefits of pesticides free fruit respondents were asked to rank the relative importance
of each benefit The main reason for asking this question was to reveal householdlsquos
preferences their non-monetary value for use and nonuse benefits and to compare
them with their stated WTP response
Results in CVM are sensitive to the valuation question format and payment mechanism
(Carson and Hanemann 2005) The National Oceanic and Atmospheric Administration
(NOAA) Blue Ribbon Panel recommended the use of single bounded dichotomous
choice CV questions with mandatory payment vehicles (Arrow et al 1993) However
recent studies show that the single bounded dichotomous choice method provides
limited information about householdlsquos WTP and produces higher WTP compared to
open-ended question and payment card method (Zhongmin et al 2006) The single
question dichotomous choice method requires a large number of respondents to obtain
an accurate estimate of WTP (Carson and Hanemann 2005) People in the study area
were not familiar with CV Survey The use of an open-ended question format may
generate high zero WTP responses Consequently this study used the entire three
payment format to elicit householdlsquos WTP for pesticides-free products
35 Householdsrsquo Survey
This research mainly based on primary data The primary data was amassed through
interview schedule On the basis of objectives of the study a well-defined questionnaire
was prepared and was pre-tested in the field A small Pre-test was conducted before the
final data collection About 1000 households from Peshawar and Mardan were face to
face interviewed In contingent valuation studies face to face interview is more reliable
(Carson 2000) Socio-demographic characteristics attitudinal and behavioral
34
information of the households were collected Through this survey the data was
gathered both from rural and urban areas of the selected districts District Peshawar and
urban areas were taken equal to one and district Mardan and rural areas were taken
equal to zero Before asking the respondents for their willingness to pay a price
premium they were briefed about the differences among the conventional and
pesticides free fruit The attitudes of the consumers and knowledge about the minimum
use of pesticides on fruit were also gathered to better know how the respondents relate
different aspects of pesticides free fruit These attitudinal behavior questions were
posed using a modified Likert scale response (where a one equals agree and zero equals
disagree) Different values were assigned to each response according to a well-defined
method in the literature (Cranfield and Magnusson 2003)
36 Conceptual Framework
This section is devoted to the conceptual framework of the study Households utility
and willingness to pay willingness to pay and contingent valuation method and the
estimation of mean WTP are discussed The empirical discussion on the factors
influencing householdlsquos willingness to pay a price premium is also discussed
361 Householdrsquos Utility and Willingness to Pay
Willingness to pay could be analyzed as a householdlsquos choice problem Following
Canfield et al 2003 the study assumes that a household who buys and consumes a
conventionally produced food products encounters the same food products but in
pesticide free form on the market The household who decides to purchase pesticide-
free fruits instead of the conventional one does so because it is assumed that hisher
utility is higher for the pesticide-free food (Magnusson et al 2005) If the utility does
not change then a rational household will not be willing to pay as an increase in the
price results in a lower level of utility compared to the base level of utility Also if the
utility increases then the household may be willing to pay more for pesticides-free
food on the basis that the price increase does not lower the utility beyond the base level
(Cranfield et al 2003) The householdlsquos willingness to pay is therefore a function of
the change in utility arising from the consumption of pesticides-free food Thus
35
Where ∆U is the change in utility
Since the choice of one product over another is a discrete one it is convenient to look at
householdlsquos choice problem in a random utility setting Random utility models have
been used extensively in the valuation literature in the analysis of householdlsquos food
safety valuation and assessment of householdlsquos response to new (or different) products
(Eom 1994 Veeman and Adamowicz 2000 Kuperis et al 1999 Quagrainie et al
1998) Following the random utility framework proposed by Cranfield et al (2003) it
is assumed that a household faces a choice between buying either the conventional or
pesticides-free food variety of the same product The utility derived from consuming a
given product by a household is given as
Where
Where is the utility arising from choosing the ith alternative is the deterministic
component of the utility function is a vector of observable alternative specific
factors that influence utility is a vector of parameters and is the stochastic
component The households choose alternative if and only if for all (or
that without loss of generality
The utility of the household is however not observable What is observed is whether or
not the household chooses to pay a premium for the pesticide free product
362 WTP and CVM
On the basis of stated preferences consumer willingness to pay can be measured by
several methods To extensively elicit consumer preferences for food labels on different
attributes economist and market researchers have used contingent valuation (CV)
choice experiment (CE) and experimental auction (EA) or combination of all the three
methods (Fox et al 1994 Fox 1995 Huffman et al 1996 Hossain et al 2003
Loureiro and Umberger2003 2005) To estimate willingness to pay (WTP) economist
must turn to hypothetical due to unavailability of markets for the good or service
Historically Contingent Valuation Method (CVM) has been used for the evaluation of
consumerlsquos preferences for those goods not available in the market
36
Contingent Valuation Method is a survey based method where respondents are
presented with a hypothetical payment scenario for pesticide free products in this study
pesticides-free fruits Methods used in contingent valuation include face to face
interview surveys and mail to elicit consumerlsquos willingness to pay for organic and
pesticide-free food Contingent valuation method based on a survey approach was
presented by SVCiariacy-Wantrup (1947) however contingent valuation method was
first time empirically used by Davis (1963) Due to its proficiency most of the
researchers and policy makers used this technique to elicit consumerlsquos valuation for
those goods which are not available in the market such as research concerns to
environment health and recreation (Jakobsson ampDragun 1996)
The classification of framework to measure WTP based on the data collection methods
are as presented in Figure 32 We employed contingent valuation method (CVM) to
measure householdslsquo willingness to pay for pesticides-free fruits among the different
available alternative methods in the literature CVM was the most widely used
approach (Hanemann 1984)
Figure 32 Classification framework of methods to measure willingness-to-pay
Source (Breidert Hahsler ampReutterer 2006)
37 Elicitation Techniques
According to Portney(1994)to draw out the value of good and service different
elicitation techniques are used to design CV question scenario It is the important part
37
of any CVM study The elicitation used in contingent valuation methods are of various
types The most popular ones are bidding game approach open ended payment card
and dichotomous choice approach
371 Bidding Game Approach
In this approach a bid is randomly assigned to each respondent from a list of
predetermined bids The assigned bid may be a lower bid or higher bid Respondents
are to answer the bid and the process is continuous until the highest positive response is
recorded (Randall et al 1974 as cited in Venkatachalam 2004) Since this approach
provides market like situation and the respondents can research their preferences so the
results obtained through this approach are quite better
372 Open-ended Elicitation Method
In open ended questions format respondents are asked to identify a single amount
without suggesting them any value Respondents are asked to give their opinion on
―How much they willing to pay for a certain attribute Mitchell and Carson (1989)
found certain drawbacks in using this question format They reported that this method
provides maximum no response no answer and outliers In this method respondents do
not know what value heshe has to select
373 Payment Card Approach
Another technique in contingent valuation method is the payment card approach In this
question format respondents are asked to select an amount in willingness to pay from a
checklist given in absolute value or in percentage of prices (Boccaletti ampNardella
2000 Lacaze Rodriguez and Lupin 2009)This approach is used for small sample
size However it has been noted that the respondents could easily be confused if the
survey is not carefully designed (Wang and Whittington 2005)
374 Dichotomous Choice Model
In this format two choices are provided to respondents ―Yes or ―No This format
resembles the market choice behavior It included single bounded double bounded and
multiple bounded questions format
38
A Single Bounded Method
The single bounded format was first used by (Bishop and Heberlein 1979) The
consumers are asked whether they would be willing to pay a single amount for a certain
goods having an extra quality attribute The answer expected might be ―yes or ―no to
the given amount This format is easy to use but it provides limited information for
willingness to pay amount and the bidding game stop after a single information
provided
Most of the research work done on willingness to pay has suggested that respondents in
contingent valuation methods do not have a single value of price but they might have a
range of economic values in their mind (Cameron ampQiggim 1994 Dobourg Jones-lee
and Loomes 1994)
B Double Bounded Method
In double-bounded questions format respondents are presented with follow-up
questions after asking the first question For example if respondentlsquos answered to the
first question is ―yes willingness to pay a $X the next question might be whether
respondents willing to pay $Y (typically $Y gt $X) On the other hand if respondents
say ―No the first question than heshe might ask whether the respondents willing to
pay $Z (typically $Z lt $X) This questionlsquos approach is also called doubled-bounded
referendum approach (Cameron ampQiggim 1994) In comparison with single bounded
model more statistical efficiency can be seen by estimating doubled-bounded
willingness to pay data with the help of interval based econometric model (Heinemann
et al 1991) Figure 33 shows double bounded choice format
This study used all the three question scenarios to elicit WTP for pesticide free fruits
39
WTP
Yes
wtp
1st bid
yes
wtp 2nd
higher bid
yes No
No
wtp 2nd lower bid
yes No
No
Figure 33 Double Bounded Choice formats
38 Empirical Estimation of WTP by Payment Card using Ordered Logit Model
Regarding discrete nature and ordinal ranking of the WTP variables in payment card
method an ordered logistic regression was applied as the most appropriate choice in
studying these issues (Green 2007) The WTP model can be written under latent
variable framework as follows
Where is an unobserved latent variable reflecting the WTP for pesticides-free fruits
for household i expressed in terms of utility to switch from the traditionally grown
fruits consumption to pesticide free fruits is a vector of parameters reflecting the
relationship between WTP captures a set of socioeconomic and
demographicvariables influencing WTP and is the unobserved disturbance term
reflecting stochastic differences between households not controlled for The
40
relationship between the unobserved and the observedoutcome for household
( =0 12hellipj) can be summarized as follows
It is presumed that ɛ is normally distributed across observation By normalizing the
mean and variance of ɛ to zero and one the following probabilities can be calculated
Where F () indicates distribution function and microlsquos are unknown parameters to be
estimated with β
A natural question arises that when a variable influencing outcome changes than how
this variable influences the probabilities of different outcome For example if age is a
factor which influence consumer willingness to pay different choices then how would a
personlsquos probability of being WTP different choices be effected if heshe was a year
older Aldrich and Nelson stated that the estimated coefficients only determine the
direction of the effect but not the magnitude The magnitude of ordered logit cannot be
simply interpreted but signs and statistical significance agree with linear regression
(Wooldridge 2001) To answer the above question and take the idea marginal effects
can be calculated The marginal effects show that how a change in explanatory
variables affects the probability of willingness to pay that consumers are willing to pay
for different WTP classes In this model the coefficients are not equal to the marginal
41
effects of explanatory variables on probabilities Since the marginal effects can be
calculated by the following equation
There are two broad Cumulative density function (CDF) choices Logistic density
function and standard normal density function The model is said to be ordered logit if
the distribution is cumulative standard logistic (F) and the model is said to be ordered
Probit if the distribution is cumulative standard normal (Φ) Results obtained from
both of these models are same only the difference is in the tail The logistic distribution
has heavier tail than the standard normal distribution As Green (2000) reported ―It is
difficult to justify choice of one distribution over other on theoretical grounds in most
applications it seems not much difference The results obtained from both models
may be quite similar because of the similar distribution However an ordered logit
model is applied in this study
Empirically we estimated ordered logit model where WTPj is an ordered dependent
variable with ten WTP price premium categories
Table 32 Payment card format
Price premium classes (PKR)
WTP
= 0
WTP
1-5
WTP
6-10
WTP
11-15
WTP
16-20
WTP
21-25
WTP
26-30
WTP
31-35
WTP
36-40
Above
40
Source Pre- tested field survey (2017)
42
39 Empirical Estimation of WTP using Double Bounded Dichotomous Choice
Model
For Dichotomous choice question Following Chen et al (2002) and Kimenju et al
(2005) a double bounded dichotomous choice model was used in this study to assess
householdslsquo willingness to pay and the influence of explanatory variables on
householdlsquos WTP a price premium for pesticides-free fruits This model was used
because the dependent variable was double dichotomous whether the respondents
would be willing to pay or not so they provide answer with ―yes or ―no Many
researchers used double-bounded dichotomous choice method in their research such as
(Ara 2002 Rodriguez et al 2007 Abdullah and Jeanty 2011 and Claudy et al
2011)
The double-bounded method confronts each respondent with two dichotomous choice
WTP questions (bids) The 2nd
bid value is contingent on the respondentlsquos reply to 1st
bid If the respondent responds in ―yes to the first bid (B) than the second bid (Bu) is
some amount higher than the first bid (Bu
gt B) If the respondent says ―no to the first
bid the second bid (Bd) is then some lower amount (B
d lt B) Thus there are the
following four possible outcomes for the double-bounded WTP question ―yes-yes
―yes-no ―no-yes and ―no-no
According to Hanemann et al (1991) the probability of answering ―yes-yes (Pryy) is
= )
Where Pryy is the probability of answering ―yes-yes WTP is the respondentlsquos
willingness to pay for the product and F is the cumulative distribution function with
parameter vector Similarly the probability for each of the other three outcome
responses is
]
43
Where and are the probabilities for saying ―yes-no ―no-yes and ―no-
no to the double-bounded question respectively Thus the log-likelihood function for
the ith
respondent can be written as
sum
(
)
(
)
Where
are binary valued (0 or 1) indicators and the formulas
for the corresponding response probabilities are given above The model was estimated
through maximum likelihood estimation method and the results were used to find out
the mean and individual WTP (s) for pesticides free fruits
Where ƒ(WTP) is a function X is a set of socio-economic characteristics are
coefficients and is error term The models were estimated using maximum
likelihood estimation method
391 Factors which could Influence WTP
As Kimenju et al (2005) has indicated WTP is influenced by householdlsquos knowledge
and perception in addition to price and socio-economic factors Moreover
householdlsquos WTP may be influenced by individuals tastes and preferences income
and perceptions on the products in addition to household and socio-economic
characteristics (Cranfield and Magnusson 2003)
A number of different explanatory variables were included in the WTP model These
include demographic variables regional variables and perceptional variables The
variables that are included may depend on the manner by which the data is gathered
(ie contingent valuation surveys experimental methods etc) Factors which
influence householdlsquos willingness to pay for pesticides-free fruits are formally specified
as
44
392 Bids Design
In this study hypothetical prices (bids) for double-bounded dichotomous choice model
were designed based on the prices available for conventional fruit in the market On
average (Rs100kg) To minimize starting bids bias bidding system was used in table
31 Respondents were asked different bid
Table33 Bid system for Pesticides free fruits
First bid High bid Low bid
10 20 5
20 30 10
30 40 20
40 Above 30
Source Field Survey (2017)
310Empirical Estimation of WTP using Linear Regression Model
For open ended questions data a linear WTP model was used to estimate WTP and
identified its determinants
sum
Where
= is the WTP of the jth household for Pesticides-free fruits
= Set of socioeconomic characteristics of the jth household
Factors effecting consumerslsquo willingness to pay for pesticides free fruits can be written
as
Willingness to pay is actually represents the demand of the household The difference
in both is only the consumer surplus If we suppose zero consumerslsquo surplus than the
two identities are the same Therefore willingness to pay in the above model showed
percentage of expenditure on pesticides free fruit of the total food expenditure The
explanatory variables included were age gender education householdlsquos size income
45
location health concern environment concern and awareness Since the dependant
variable in the model is continuous so the appropriate method of estimation was
ordinary least square (OLS)
311Description of Variables
Table 34 presents a list of explanatory variables used in estimation of willingness to
pay a price premium for pesticides-free fruits
Table34 Description of explanatory variables
Respondents willingness to pay
WTP ( Price Premium)
0= Not willing to pay
1= Willingness to pay 1-5
2= Willingness to pay 6-10
3= willingness to pay 11-15
4= willingness to pay 16-20
5= willingness to pay 21-25
6= willingness to pay 26-30
7= willingness to pay 31-35
8= willingness to pay 36-40
9= willingness to pay above
Age of the householdlsquos head
Age Age of the householdlsquos head measured in years
Gender of respondents (Dummy variable)
Gender 0= Female
1= Male
Householdlsquos head education
Education Education of the householdlsquos head in years
Member in each household
Householdslsquo Size In number including all family members
Households location 0 = Rural households
1= Urban households
Awareness Household knowledge regarding pesticides uses on fruits
where 1 shows aware respondents and 0 shows unaware
respondents
Income Income of the households in Pakistani rupees
Consumer attitude towards impact of pesticides on health
Health concern 1 if respondents concern to health 0 if not concerned
Consumer attitude towards impact of pesticides on environment
Environment concern 1 if respondents concern to environment 0 if not
concerned
46
1V RESULTS AND DISCUSSION
This chapter illustrates the major finding of this research endeavor These findings are
computed in the light of major objectives and hypotheses constructed for this research
The collected primary data was punched into the computer and was estimated
encompassing double bounded dichotomous choice model ordered logit model and
linear regression model in the STATA econometric software This chapter is further
bifurcated into three sections In the first section a descriptive statistics is computed to
elaborate the respondentlsquos traits of the study area that includes socio-economic and
demographic aspects as well Followed by the analysis of major attributes such as
attitudinal behavior perception about pesticides free fruit and householdlsquos consumption
behavior that has attain the specific objectives of this study The empirical results on
willingness to pay are underscored in section two Moreover the three different
questionnaires ie dichotomous choice open ended and payment card are adopted and
their results are discussed and compared with each other in section three
41 Descriptive Analysis
Descriptive analysis is a statistical tool that is used to summarize the collected data in
tabulated form The range of data mean value median standard error and variance
coefficients are highlighted via statistical analysis This helps the researcher and readers
to get understanding about the pattern of data This section consists of the descriptive
part of the analysis Socio-demographic characteristics such as age gender education
and other attributes of the respondents are shown in the tabulated form Moreover
socio-economic portfolio that includes income consumption and certain perception
along their attitudinal trend regarding organic and conventional fruits are given and
discussed
411 Demographic and Socio-economic Characteristics
This section demonstrates the demographic and socio-economic characteristics of the
respondents The information was gathered from 1000 household of the study area
47
Age of the householdrsquos head
Householdslsquo age is an essential demographic characteristic and an important factor that
can influence householdslsquo willingness to pay An average age of the household in
district Peshawar and Mardan is computed and given in Table 41 The computation
depicts that an average age of the respondents in Peshawar is reported around 40 years
while in Mardan an average age is observed as 54 years Result reveals a significant
difference in the mean age of rural and urban location of Peshawar with a probability of
(0001) Whereas no significant difference was found in householdlsquos age in urban and
rural region of district Mardan
Table 41 Age of the householdrsquos head (Years)
District Age of the Respondents
Mean Rural Urban T-test
Peshawar 3997 35382 42333 7217
(0000)
Mardan 5402 53188 55870 1104
(0136)
All 46995 47310 46659
Source Authorrsquos calculation based on Survey Data 2016-17
Educational Level of the Householdrsquos Head
An individual entails modern education about developments in technology science and
an array of other managerial skills that drives consumerlsquos behavior Education can also
play a pivotal role in consumerlsquos awareness while choosing improved quality of food
Therefore education can be considered as an imperative factor influencing consumerlsquos
decision to pay higher price for pesticides free fruit Several research studies carried out
across the globe have corroborated that an educated households with higher
qualification are more conscious while making purchasing decision and prefer to
choose pesticides free fruit
Keeping in view an education as a substantial factor persuading consumer behavior the
householdlsquos head education level was analyzed and is presented in Table 42The
descriptive statistics divulged that the mean educational level was observed as 978 and
1138 years of schooling of the household head in Mardan and Peshawar respectively
Estimates of t-test further depicts a significant difference in educational level in rural
48
and urban region of both districts with a p-value of (0001) and (0000) for Mardan and
Peshawar respectively These findings suggest a higher level of education in urban
households compared to rural households These results are in line with Shah et al
(2016)
Table 42 Educational Level of the Householdrsquos Head (Years)
Districts Educational Level
Mean Rural Urban T-test
Mardan 978 8782 12012 3780
(0001)
Peshawar 1138 7735 13257 8016
(0000)
All 1058 8436 12855
Source Authorrsquos calculation based on Survey Data 2016-17
Households Size in the Study Area
Householdslsquo size is an important demographic characteristic which shape households
purchasing behavior Large householdslsquo size increases the consumption without taking
quality in consideration The probability of choosing an improved version of fruit
quality decreases with an increase a member in a household Small size households are
more concerned about good quality of fruit
An estimation of household size data illustrates that an average household size in
district Peshawar and district Mardan was reported as 06 and 09 members respectively
The results shown in Table 43 have suggested no significant difference in householdslsquo
size in urban and rural areas of both districts The average householdlsquos size was
computed as 715 members These results are consistent with Shah et al (2016) who
depicted similar findings for household size in KP
Table 43 Householdsrsquo size of the Respondents (Member in Number)
District
Mean Rural Urban T-test
Mardan 863 8666 8548 0965
(0400)
Peshawar 567 6029 5484 -2122
(0018)
All 715 7796 6463
Source Authorrsquos calculation based on Survey Data 2016-17
49
Income of the Households
The household income level is one of the driving aspects that manipulate the
consumption and saving behavior of an individual Those societies where individuals
earn high income are usually deemed as food secured societies across the globe
however low income group of the poor societies are generally reported as food
insecure It is worth-mentioning that surge in an income can subsequently leads to
choose high quality food (that includes cereals fruits vegetables pulses and their
byproducts) by individuals Likewise householdlsquos income has considered as an
important determinant of willingness to pay for quality attributes such as pesticides
free
An income status of the households in the study area is outlined in Table 44 The mean
income of the Household was calculated as Rs62130 and 42430 in district Mardan and
Peshawar respectively There was a significant difference in the mean income of
respondents from urban and rural areas of both the districts The T-value of Mardan
region was signified as 6018 and had a probability of (0000) while in Peshawar region
was 950 with P-value of (0000)
Table 44 Householdsrsquo Income in Pakistanrsquos Rupee (PKR)
District
Mean Rural Urban T-test
Mardan 63130 5489855 8145161 6018
(0000)
Peshawar 42430 2923529 4922727 9504
(0000)
All 52780 4642718 5952577
Source Authorrsquos calculation based on Survey Data 2016-17
Householdrsquos Expenditure on Food
Food consumption expenditure is the monetary expense incurred by household to
purchase food items Such food expenditure is the key component of current
expenditure to buy consumable goods The data regarding householdlsquos expenditure on
food is estimated and is shown in Table 45 The mean expenditure incurred on food by
the household in Mardan and Peshawar was determined as Rs 49280 and 34860
respectively A significant difference in rural and urban householdlsquos food expenditure
has been reported The computed t-value observed as 425 and 743 with a p-value
0000 which implies that householdlsquos expenditure in urban region was higher as
compared to rural households
50
Table 45 Households expenditure on food (PKR)
District
Mean Rural Urban T-test
Mardan 49280 4511594 5854839 4256
(0000)
Peshawar 34860 2544118 3971212 7435
(0000)
Total 42070 3862136 4573196
Source Authorrsquos calculation based on Survey Data 2016-17
Note Values in parenthesis is P-Value
Householdrsquos Monthly Expenditure Share on Fresh Fruit
Expenditure share is an amount of income that is incurred by an individual on certain
goods out of total spending Households in the study area have allocated their income
share to make an expense for fresh fruits which is shown in Table 46 It has been
observed that in districts Mardan an average spending for fresh fruit was computed as
4172 (PKR) per month by the household Whereas expenditure share for fresh fruit by
Peshawarlsquos household was 3800 (PKR) which was less as compared to Mardan The
given t-values of the estimates confirm a significant difference in expenditure share
incurred for fresh fruits by rural and urban region households of both the districts This
significant difference implies that householdlsquos expenditure share for fresh fruit in urban
area is higher as compared to rural households
Table 46 Householdrsquos monthly expenditure share on fresh fruits (PKR)
Respondents
Mean Rural Urban T-test
Mardan 4172 3798551 5003226 3055
(0000)
Peshawar 3800 2411765 4515152 5103
(0000)
All 3986 3340777 4671134
Source Authorrsquos calculation based on Survey Data 2016-17
51
412 Householdrsquos Awareness and Perceptions about Pesticides Application on
Fruit
This research endeavor was mainly designed to assess the consumer willingness to pay
for pesticides free fruit Therefore it was pertain to glean data about their awareness
about pesticide use on locally produced fruit in the study area These fruit include
Apple Peach and Mango Due to irrational use of pesticides environmental hazards are
also reported by previous research studies therefore there respondents were asked about
their perception about environmental hazards Major findings about the aforementioned
aspects are underscored in Table 47 which reveals that 61 percent of respondents have
a perception that there is an irrational and intensive use of pesticides on fruit by the
local fruitlsquos farmers Around 88 percent of the respondents perceived environmental
and health concerns over pesticides residues in food Similarly 91 percent of the
respondents believed that farmer should engage in environmental friendly agricultural
production practices which have a minimum adverse impact on health and the
environment
However the overall results indicate that sampled households were not entirely
cognizant about an intensive use of pesticide on local fruits however they were
correctly perceived over the impacts of pesticides on human health and environment
Table 47 Householdrsquos Awareness and Perceptions of Pesticides use on Fruit
Grown
Statements Agreed Disagreed
Local farmers are intensively using pesticides on
Apple Peach and Mango fruits
61 39
I feel the use of pesticides in agriculture has
negative effect on the environment
881
119
I am concerned about pesticide residue in our
food supply
876 124
I believe farmer should engage in environmental
friendly agricultural production practices with
minimum impact on human health
901
99
Source Authorrsquos calculation based on Survey Data 2016-17
52
42 Empirical Results of this Research Endeavour
The empirical analysis of the gleaned data was made to achieve the major objectives
and to address the research questions of this research endeavor Major estimates on
―willingness to pay for pesticide free fruits have been made and conferred in this
section Different elicitation techniques were employed to assess householdlsquos
willingness to pay price premium These estimation techniques encompassed double
bounded dichotomous choice model ordered logit model and linear regression model to
appraise dichotomous choice payment card and open ended question
421 Distribution of responses on householdsrsquo willingness to pay
(WTP)
Householdlsquos preferences to pay higher prices for pesticides free fruit were investigated
and highlighted in Figure 41 which demonstrates the distribution of response about
WTP price premium for pesticide free fruit in the survey area The households were
asked whether and how much they were willing to pay higher prices for pesticide free
fruit than conventional produced fruit The primary data estimates confirm that about
935 percent of respondents are willing to pay a higher price premium for pesticide free
fruit in the sampled districts These results are similar with the previous research study
undertaken by Hayati et al(2017) in Iran by using contingent valuation method
Furthermore an ordered logistic regression model was employed which depicts that out
of 394 respondents who were interviewed 97 percent of respondents were willing to
pay price premium for pesticides free fruits and vegetables These results are supported
by Nandi et al(2017) who conducted a study in India by using contingent valuation
method and applying binomial logistic regression model Data was obtained from 250
respondents and reported that more than 90 percent of the respondents were willing to
pay higher price for better quality fruits and vegetables Decomposing the responses 35
percent of the households are willing to pay 16 to 20 percent higher prices for
pesticides free fruits than the conventional 24 percent willing to pay 6 to 10 percent
higher price and 65 are not willing to pay higher price A plausible reason for higher
WTP for significant portion of the population is due to awareness As most of the
respondents in the study area were aware they may have some knowledge about
adverse effects of chemical pesticides Therefore they were willing to pay higher prices
for pesticide free fruits if available
53
NotWTP
1_5 6_10 11_15 16_20 21_25 26_30 31_35 36_40 Above40
650 4
24
9
35
6 550 150
550 3
Figure 41 Distribution of willingness to pay responses (Rskg)
422 Householdrsquos willingness to pay using ordered logit model
Estimated parameters and coefficients of ordered logit model are presented in table 48
Model is specified on the bases of R2 estimated from restricted and unrestricted
likelihood function The likelihood ratio test is used to test the null hypothesis that the
overall effect of coefficients is zero The p-value is 0000 shows that the model is
statistically significant at 95 level of significance The estimated model with a scaled
R2
about 022 which is in consist with the generally R2 value mostly observed in cross
sectional data In cross sectional data like the one used for this study the value of
Pseudo R2 is typically low The conventionally computed R
2 is of limited value in those
models having qualitative nature In most cases this value is low and use of coefficient
of determination as a summary statistics should be avoided in those cases where the
response variables are qualitative (Gujrati 1995)This pseudo R2 cannot be interpreted
separately or across the dataset but could be used when evaluating multiple models
which predict the same results on the same set of data It has only meaningful when
compared to some other pseudo R2 in the same data on the same type and predicting
the same results In this case pseudo R2 indicates which model better predict the results
(Bruin J 2006)This value pointed out overall ability of the model for the correct
prediction of willingness to pay of the consumer based on explanatory variables The
null hypothesis that the joint influence of explanatory variables was zero on the bases
of chi-squire value null hypothesis was rejected
Predicted probabilities and marginal effects are calculated separately because of the
non-linear behavior of logit model Most of the coefficients are statistically significant
54
The variables like householdlsquos age education level of the respondents awareness
income and health concern variables and household size are significant at five percent
The negative sign showed that as the size of numbers in a family increased the log
odds for willingness to pay decreased The same was reported in a relevant study by
Govindasamy and Italia 1999 carried out a research study in New Jearsy to provide
opinion on organic produce Objective of the study was to evaluate demographic
characteristics caused consumers to pay higher prices to obtained organic food
products Findings of the study showed female respondents consumer with higher
annual income and younger individual were more likely to pay higher premiums for
organic produce Our finding shows variables gender was not significant because most
of the respondents in the study area were male
Positive sign on income showed that consumer with higher income were more likely be
willing to pay higher prices for pesticides free fruit It has been also noted that with
increased in income purchasing power of the respondents increased that changed the
purchasing pattern of the respondents This was also confirmed by Roitner-
Schobesberger et al(2008) They conduct a study on consumerslsquo perception regarding
organic food in Bangkok and found that more than a third of the 848 respondents
reported having purchased organic fruits or vegetables and the main reason for buying
organic food was the expectation of the consumers that the food are healthier and
environmentally friendly The respondents who purchased organic vegetables were
those having more aged higher income and more education
Findings of our study also showed that respondents with friendly attitude regarding
environment would be willing to pay higher price for such fruit These results were in
line with Haghjou et al (2013) carried out a research study on factors effecting
consumerlsquos potential willingness to pay for organic food in Tabriz Iran By adapting an
ordered logistic regression model results showed that factors like income of the
respondent family dimension environmental concern and wholesome diet besides
consumerslsquo awareness were significantly increases consumerslsquo willingness to pay for
organic food Results revealed that consumers with higher care about their health were
more likely to be willing a higher price for such pesticides free fruit
55
Table 48 Factors influencing respondent householdrsquos WTP (Ordered logit
model)
Variables Estimated
Coefficient
Std Error Z-ratio P-value
Age 00698807 00147356 474 0000
Gender -02469171 08432503 -029 0770
Education 00821316 00223365 368 0000
Household size -00975395 00502583 -194 0052
Location
Urban
02783974 02961745 094 0347
Income 00000277 000000502 551 0000
Health concern 2600153 05346547 486 0000
Environment
concern
03993532 0574947 069 0487
Awareness 09595126 02836742 338 0001
Source Authorrsquos calculation based on Survey Data 2016-17
Log likelihood = -29863 Pseudo R-squared = 020 LR chi2 (9) = 15849
Number of observation = 200 Probability gt chi2 = 0000
Note indicate statistical significance at 5
56
423 Predicted probabilities and Marginal effects of ordered logit
model
Predicted probabilities and marginal effects of explanatory variables are underscored in
Table 49 These predicted probabilities indicate a strong likelihood that the average
respondent is willing to pay more prices for pesticides free fruit Producers usually
expect high price for their production so if they sought high premiums than marketing
efforts would be diverted to such fraction of consumer where they would probably
willing to pay high price than the conventional price Alone these predicted
probabilities are not too much informative what is more informative is the impact of a
change in predictors on the predicted probabilities (ie marginal effects)
Due to the non-linear behavior of ordered logit model to measure the impact of a
change in particular independent variable on householdslsquo willingness to pay marginal
effects of explanatory variables are calculated Marginal effects show the change in
predicted probabilities for different class of willingness to pay regarding an average
household concerning the particular variable For qualitative choice model estimated
coefficients affect marginal probabilities These marginal probabilities (probability
derivatives) were calculated from the estimated model They measure the change in the
probabilities of each willingness to pay outcome with respect to change in each
explanatory variable The sum of marginal probability is zero in each row because an
increase of the probability in one category must be set off a decrease in the other
category or categories
For continuous variables the interpretation is simple and straight forward Keeping all
other variables fixed a unit change in explanatory variable will results an increase or
decrease in the predicted probability equal to the degree of marginal effect of the stated
variable However in case of binary variable marginal effects shows change in
predicted probabilities based on whether the respondents falls in that category or not
Our results suggest some meaningful insight into the role of socio-economic and
demographic variables on householdlsquos WTP for pesticides-free fruit
Age has a positive and significant influence on householdlsquos WTP for pesticides free
fruit The results show that with an increase in age WTP also increases This finding is
consistent with other researchers who reported that WTP of organic and healthy food
57
increases with age beyond 30-40 years (Hayati et al 2017 Boccaletti and Nardella
2000 and Zellner and Denger 1989)With increase in age people are more concerned
about their health as they may perceive that they are prompt to low immunity and
higher risk for diseases With realization of aging they are more likely to pay higher
price premium for safer foods Our result suggests that the marginal effects of age is
negative for first three WTP classes (ie Not willing to pay WTP 1-5 percent WTP 6-
10 percent and WTP11-15 percent) while positive for the rest of the four classes in
upper tailsmdashindicating that higher age is associated with higher likelihood of paying
premium on upper tails The highest marginal effect of age 0007 is found for category
16-20 percent higher premium This indicates that an increase in age by one year is
associated with 07 percentage point increase in likelihood of paying 16-20 percent
higher premium for pesticides free fruits over conventional These results are in
contrast with Cranfield and Magnusson (2003) conducted a research study on
consumerlsquos willingness to pay for pesticides free food products in Canada by using
contingent valuation method and reported that younger consumers have the strongest
marginal effects (those consumers had an age less than 35 years younger) followed by
those consumers had an age less than 50 years Results showed younger consumers pay
more for healthy foods as compared to older in case of Canadian consumers However
our results are in consistent with several other studies (Hayati et al 2017 Zellner and
Denger 1989) finding a positive influence of age on consumerlsquos WTP for organic and
healthy foods In another study Boccaletti and Nardella (2000) conducted a study on
consumer willingness to pay for organic produce in Northern Italy By adapting an
ordered logit model the impacts of relevant explanatory variables were reported
Results suggests a positive impact of consumerlsquos age on WTP a price premium
The marginal effects for gender indicate female respondents are less likely to be willing
to pay more prices or likely to pay less amount for pesticides free fruit Female
respondents like to pay a price premium but less as compared to male respondents (no
premium or 1 to 5 percent premium) One can observe that most of the respondents in
the study area were male which support our findings These results are in contrast with
Cranfield and Magnusson (2003) The probability of marginal willingness to pay
decreased by (-0001 percent) for higher amount
58
Another significant variable affecting WTP in our study is the years of education of the
householdlsquos head Our result suggests a positive relationship of education on WTP for
pesticides free fruit Households with more formal education have better understanding
of the adverse effect of consuming fruit contaminated with pesticides So they may
better understand the benefits of pesticides free fruit Marginal effects of education are
positive as WTP progresses for higher classes (categories) beyond 16-20 percent (table
49) Among these the highest effect of education 0020 is shown for WTP category
36-40 percent which implies that an additional year of schooling of the household head
increases likelihood of paying 36-40 percent higher price premium for pesticides free
fruit over conventional by around 2 percentage These results are in line with the
findings of Haghjou et al (2013) who found a positive effect of education on WTP for
organic food products in Iran However these results are in contrast with Boccaletti and
Nardella (2000) who reported an inverse relation of consumer education with WTP a
price premium
We also found a significant effect of the household size and household income on WTP
for pesticides free fruit The effect of household size is negative Marginal effect in
table 49 shows that the highest negative effect of 012 is shown for 16-20 WTP
categories which indicate that an additional household member decreases the likelihood
of paying 16-20 percent higher premium for pesticides free fruits by 12 percent One of
the convincing reasons for this negative effect of household size can be the householdlsquos
budget constraint Budget constraint limits the extent to which consumer pay higher
prices for food products (Cranfield and Magnusson 2003) Our findings are consistent
with previous studies Ariyawardana et al (2009) conduct a study on consumerslsquo
willingness to pay for organic ethnic specialty produce in USA reported that marginal
effect of price premium decreases with an increase in householdslsquo member
In regards to income households with higher income are more willing to pay higher
premiums for pesticides free fruit Income always played a significant role in changing
consumerlsquos behavior to change hisher decision from not willing to pay or less willing
to pay to higher willing to pay for organic products Households in highest income
class showed a strong propensity to pay more prices Marginal effects of income for the
first four classes emerged negative Our results suggest a strong propensity to pay
higher prices as household income increases Our marginal effects of income show a
59
monotonic increase in the income effect as WTP premium level progresses beyond 16-
20 percent It implies that at low level of income households are unwilling to pay more
but with rise in income households are ready to pay higher premium for pesticides free
fruit a significantly higher magnitude is shown for the highest category (010 income
coefficient for more than 40 percent premium) Overall it clearly suggests that
household with higher level of income would pay more prices for pesticides free fruit
These results are in line with Hayati et al (2017) and Cranfield and Magnusson (2003)
who found that an increase in income increases purchasing power of consumer which
results a change in purchasing pattern Boccaletti and Nardella (2000) conducted a
study on consumerslsquo willingness to pay for pesticides free fresh fruits and vegetables in
Italy and found that willingness to pay is significantly and positively related to income
We also included variables indicating health and environmental concern of the
respondent Results indicated that the more the households were concerned about the
impact of pesticides in fruits on health and environment the more the probability of
willingness to pay The marginal effects for health concern is negative for first three
willingness to pay classes (ie not willingness to pay willingness to pay 1_5 wiliness
to pay 6_10 percent) and for environment concern it is negative for first four classes
while for the remaining WTP classes it is positive Strikingly the highest magnitude of
marginal effects up to 041 among all variables is found from the health concern
variable On one hand a significantly positive effect suggests that the health concerned
householdslsquo are more likely to pay higher premium for WTP than those not concerned
A magnitude of higher scale on marginal effect on the other hand strongly supports
the distinct difference in WTP between health concerned and non-concerned
individuals Overall this also highlights the importance of this variable on modeling
WTP for pesticides free fruits For example a 041 marginal effect of health concern
variable on 16-20 premium category of WTP suggest that health concerned individual
are 41 percent more likely to pay 16 to 20 percent higher premium for pesticides free
fruit as compared to non-concerned households The effect of health concern on WTP
is consistent and distinctly higher in magnitude from previous similar studies in other
countries For example Hayati et al (2017) found that health concerned individual were
26 percent more likely to pay 16 to 20 percent in Iran This indicates that health
concern factor is an important motivation to premium price for pesticides free fruits in
Pakistan
60
Finally we found a significant effect of awareness variable Recall that our awareness
variable is represented by dummies Our result suggests that the households in the study
area were aware of the fact that farmers are intensively using pesticides on fruits so
they were willing to pay more price premium for pesticides free fruits Marginal effects
show a negative signs for modest price premiums on WTP categories 1-5 and 6-10
while positive signs for all higher categories 16-20 21-25 26-30 31-35 36-40 and
above 40 This may indicate that households are more aware of the adverse impact of
pesticides on health and environment Probably awareness comes from education as our
results shows that the average years of education is higher in the study area
424 Matrix of Correlation Coefficient
Income is generally related with age and education of the households in the study area
(table 410) This result may indicate that more aged households have higher income
and advanced education Households in high income and more educated class shows
high propensity of willingness to pay for pesticides free fruit As the results indicated
that more aged people do care more about their health and high class income
respondents have more discretionary income to spend on fruit Overall the results show
that explanatory variables are not highly correlated hence no problem of
Multicollinearity was diagnosed in the data
61
Table 49 Predicted probabilities and marginal effects from the estimated ordered logit model
Not WTP
()
WTP 1-5
()
WTP 6-
10 ()
WTP 11-
15 ()
WTP 16-
20 ()
WTP 21-
25 ()
WTP 26-
30 ()
WTP 31-
35 ()
WTP 36-
40 ()
WTP
Above 40
()
Predicted Probabilities
00122 00179 02616 01183 04434 00620 00510 00110 00201 00026
Marginal effects
Age -0000 -0001 -0011 -0002 0007 0003 0003 0006 0001 0001
Gender 00039 00054 00623 0015 -0033 -0019 -0019 -0004 -0008 -0001
Education -0000 -0001 -0013 -0002 0010 0003 0003 0010 0020 0002
Household size 0002 0002 0012 0004 -0012 -0004 -0004 -0001 -0020 -0002
Urban rural -0003 -0004 -0049 -0009 0031 0013 0013 0002 0005 0001
Income -0003 -0004 -0004 -0010 0003 0001 0001 0002 0005 0010
Health concern -0103 -0113 -0372 0030 0410 0100 0100 0014 0030 0003
Environment
concern
-0005 -0007 -0072 -0010 0052 0017 0015 0003 0006 0008
Awareness -0014 -0020 -0120 -0030 0122 0045 0041 0010 0020 0002
Source Authorrsquos calculation based on Survey Data 2016-17
62
Table 410 Matrix of correlation coefficient between explanatory variables
Source Authorrsquos calculation based on Survey Data 2016-17
Variables Age Gender Education Location Households
size
Income Health
Concern
Environment
Concern
Age 10000
Gender -00193 10000
Education 00872 -00147 10000
Location 00725 00689 01047 10000
Households size -00294 00277 -00161 -01704 10000
Income 04123 -00690 02133 - 00405 01583 10000
Health Concern 01604 00224 02229 00660 - 00422 02102 10000
Environment Concern -00786 00944 -00245 00570 -00059 -00350 00118 10000
63
43 Householdrsquos willingness to pay using double bounded dichotomous
choice model
The double bounded dichotomous choice model was used to find out how much
households are willing to pay a price premium for pesticides free fruit The model has
been proved useful for the determination of the contribution of independent variables in
householdslsquo willingness to pay for pesticides free fruit Mainly those factors that
influenced the householdslsquo willingness to pay are age of the householdlsquos head
householdlsquos size gender awareness income head education and their perceptions
The Likelihood Ratio test statistic the Wald Chi2 value is 27228 with a p-value of lt
0001 confirmed that the model with all the explanatory variables has good prediction
power of householdslsquo choice and WTP for pesticides free fruit (table 411) The
estimated coefficients for most of the explanatory variables are statistically significant
and have signs consistent with prior expectations Headslsquo characteristics such as age
education level and awareness of pesticides use on fruits perception of health and
environmental concerns of pesticides are the most import determinants of the
householdlsquos WTP for pesticides free fruit Householdlsquos income and number of
individuals have significant effect on their price premium for fruits free of pesticide
residue
The coefficient for Age is positive and its value is 0294 which reveals that a one year
increase in headlsquos age would increase householdlsquos willingness to pay a price premium
of 0294 rupees for pesticides free fruit at constant level of other variables This
generally implies that household headed by an old individual has strong preferences
and high WTP for pesticides free fruits as compared to others These results are
supported by Vidogbena et al 2015 reported a positive significant effect of consumerslsquo
age WTP in Benin for minimized pesticides residues Results suggest older households
are more concerned about health benefits associated with fresh pesticides free food
This positive correlation of householdslsquo age and Willingness to pay a high price
premium for pesticides freeorganic food is also in agreement with findings of (Anifori
2013 Haghiri et al 2009 Misra et al 1991) However these findings are in contrast
with (Govindasamy and Italia 1999) carried out a research study on consumerslsquo
willingness to pay for organically produced fresh produce in New Jersey to find
64
opinion on organic produce and found that all the three age category younger people
like to pay a high price premium
Headlsquos education level has a positive significant association with householdlsquos
willingness to pay a price premium for pesticides free fruit A likely explanation is that
education increases consumerslsquo awareness regarding the adverse effect of pesticides on
human health and natural environment Consumerslsquo with a high level of education can
better understand the benefits attached to the consumption of food produced without the
use of pesticides These results are also in line with Vidogbena et al (2015) studied
consumerslsquo willingness to pay for cabbage with minimized pesticides residues in
Southern Benin and reported that consumers with high level of education were
positively affected WTP In some other related studies Darby et al (2008)Liu et al
(2009) and Misra et al(1991) also confirmed positive association of consumerlsquos
education and willingness to pay price premium for pesticides free organic fruits
Headlsquos awareness of pesticides use on local fruits production and their health and
environmental concerns over pesticides use are also the most important determinants of
householdlsquos willingness to pay for pesticides free fruits As discussed in the previous
section householdlsquos awareness and perception of pesticides use on fruits and their
education level are connected and have significant influence for creating market for
pesticides free organic fruits
Householdlsquos demand for best quality fruit is expected to rise with increase in their
income level The estimated coefficient for householdlsquos income is positive which
implies direct association with their price premium for pesticides free fruits and is
consistent with general theory and our prior expectations In future with economic
growth increased in per capita income is expected and this increase in per-capita
income will increase the demand for pesticides free fruits
We found a negative significant effect of the householdlsquos size on WTP for pesticides-
free fruit As the number of members increases household become less likely to pay a
price premium for pesticides free fruit More mouths to feed reduces budget for best
quality fruits as noted previously by (Oyawole et al 2016 Ghorbani and Harnraz
2009) In another study Govindasamy et al (2001) findings suggests that each
member in a lager household has less discretionary income to spend compared to a
65
smaller household and may consider paying a premium for integrated pest management
a luxury
Table 411 Factors influencing consumersrsquo WTP (double-bounded dichotomous
choice model)
Variables Coefficient Std Error z-statistic Pgt|z|
Constant -8614601 3640408 -237 0018
Age 0294755 00638171 462 0000
Gender -0133885 - 4628428 003 0977
Education 04521878 01574002 287 0004
Income 00001208 00000284 426 0000
Householdlsquos
Size
-06690743 2499154 -268 0007
Health concern 6165207 1882292 328 0001
Environment
concern
6739389
2053786 328 0001
Awareness 8194937 1693789 484 0000
Urban Rural 02295739 1339268 017 0864
Source Authorrsquos calculation based on Survey Data 2016-17
Log likelihood = -61347 Number of observation = 600
Wald chi2 (9) = 27226 Probabilitygt chi2 = 0000
Note indicate statistical significance at 5
431 Householdsrsquo estimated Mean WTP
The estimated model was used to derive each householdlsquos willingness to pay price
premium for pesticides free fruits Table 412 and figure 42 presents the summary
statistics for the estimated price premium The Table shows that householdlsquos estimated
mean willingness to pay price premium is around 26 rupees with a standard deviation
of 106 and the estimated minimum and maximum price premium are 0 and 445
rupees respectively These statistics reveals that householdslsquo on average are willing to
pay 26 percent more price premium for pesticide-free fruits than the existed market
producing pesticide free fruits
66
2
125 115
38
325
35
-5
0
5
10
15
20
25
30
35
40
45
0 1-10 11-20 21-30 31-40 gt40
Fre
qu
en
cy o
f th
e h
ou
seh
old
s
WTP bins
Table 412 Households mean estimated WTP
Mean Std Dev Min Max
WTP 25798 10601 0 44511
Source Authorrsquos calculation based on Survey Data 2016-17
Figure 42 householdsrsquo estimate WTP bids
432 Households Response to First Bid (Amount)
Table 413 and figure 43 shows households response to first bid of the WTP question
The Table clearly show the sensitivity of a householdlsquos yes - no response to the bid
amount As the bid amount goes up the probability of acceptance is expected to
decrease Results show that higher bids reduced the likelihood of acceptance For
example for a bid amount of Rs10 as price premium for pesticides free fruits 8833
percent of the households are willing to pay while it dropped to 222 percent when the
bid amount is increased to Rs40 which is consistent with the standard theory
67
0
01
02
03
04
05
06
10 20 30 40
Table 413 Householdsrsquo Response to First Bid (Amount)
Households
with YesNo
response
First bid amount (PKR)
10 20 30 40
Households
with No
response
21 (1167) 24 (2581) 141 (5732) 63 (7778)
Households
with Yes
response
159 (8833) 69 (7419) 105 (4268) 18 (2222)
Total
Households
180 93 246 81
Source Authorrsquos calculation based on Survey Data 2016-17
Figure 43 Probability of WTP given bids
44 Post Estimation Diagnostic Test
The model was tested against Multicollinearity by using (variance inflating factor
criteria) and for Heteroskedasticty (Breusch-Pagan test) and the results are presented in
table 414 Rule of thumb for VIF is that if the value is ge 10 than the problem of
Multicollinearity is severe According to our findings the mean value of variance
inflating factor is 114 less than the critical value suggests that there is no
Multicollinearity problem in the model Breusch-Pagan test is used for detecting
Heteroskedasticty problem The (χ2) value is 066 and p- value is 041 This p-value
suggests that the probability of rejecting the presence of Heteroskedasticty is 41percent
68
Table 414 Diagnostic test results
Problems Diagnostic Test Mean value P-value
Multicollinearity VIF 112 _
Heteroskedasticty Breusch-Pagan 066 041
Source Authorrsquos calculation based on Survey Data 2016-17
441 Householdsrsquo willingness to pay by using linear regression model Results of householdlsquos willingness to pay for pesticides-free fruits using linear
regression model is shown in table 415 Variables such as age education awareness
income householdslsquo size and consumer perceptions regarding health and friendly
environment are significantly influencing consumerslsquo WTP for pesticide-free fruits
Age has a positive and significant influence on willingness to pay ie the result shows
that with an increase in age willingness to pay also increases This result is slightly
different from few findings of other researchers who reported a high WTP in young and
middle age consumerslsquo (30-40) years Govindasamy and Italia (1999) But there are
some logical reasons behind our findings As young people are not so much health
conscious but with getting older and older the disease of aging caught their minds and
they keep more care about their health Another reason with an increase in age
education and experience increases as a result an increase in WTP for pesticides free
fruits These results are supported by Muhammad et al (2015) found a positive and
significant association between age and consumer willingness to pay Their results was
supported by the fact that young individual health consciousness is a rare phenomena
but as the people get older and older many diseases related to health induce them to
pay more attention towards safe and healthy food such as pesticides free organic food
Education and monthly income are the other factors positively and significantly
influencing householdslsquo WTP Households with more formal education have more
concern and better understanding of the risk associated with consuming food
contaminated with pesticides So they better understand that fruits produced without the
use of chemicals pesticides could be beneficial for health Results show that a one year
increase in formal education householdslsquo WTP increases by rupees 025 for pesticides
free fruit as compared to those having no education In regards to income respondents
with higher income are willing to pay more price premium A one rupee increase in
income will increase householdlsquos WTP by 0001 Muhammad et al (2015) reported a
69
significant effect of income and education on householdslsquo stated willingness to pay for
organic food in Arab Emirates consumer
Householdslsquo size is usually reported as negative influence on WTP Findings of our
study show a negative significant influence on householdlsquos willingness to pay This is
likely due to larger households requiring additional funds to satisfy households demand
for pesticides free fruit which may induce households to buy conventional fruit Other
reason may be as with limited resources feeding more mouths is increasingly difficult
These results are in contrast with Muhammad et al (2015) conducted a study on
factors affecting consumerlsquos willingness to pay for certified organic food products in
United Arab Emirates and reported a positive relationship of willingness to pay and
householdlsquos size Usually householdslsquo size is large in Arab Emirates and hence more
earning resources compared to small households which support their findings Our
finding shows a decrease of 085 rupees by an addition of one member in a household
Other important variables are householdslsquo concern regarding health and environment
Results show that respondentslsquo are highly concerned about residual effect of pesticides
on human health and environment Our results support these findings by positive WTP
Table 415 shows householdslsquo concerned regarding health and environment Results
suggest that households with more concerned for health and environment are willing to
pay Rs582 and Rs020 respectively higher prices for pesticides free fruit compared to
those not concerned
Finally we found variable awareness positively and significantly influencing
householdslsquo WTP for pesticides free fruit in survey area The result shows that more
aware households are willing to pay more price premium compared to unaware
households Awareness usually increases with education and age as can be evidence
from our findings a positive and significant influence of education and income on
householdlsquos WTP When households education level and age increases their awareness
regarding pesticidelsquos negative impact on health increase and hence an increase in WTP
for pesticides free fruit
70
Table 415 Estimated parameters using liner regression model
Variables Coefficient Std Error t-Statistics P-value
Constant -6174109 - 4353038 142 0158
Age 02348861 00467651 502 0000
Gender -2828394 3096026 - 091 0362
Education 0243413 00772618 315 0002
Income 00001237 00000157 790 0000
Householdlsquos
size
-03936806 01755667 -224 0026
Health concern 5567941 1465789 380 0000
Environment
concern
02999708 2023651 015 0882
Awareness 3567843 1001883 356 0000
Urban rural 0587075 1047051 056 0576
Source Authorrsquos calculation based on Survey Data 2016-17
Note indicate statistical significance at 5
No of observation = 200 F (9) = 2859 Probgt F = 0000 R-squired adjusted = 055
45 Comparison of elicitation questions formats Mean WTP by using double dichotomous payment card and open ended elicitation
format are reported in table 416The willingness to pay evaluated using average values
for the explanatory variables are Rs2576 for double bounded 1632 is for payment
card and 1437 for linear regression Results indicated that householdslsquo evaluated
through double dichotomous choice payment card scenario and open ended format are
willing to pay 26 16 and 14 more price for pesticides free fruits in the study area
These results are in line with Ngo et al (2013) conducted a study on consumerslsquo
willingness to pay for organic vegetables in Vietnam and found 70 more price
premium Rodriguez et al (2008) carried out a research study in Argentina on
consumerslsquo willingness to pay for organic food products and reported that consumers
were willing to pay a higher premium of 87 for leafy vegetables Mean willingness to
pay for double dichotomous model was calculated by maximum likelihood estimation
mentioned in the model while for payment card and open ended format logit regression
of response on bid amount was used All mean WTP values are significantly different
71
from zero and are different across the three questions format The probability (Plt
0000) between double bounded open ended and payment card method shows a
significant difference in estimated mean values of all the three questions elicitation
formats A t-value of 1483 250 and 1222 means that the mean values calculated
through different methods are significantly different from each other
Table 416 Mean willingness to pay comparison from CV question format
CV questions format Open ended
Mean WTP (1437)
Payment card
Means WTP (1632)
Payment card
Mean WTP (1632)
MD (194)
t-value (250)
P-value (0006)
--------
Double bounded
Mean WTP (2576)
MD (1143)
t-value (1483)
P-value (0000)
MD (949)
t-value (1222)
P-value (0000) Source Authorrsquos calculation based on Survey Data 2016-17
1MD = Mean difference 1US$=105 PKR in 2017
451 Response rate for zero WTP
Table 417 shows householdlsquos response rate to different elicitation formats The
response rate of payment card format is more than both DC and OE questions formats
Results show that 87 of the respondents respond to the willingness to pay question for
payment card method For dichotomous choice the response rate is 58 and for open
ended respondentslsquo response rate is 46 Taken together these results suggest that the
payment card format is easy for valuation task faced by respondents and lead to
efficiency in data collection
Table 417 Comparison of response rates by CV question format
Percent Response
to WTP question
Double dichotomous
choice
Payment card
method
Open ended
method
Yes 5850 87 4650
No 4150 13 5350
Source Authorrsquos calculation based on Survey Data 2016-17
72
46 Discussion about Major Findings This study was design to explore householdlsquos preferences and willingness to pay for
pesticides free fruit in Khyber Pakhtunkhwa Pakistan For this study a detailed
questionnaire was designed to obtained information from the households on their socio-
demographic characteristics perception regarding pesticides used on conventional fruit
and their willingness to pay a price premium for pesticides free fruit The overall
objective of the study was to know householdslsquo willingness to pay a price premium for
pesticides free fruit such as Apple Peach and Mango In response to willingness to pay
question 93 percent of the households were willing to pay a price premium while a
negligible portion were unwilling to pay any premium for pesticides free fruit Out of
total WTP 35 percent of the households were willing to pay16-20 percent higher
amount for pesticides free fruit
With regards to gender status of the households findings of the research showed most
of the respondents in the study area were male and a minor portion were female
Variable gender was not significant in this study because of the area structure where
male households are the primary purchaser of householdlsquos food items In this research
we found that majority of the respondents were educated most of them were highly
educated while a negligible portion of the respondents had no formal education The
mean education in Mardan and Peshawar was almost 10 and 12 years of schooling
respectively A significant difference was observed in urban and rural householdslsquo
education level in both the districts
Householdslsquo expenditure on food and fresh fruits were also calculated The mean
expenditure on food in district Mardan was PKR- 49280 and in district Peshawar was
PKR- 34860 Based on t-test a significant difference was observed on the consumption
of fresh fruit in urban and rural areas of the two districts Total expenditure on fresh
fruits in Mardan and Peshawar was 3340 and 4671 respectively Based on findings of
the study it could be concluded that respondents in urban region spent more income on
fresh fruit and consume more fresh fruits compared to rural region
Householdslsquo awareness of pesticides use on locally produced fruit such as Apple
Peach and Mango and their health and environmental concerns over pesticides use
were estimated The results revealed that 61 percent of the respondents were agreed that
local farmers use intensive pesticides on fruit Around 88 percent of the respondents
perceived environmental and health concerns over pesticides residues in food
Similarly 91 percent of the respondents believed that farmer should engage in
73
environmental friendly agricultural production practices which have a minimum
adverse impact on health and the environment These results induced households to pay
higher prices for such pesticides free fruit if available in the market The overall results
indicated that sampled households were not fully aware of the intensive pesticides use
on local fruit however they were correctly perceived over the impacts of pesticides on
human health and environment
The empirical findings of the study revealed socio-demographic characteristics had a
significant influence on householdslsquo willingness to pay a price premium for pesticides
free fruit Results showed more aged householdslsquo head were willing to pay more price
premium This is supported by the fact that older people are more health concern
compared to young individual Householdslsquo head education level also played a positive
and significant role with high education consumers seems slightly more willing to pay
These results are in line with Haghjou et al (2013) Householdlsquos size was negatively
influencing householdlsquos WTP and accord with the expectation Due to income
constraint with increase a member in a household will decrease WTP for pesticides-
free fruit because feeding more mouths with limited resources would be difficult These
results are in line with Oyawole et al 2016 Many Conflicting results are also reported
regarding household size Some studies indicated the presence of more children
positively influencing WTP for organic food while some results reported an inverse
relationship between WTP and householdslsquo size Findings of our research revealed a
negative significant influence on householdslsquo willingness to pay for pesticides free
fruits These results were also according to our expectation With an increase in family
size the households do not care much about quality but mostly quantity
Income of the householdslsquo head was taken as continuous variable in this research study
In most cases especially in willingness to pay research studies a positive association of
income and households WTP was observed Any increase in householdslsquo income leads
to rise in their willingness to pay for safer healthier and pesticides free fruit Despite
high prices for pesticides free food products householdslsquo with high income showed
likelihood to pay a price premium Our findings also showed a positive effect of
income on householdslsquo WTP for pesticides free fruit An increase in income changes
householdslsquo purchasing behavior and choose better quality of food So with an increase
in income households were willing to pay more price premium Same results were
reported by Cranfield and Magnusson 2003
74
Variable awareness played a significant role while consuming better quality of food
Findings of our study also showed a positive and significant influence of variable
awareness on householdslsquo WTP for pesticides free fruit More than half of the
respondents were aware of the intensive use of pesticides on fruit Majority of the
households knew about the risk attached with fruits produced with agrochemicals The
more aware households were willing to pay more price premium for pesticides free
fruit compared to unaware households These results are also supported by Oyawole et
al2016
Moreover results of this study are also consistent with previous studies that health and
environmental concern are the important factors in householdlsquos preferences for
pesticides free food and reduced input food products We also found a positive
significant influence of health concern and environment concern on WTP These results
suggest that respondents in the study area are more conscious about health and
environment They are willing to pay more prices for such fruit free from pesticides
residues Based on above results most of socio-demographic characteristics have
positive influence on householdlsquos willingness to pay for pesticides-free fruit in the
study area On the basis of these findings we reject the null hypothesis and accept the
alternative hypothesis by concluding that socio-demographic characteristics have
influencing behavior on householdslsquo WTP
Willingness to pay across urban and rural regions shows no significant difference The
P-value of 0864 showed that WTP of households in urban regions were not statistically
different from those in rural regions Although we had expected a positive and
significant difference among urban and rural households willingness to pay for
pesticides free fruit and the difference in householdslsquo income education and
expenditure across urban and rural households support our expectation One of the
reasons for no significant difference is the selection of rural union councils which are
nearby urban union councils If the study is spread to more rural union councils than an
expected difference in urban and rural households may be observed Based on these
results the null hypothesis of no significant difference between urban and rural
households is accepted and can be concluded that no significant difference was found
in willingness to pay amount across rural and urban households
75
A Payment Card Approach
In this approach respondents are asked to select their WTP from a payment card given
in absolute value or in percentage of prices (Boccaletti amp Nardella 2000 Lacaze
Rodriguez and Lupin 2009) Payment card requires smaller sample sizes for the
efficient estimation of parameters than the double bounded model A recent research
found that payment card is to be free of range and centering biases when the
willingness to pay values on the payment card is sufficiently large and the respondents
are not constrained (Rowe et al 1996) However choosing an amount from payment
card may be more cognitively burdensome on the respondents and difficult than simply
yes or no response
B Open Ended Approach
In open ended question respondents are asked to state their WTP for a certain attribute
without suggesting them any value This technique does not require an interviewer and
does not result in any starting bias This approach is easy for the respondents to answer
Due to non provision of any value respondents find it difficult to answer and results
large non- response rate
C Double Bounded Approach
The dichotomous choice contingent valuation method is an important method in
contingent valuation surveys Due to simplicity this method is popular and widely used
for data collection Two questions formats are used in this method single bound and
double bounded questions are asked from the respondents For single bound question
format the respondentlsquos only reply in yes or no while in double bounded approach
second question contingent on the first response is asked
Hanemann et al (1991) recommended double bounded dichotomous choice model for
eliciting householdslsquo WTP In the double bounded formate each respondent is
presented with two bids The level of the second bid is contingent upon the response to
the first bid If an individual responds in ― yes to the first bid Bi the second bid (Bu) is
some amount greater than the first bid (Bi lt Bu) is askedIf the respondent responds
―no to the first bid the second bid (Bl) is some amount smaller than the first bid (B
llt
Bi) is asked
76
Henemann et al (1991) and Leon (1995) confirmed that double bounded model is more
effcient than single bound model For the correction of poor choice of the initial vector
double bounded model was suggested Researchers also found that double bounded
method produce more precise point estimates of parameters Double bounded model
requires more sample size due to the statistical inefficiency imposed by the data
compared to payment card and open ended model If sample size is large enough
double bounded model estimates accurate results
Due to its potttential inconsistency with response to the first binary question and larger
scope for biased results double bounded model is contravartial Bateman et al (2001)
concluded that the respondents feel fury and guilt when the second question is asked
making the response of the double bounded internally inconsistence One of the main
disadvantage of double bounded model is that response of the respondents may be
influenced by the first offered amount which is generally called starting point bias
(Flachaire and Hollard 2005)
There are few notable patterens while studying consumerlsquos willingness to pay by using
different elicitation formats Estimated willingess to pay based on double bounded
format and payment card format tend to be large compared to open ended questins
format Furthermore estimated willingness to pay from double bounded model would
be larger than payment card format
Not surprisingly as shown in table 416 the estimated mean willingness to pay for
pesticides free fruit based on the models were significantly different across the three
elicitation format Estimated WTP for double bounded format payment card format
and open ended was 25 percent 16 percent and 14 percent respectively The estimated
mean WTP for double dichotomous model is higher than twice the estimated mean
willingness to pay based on payment card and open ended data
When comparing response rate of households to the willingness to pay questions
format was different across the three elicitation methods In double bounded method
the question was whether the households were willing to pay a specific amount in
payment card method households were asked to select the amount from a specified
values provided on a card whereas in open ended question households were asked to
say how much extra they were willing to pay for pesticides free fruits The difference in
questions leads us to expect that more individual would respond positively to
willingness to pay question in payment card method because in this elicitation format
consumers had to select from payment level The response rate of payment card format
77
is more than both DC and OE questions formats Results show that 87 of the
respondents respond to the willingness to pay question for payment card method For
dichotomous choice the response rate is 58 and for open ended respondentslsquo response
rate is 46 Taken together these results suggest that the payment card format is easy
for valuation task faced by respondents and lead to efficiency in data collection
It has been remained an unresolved issue that which CV questions format is best to use
While the NOAA panel (Federal Register 1993) recommended using double bounded
dichotomous choice model due to its easy use and resemblances in day to day decision
making In this study we found that the response rate in double dichotomous choice
model is lower than payment card format and higher mean willingness to pay than both
open ended and payment card format In contrast payment card format has desirable
response properties
One elicitation format is not clearly better than the others on priority ground The
appropriateness of any elicitation format depends upon the circumstances of the study
For example payment card elicitation format better suits if the sample size is small If
the sample size is large enough double bounded elicitation format is preferred
78
V SUMMARY CONCLUSION AND RECOMMENDATION
This chapter presents findings of the research study as well as policy recommendations
This chapter also outlined limitation in this research and suggestion for further research
in future
51 Summary
Conventional agriculture has gained the power of providing food to majority of the
world population but at the cost of damaging the environment and human health While
pesticides free farming on the other side is environmental and human health friendly
farming that avoids the use of such hazardous chemicals which are harmful for human
plants and animal planet Pesticides free farming system is increasingly becoming
popular in producers as well as in consumer The term pesticides free denote production
of fruit without the use of pesticides and play a vital rule in future agriculture
commodities production It has been observed that fruit produced without the use of
chemicals pesticides are generally higher in prices than the conventional fruit
production in most part of the world However pesticides free farming and pesticides
free food is a relatively new phenomenon and very few people especially in developing
countries are aware about the beneficial impacts of such food on health and
environment Willingness to pay for pesticides free fruit is different from fruits
produced through the use of chemicals pesticides because pesticides free fruits are
relatively expansive
The main theme of this study was to investigate householdslsquo awareness and willingness
to pay for pesticides free fruit and to determine socio-economic and socio-demographic
characteristics in relation to their impact on willingness to pay a price premium This
study was carried out in two districts of Khyber Pakhtunkhwa (Pakistan) namely
Peshawar and Mardan The household level data employed in this study were obtained
from 1000 households through face to face interview by employing pretested
questionnaires Householdslsquo perception and attitude about pesticides free fruit were
also analyzed Three questionnaire elicitation formats ie dichotomous choice payment
card and open ended were used in this study For the estimation of dichotomous choice
data double bounded dichotomous choice model was used An ordered logit model was
used for the estimation of payment card type data and for the estimation of open ended
79
questionnaires linear regression model was used to estimate householdslsquo willingness to
pay price premium for pesticides free fruits
52 Conclusions
Adoption of technological advancement in agriculture has attracted considerable
attention in many developing countries because majority of population in less
developed countries derives its likelihood from agricultural production New
technologies provide farmers an opportunity to increase production and enhance
economic growth (Carvalho 2006) Although the green revolution spread across
developing countries in Asia and resultant in increased food production by adopting
technological inputs like fertilizer and pesticides However the high usage of these
chemicals to bring this spectacular growth in agriculture production is not without its
problems In most countries it has been observed that using commercial agricultural
practices causes many problems like environmental degradation and human health
effects (Wilson 2000) Coordinated efforts are needed to increase food production
with a view to enhance food safety and quality Although chemicals free agriculture is
gaining more and more support for safer food but still not providing enough food to
support need of the population in developing countries
Demand and markets for pesticides free fruit has gained a significant and valuable
interest of research scientist in all over the world Several research studies have been
identified price premium that consumers are willing to pay for pesticides free fruit and
also showed some socio-demographic factors influencing their decision to pay more
price premiums Different approaches are adopted in these studies depending on their
objectives These research studies mainly focused on attitudes and perception towards
these foods and not their actual purchase According to our knowledge studies on
householdlsquos willingness to pay and the most relevant factors influencing their decision
to pay more price premium are limited in developing countries such as Pakistan
The general objective of this survey was to study the socio-demographic and socio-
economic characteristics of the householdslsquo and to investigate factors influencing their
willingness to pay for pesticides free fruit A variety of factors including respondentlsquos
age gender householdlsquos size respondentlsquos income householdlsquos head education
awareness and certain attitudinal questions like health concern and environment
concern appear to influence householdlsquos willingness to pay a price premium Findings
80
of the study suggest health concern and environment concern has significant influence
on householdslsquo willingness to pay Hence it can be concluded that households in the
study area are more concern about their health and surrounding environment Results of
the study also indicated no significant difference in willingness to pay across rural and
urban regions of the study area
Study concluded that the most relevant explanatory variables positively influencing
householdslsquo willingness to pay for pesticides free fruit are age of the householdlsquo head
income of the household headlsquos education householdslsquo awareness health concern and
environmental concern while householdlsquos size is negatively significant which usually
reported that householdslsquo with more members do not care much about quality but more
quantity because feeding more people with limited resources are difficult Majority of
the households are willing to pay price premium for pesticides free fruit especially
those with high level of income household leads to high degree of willingness to pay
Education level also became an important factor in willingness to pay higher price for
pesticides free fruit More aged people have always been concern about their health As
the people get aged more and more the diseases of aging caught their minds so they
like to pay more for safer food While when it become to pay more price variable
gender shows insignificant affect due to the limited availability of female respondents
in the sample data
Results of the households awareness regarding pesticides used on conventional fruit
and its impact on health and natural environment are positive Most of the households
are highly concern about health and environment Results suggest that more than half of
the households are aware of the adverse impact of pesticides on health and
environment Survey suggested that more than half of the households are strongly
agreed that farmers should produce such an agricultural food product which has
minimum adverse impact on human health and natural environment Results of the
study are consistent with other findings conducted on consumerslsquo willingness to pay for
organic food and pesticides free food and reported that health and environmental
concern were the most important factors
Health and environmental concern is an important factor constituted a significant
influence which inclined households towards willingness to pay for pesticides free fruit
Krisoff (1998) reported that consumers perceived pesticides free food as healthier safer
and environmental friendly as compare to food produced by conventional method
81
From this study it is observed that households perceived pesticides free food as
healthier they are willing to pay more price premium
Results obtained from this study concluded that 93 percent of the households are
willing to pay more prices for pesticides free fruit Out of this proportion 35 percent of
households are willing to pay 16 to 20 percent more price above the regular price while
24 percent are willing to pay 6 to 10 percent higher price for pesticides free fruit
Households are willing to pay above than 20 percent comprised of 215 percent of the
sample data Results show that out of total willingness to pay 4 percent of the
households are willing to pay 1 to 5 percent price premium and 9 percent are willing to
pay 11 to 15 percent more price premium Results also show that only a minor portion
65 percent of the sampled respondents is unwilling to pay any more
Householdslsquo willingness to pay was also assessed The study revealed that on average
the respondents are willing to pay 26 percent higher price for pesticides free fruit than
the regular price which concluded that households in the study area are responsive
towards safer food and they like to pay higher premium for such fruit
53 Recommendations
This study is one of the first analytical attempts to measure householdslsquo willingness to
pay for pesticides free fruit in Pakistan Since not much research work is done on
pesticides free fruit in Pakistan so this study would contribute a little for future
researchers Findings of the survey suggest some recommendations for consumers and
producers Researchers may consider this study as basis for further research
An important task is to provide more information to consumers regarding
pesticides free fruit and the perceived benefits by consuming these fruit This
research study also provides information to consumers that how pesticides free
fruit is differ from fruit produced conventionally The sampled studied shows
that there is a potential for market growth of pesticides free fruit To identify
these potential consumers knowledge about their socio-demographic and socio-
economic characteristics is important
With potential demand and high price premium pesticides free fruit production
could be one of the lucrative strategies for producers to earn higher net margin
from their production so like other new technologies management practices
and production system pesticides free fruit production also needs government
82
assistance such as advertisement consumers awareness campaigns financial
aids as well as green subsides and loans to the producers to develop well
established market and efficient supply chain in Pakistan
By adopting new agricultural practices and comply with standards of World
Trade Organization (WTO) this will not only abridge the supply demand gap
for pesticide free fruit sat domestic level but also will boost the economy of the
country due to increase in fruit and vegetables exports
Contribution in the field of pesticides free fruit production from academics
research workers extension graduates scientist and other professionals are
necessary to brief producers as well as consumers about the negative impact of
pesticides due to incorrectly use of these hazardous chemicals on human and
animals health as well as effect on natural environment
Based on the findings from this research government non-government
organization and other stakeholders should formulate policies and would
promote and encourage the production of pesticides free fruit in Pakistan
Demonstration centers should be established within the agriculturist community
for the awareness of farmers regarding the production of pesticides free food
As the results identified householdlsquos willingness to pay is effected by
explanatory variables so more independent variables should be included in the
model to further explain willingness to pay for pesticides free fruit
In addition the area of sampling could be more spread and not be limited to only
two districts of Khyber Pakhtunkhwa If data are collected from different
provinces and districts all over Pakistan the results obtained might be a better
representation of the whole population
As this research study conducted only at few fruit such as Apple Peach and
Mango future research should focus on more fruit as well as on vegetables
54 Limitation and Suggestion for Future Envisage
A couple of limitations were encountered during this research study
This research study has investigated willingness to pay for fruit only due to
time and budget constraint In future a large scale research study should be
carried out both on fruit and vegetable
83
Second since only two districts of Khyber Pakhtunkhwa were examined in
the future such studies should be replicated to other districts and provinces of
Pakistan to determine householdslsquo willingness to pay for pesticides free fruit
Third some variables employed in this study were not statistically significant
presumably due to small sample size To overcome this problem in future
study large sample size should be taken into consideration in order to enhance
the degree of freedom
56 Suggestions
The future of pesticides free agriculture production is very bright To lead a healthy life
human being needs pure food and pollution free environment It has been proved that
pesticides free agriculture is the only solution to provide safe and healthy food to the
world population Chemicals free agricultural system is a natural phenomena and
human being can feel its importance By adopting pesticides free farming soil fertility
can also be maintained Farmers can provide healthy and safer environment by
strengthening the sustainable and pesticides free agriculture Now a daylsquos demand for
pesticides free food is increasing very fast and in the future it would be necessary to get
rid of food produced by using chemical fertilizer and pesticides
To inform consumers long term investment in promotion and education campaigns
would help to develop individual concern regarding the risk associated with pesticides
on food products This concern will translate individual willingness to pay towards a
positive price premium
84
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85
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96
Appendix- 1 Questionnaire
Q1Socio-economic characteristics
1 Location
o Rural
o Urban
2 Name ____________________
3 Age ____________________(years)
4 Gender
o Male
o Female
5 Educational status ______________ Years
6 Household Size_________________ No
7 Monthly income _______________________________Rs
8 Monthly consumption expenditure _________________Rs
9 How much you spend on Fresh Fruits Rs __________month
10 How much you consume the following fruits
Fruits Quantity
Apple
Mango
Peaches
11 Local farmers are intensively using pesticides on Apple Peach and Mango fruits
o Aware
o Not aware
97
12 Attitudinal question responses
Householdrsquos Awareness Perceptions of Pesticides use
Questions Agreed Disagreed
Local farmers are intensively using pesticides on
Apple Peach and Mango fruits
I feel the use of pesticides in agriculture has negative
effect on the environment
I am concerned about pesticide residue in our food
supply
I believe farmer should engage in environmental
friendly agricultural production practices with
minimum impact on human health
The effect of pesticides residues on human health
The use of pesticides can badly affect the agro-ecological system as well as human
health Human health related problems may vary with the composition of chemicals
The most common problems are skin flue and headache while severe health hazards
include paralysis cancer etc Studies show that globally around 30 lakh people are
poisoned annually from consumption of pesticides contaminated food and 2 lakh of
them die from different heath problems caused by pesticides residues Most of the
pesticides used on agricultural crops are banned by the WHO
13 Householdrsquos willingness to pay for pesticide free fruit
Wording for Dichotomous choice question
Suppose your favorite fruit such as apple mango and peach regularly cost on average
Rs 100kg Assuming no difference in taste and nutritional content would you pay Rs
X more to consume pesticide free version of the same fruits
Yes No
Wording for open ended question
Suppose your favorite fruit such as apple mango and peach regularly cost on average
Rs 100kg Assuming no difference in taste and nutritional content how much would
you pay for pesticides-free version of the same fruits
Rs _________
98
Wording for payment card question
Suppose your favorite fruit such as apple mango and peaches regularly costs on
average Rs 100kg you purchase Assuming no difference in taste and nutritional
content would you pay slightly more for a pesticides free version of the same fruits
Yes No
If yes how much would you pay to consume pesticide free version of the same fruit
Select from the given payment card
1 WTP= 0
2 WTP= 1-5
3 WTP= 6-10
4 WTP= 11-15
5 WTP= 16-20
6 WTP= 21-25
7 WTP= 26-30
8 WTP= 31-35
9 WTP= 36-40
10 WTP= Above than 40
If no what are the reasons for not paying price premium for pesticide free
commodities (PFC) Please select the most relevant one
o I canlsquot afford to pay price premium on PFC
o The pesticide have no harmful effect on health
o We do not use fresh fruits
o Other reasons ___________________________
99
PLAGIRIASM UNDERTAKING
It is certified that the research work presented in the Ph D dissertation of Mr Jahangir
Khan C No 45 University Registration No2006-Agr-U-13234 Session 2014-2017
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar under the titled ―HOUSEHOLD
PREFRENCES AND WILLINGNESS TO PAY FOR PESTICIDES FREE FRUIT IN
KHYBER PAKHTUNKHAWA (KP) PAKISTAN was conducted under the
supervision of Dr Abbas Ullah Jan
I understand the zero-tolerance policy of HEC and the University of Agriculture
Peshawar towards plagiarism Therefore I as an author of the above titled research
thesis declared that no portion of my thesis has been plagiarized and the material used
for references is properly cited
I undertake that I found guilty at any time and any statement is found to be incorrect or
plagiarized in the above mentioned titled thesis even after my graduation the
University has the right to withdraw my Ph D degree and the HEC has the right to
publish my name on the HECUniversity website on the list of persons who submitted
plagiarized thesis of guilty under plagiarism policy
Jahangir Khan
100
AUTHORrsquoS DECLARATION
I Mr Jahangir Khan C No 45 Session 2014-2017 hereby stated that my Ph D
dissertation titled ―Household Preferences and Willingness to Pay for Pesticides free
Fruit in Khyber Pakhtunkhwa (KP) Pakistan is my own work and not been submitted
previously by me or anyone else for taking degree from The university of Agriculture
Peshawar or any other University in the country world At any time if any statement
found to be incorrect even after my graduation the university has the right to withdraw
my Ph D Degree
Jahangir khan
Date
101
CERTIFICATE OF APPROVAL
It is certified that the research work presented in the Ph D dissertation of Mr Jahangir
Khan C No 45 University Registration No 2006 -Agr-U-13234 Session 2014-2017
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar under the titled ―HOUSEHOLD
PREFRENCES AND WILLINGNESS TO PAY FOR PESTICIDES FREE FRUIT IN
KHYBER PAKHTUNKHAWA (KP) PAKISTAN was conducted under the
supervision of Dr Abbas Ullah Jan
No part of this dissertation has been submitted anywhere else for any degree The
dissertation is submitted for the award of degree of Doctor of Philosophy in the
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar
Ph D Scholar Jahangir Khan
APPROVED BY
1 External Examiner _________________ Lal K Almas Ph D
Associate Dean and Regents
Professor Agricultural Business amp
Economics University of West Texas
AampM USA
2 External Examiner ___________________ Prof Dr Harun Ucak
Alanya Alaadin Keykubat
University Turkey
Major Supervisor ___________________ Dr Abbas Ullah Jan
Head of Department ________________
Dr Ghaffar Ali
ii
ACKNOWLEDGEMENTS
I am grateful to Almighty Allah for blessing me with the potential of seeking
the light of knowledge the taste of gaining knowledge courage and for all the blessings
which enabled me to complete a stage of education
Doing a research is not an individual work Itlsquos indeed the result of efforts by
many people I would like to thanks all people who helped and supported me to
complete this research successfully
My whole hearted and profound thanks to my advisor Dr Abbas Ullah Jan
Department of agricultural amp Applied Economics for his support critical review
valuable suggestions and inspiration to make this research success
My most special thanks to Assistant Prof Dr Syed Attaullah Shah Department
of agricultural amp Applied Economics for his cooperation and valuable suggestions
providing me all facilities during the course of this research
My sincere thanks to Dr Ghaffar Dr Dawood Jan and all faculty members
Department of agricultural amp Applied Economics for their cooperation advices and
back-up to achieve my goals and their encouragement and instrumental support during
the research practical work
I would like to submit my admirations to my friends and foreign research expert
Dr Kar Ho Lim and Dr Aditya Khanal Department of Agricultural amp Environmental
Sciences College of Agriculture Tennessee State University USA for their help
especially in thesis write-up and paper publication
At last but the not least I wish to put across my deep admiration to my parents
friends relatives and family members who support me during my study
Jahangir Khan
iii
HOUSEHOLDrsquoS PREFRENCES AND WILLINGNESS TO PAY
FOR PESTICIDES FREE FRUIT IN KHYBER
PAKHTUNKHAWA PAKISTAN
Jahangir Khan and Abbas Ullah Jan
Department of Agricultural amp Applied Economics
Faculty of Rural Social Sciences
The University of Agriculture
Peshawar-Pakistan
May 2018
ABSTRACT
The over use of fertilizers and pesticides in agriculture are degrading natural ecosystem
and human health The substantial association of health risk with pesticide residues and
its adverse impact on environment has fetched attention of researchers across the globe
In this alarming scenario pesticide free farming is deemed as panacea to
environmental human and animal health friendly production system Pesticide free
fruit are considered to be superior in quality as compared to fruit produced
conventionally and helps in preventing several health and environmental hazards
Therefore the demand for pesticide free fruit is increasing throughout the world Given
this increasing demand for pesticide free fruit this study is designed to measure what
price premium household would be willing to pay (WTP) for fruit free from pesticides
such as apple peach and mango This study also aims to identify factors influencing
householdslsquo WTP decision of pesticide free fruit in Khyber Pakhtunkhwa (KP)
Pakistan The primary data was gleaned from 1000 sampled respondents through face
to face interview from two selected districts namely Peshawar and Mardan KP
Pakistan To elicit householdlsquos WTP information Contingent Valuation Method
(CVM) was employed Contingent valuation is a survey based method used for eliciting
willingness to pay of the householdslsquo for environmental and natural resources
Different elicitation techniques are used to design CV question scenario such as
payment card question double dichotomous choice question and open ended question
Consequently this study used the entire three payment format to elicit householdlsquos
WTP for pesticide free fruit The ordered logit model was employed to appraise the
payment card method However linear regression model was adopted to identify
factors influencing householdlsquos willingness to pay for pesticides free fruit
Nevertheless the double bounded dichotomous choice model was performed to
measure dichotomous choice questions The major results demonstrate that 935 percent
households were willing to pay higher prices for fruit pesticides free in the study area
Estimates remarkably reveal that around 35 percent households were willing to pay 16
to 20 percent higher prices and 24 percent households were willing to pay 6 to 10
percent higher prices for pesticides free fruit than the prevailing prices of conventional
produce It is reported by 61 percent of the households that local farmers use irrational
pesticides on fruit Major findings have also corroborated that 881 percent sampled
household have perceived health concerns over pesticides residues in food Similarly
911 percent of the households have supported the idea that farmer should be engaged
in environmental benign agricultural production practices which have a minimum
adverse impact on health and the environment Socio economic and demographic traits
have confirmed positive significant effects on householdlsquos willingness to pay The
iv
results of householdlsquos head awareness on WTP are according to the prior expectations
that awareness of householdlsquos head has significant contribution in willingness to pay
for pesticides free fruit While householdlsquos size has a significant but inverse effect on
willingness to pay for pesticides free fruit Furthermore householdlsquos perception
regarding health and environment concern has a propensity to positively influence the
willingness to pay for pesticides free fruit It is also depicted by the results that mean
WTP by using double dichotomous payment card and open ended elicitation format
validates consumer demand for pesticide free fruit in the study area Three separate
mean WTP were computed for each double dichotomous choice payment card and
open ended format which were figured as Rs2576 1632 and 1437 respectively
These results reveal market potential for pesticides free fruit in the study area This
research study is expected to contribute in the three different aspects Firstly this study
has figured out the potential for pesticides free markets in Pakistan This study has also
abridged the research gap regarding consumerlsquos preferences and willingness to pay for
pesticides free fruit which can be generalized and replicated to other areas In addition
results have provided insight to fruit producers helping them to strategize production
system decisions Based on the findings from this research government non-
government organization and other stakeholders should formulate policies and would
promote and encourage the production of pesticides free fruit in Pakistan
1
I INTRODUCTION
Pesticides are agrochemical formulated to cope with the severe problems diseases
caused by insects fungi virus and self-grown weeds The term pesticide can be defined
as any chemical or natural substance applied with the objective to repel destroy or
control pests and regulate plant growth (FAO 2002) In modern agriculture arena
pesticides are intensively used on crops before and after harvest The application of
pesticides surged with the passage of time due to an increase in the demand for
agricultural commodities by the burgeoning population of the world The overall
pesticidelsquos consumption across the globe is observed as about 2 million tons per year
While this massive pesticides consumption demonstrates that about 69 percent is used
by European countries and the remaining 31 percent is utilized by the rest of the world
as mentioned by Abhilash and Singh (2009) The more alarming situation is that the
aforementioned magnitude of pesticides consumption is increasing with the every
passing year as reported by FAO (2002)
The green revolution as well as a huge increase in the application of pesticides in the
agriculture realm had enhanced food and non-food crop production Resultantly the
significant surge in the economic growth of several agricultural based economies was
reported over the last few decades as demonstrated by Carvalho (2006) Despite the
substantial contribution of pesticides to diminish the food insecurity societies around
the world are cognizant and concerned about the food sanitation safety and
environmental externalities owing to irrational use of pesticides and other croplsquos input
(Wilson 2000) More categorically the food safety realization in developed countries
has been led to organic agriculture Whereas in many developing countries which
include but not limited to Pakistan the pesticides-free and organic food markets
remained underdeveloped due to several reasons One of the obvious reasons is the
uncertainty among consumerlsquos preference that led to their concern if an organic market
can be self-sustained Similarly a dearth of proper market structures and institutional
support failed to provide environment-friendly agriculture practices in developing
countries (Rehber and Turhan 2002) The current scenario of agriculture sector in
developing countries has raised several considerable questions to acquire the
anticipated implications for this sector However the most relevant query drifted that
2
―Is there sufficient consumerlsquos willingness to pay (WTP) available in a developing
country for grass-roots development of pesticide-free agriculture
11 Background of the Research Endeavor
Agriculture sector is the mainstay of Pakistanlsquos economy which significantly
contributes as 192 percent to overall Gross Domestic Product (GDP) of its economy
(GOP 2016-17) Despite many efforts and policy reforms still this sector is entangled
with insignificant growth momentum
Since the inception of this country in 1947 there wasnlsquot any notable crop and plant
protection policy adopted by concerned policy makers over a long span of time It is
evident from past timeline that ―Grow More slogan was initiated by the government of
Pakistan back in 1970s to address the escalating foodlsquos demand of rapidly increasing
population of Pakistan Subsequently Grow More policy resulted in ever increasing
pest problem which couldnlsquot be controlled with conventional crop management
practices Therefore the government started to provide the direct subsidy to Pesticides
Industry to provide panacea to croplsquos pest problem But unfortunately the colossal
surge in pesticides utilization had not only destroyed the pests but was also found lethal
for the environment benign organisms that include predators birds etc This irrational
use of pesticides and other crop inputs has caused huge economic loses and health
issues among the farming community
Pakistanlsquos agriculture is endowed with 11 (Eleven) different agro-ecological zones
providing the country an incredible exciting arena for experimentation and state of the
art for agriculture as reported by Altaf (2010) This diversified nature of ecological
zones can be utilized in a lucrative way to attain an optimal output The driving forces
of this sector are striving hard to curtail the gaps by ensuring the adequate production
and supplying the food to meet the demand of rapid growing population of the country
However the emerging challenges such as irrational use of croplsquos input and complying
with world trade organization (WTO) obligations are insisting the concerned policy
makers to focus on paradigm shift for significant contribution of agriculture towards
livelihood welfare and prosperity
3
These different agro ecological conditions provide the encouraging and conducive
environment for the production of cereal crops fruits vegetables and even for non-food
crops Fruits and vegetables grown in Pakistan have a wide domestic demand and have
also attracted the international consumer by exporting these edibles in the international
market Pakistan exports mango apple dates oranges guava and dry fruits like pine
nuts to different countries which include but not limited to Afghanistan UAE Saudi
Arabia and Europe (GOP 2014-15)
The relative importance of agricultural sector can be gauged with high growth rate of
exports of fruits and vegetables from Pakistan to different countries mainly South East
and the Middle East (Khalid Mustafa 2003) where low Sanitary and Phytosanitary
(SPS) standards are comply with Yet several more fruit grown in Pakistan have
enormous potential to be exported in the international market Specifically insect pest
infestation during pre- and post- harvest of fruit and vegetables is a significant problem
To protect from those many kinds of pesticides and agro-chemicals are widely used in
Pakistan These include different types of agro-chemicals which consist more than 100
types of insecticides almost 30 types of fungicides and approximately 39 different
types of herbicides (Zia et al 2009Anwar et al 2011) In 1960 the consumption of
chemical pesticides in Pakistan was 7000 tons per year which has risen to 78 232 tons
per year in 2003 (Syed and Malik 2011)With the development of pest resistance to
those chemicals over years each year new chemical compounds in large amount are
used to protect crops Overuse of these agro-chemicals has caused many adverse health
and environmental effects
However significant variation in consumer behavior in the developed countries has
excelled the demand of high quality food which had encouraged the organic
agriculture Thatlsquos why developing countries who have still adopted obsolete strategies
for pest control are out of race for agriculture export and are at venture to be considered
as ―dirty producer in an international market Similarly in Pakistan massive increase
in the pesticidelsquos use has escorted to two major harms to Pakistanlsquos economy Firstly
Pakistan imports a large quantity of pesticides incurring billions of costs on it and
second overuse of pesticides on agricultural commodities has created many health and
environmental hazards in the farming community of Pakistan Several research
endeavors such as Ahmad et al (2004) Rizwan et al (2005) Parveen and Masud
4
(2001) had divulged that individuals working in field under pesticides exposed
environment specifically women who worked long time in the cotton croplsquos field
sustained more health hazards These health hazard underscored skin irritation
headache nausea and gastroenteritis It is also evident that the hazardous chemical
residues of organo-chlorines organophosphate and synthetic pyrethroids pesticides
were found in 85 percent of the blood samples drawn from 75 sampled individuals
(male and female) in Pakistan
12 Pesticides free Food and Products
Pesticides free fruit and vegetable are those edibles that are grown without the use of
pesticides and can be deemed as major component of an organic farming Due to
awareness among people about advantages of Pesticides free fruit and vegetable which
upshot in food safety and benefit environment as well the production and consumption
of such food products is being highly valued With the consumption of food produced
without the use of pesticides can be helpful in the prevention of some of the health
hazards related with the consumption of conventional food (Nouhoheflin et al 2004)
The term ―Pesticides free was introduced for the first time in a book ―Look to the
Land in 1939 by Lord Northbourne The author narrates pesticides free farm as an
organization that making use of environment balance technique by adopting zero
pesticides In early 20th
century pesticides free food ideology was brought forward
while correspondingly there was an immense use of chemical in food products as well
Householdslsquo were having great concern about their health as well as soil condition and
they began to grow such food which was free from chemical residuals In the era of
70s a noteworthy change was reported in escalating the demand of pesticides free food
and pesticides free farming Therefore in year 1972 ―International Federation of
Pesticide free Agriculture Movement was formed In the same era the producers who
were producing pesticides free food individually commenced the certification process
The obvious aim of the process was to develop rules and to underpin the standards of
pesticides free production
In this modern era where food consumers are highly concerned about their health safety
and environment benign practices they prefer to buy pesticides free food products
This is because of their knowledge about the relationships between the production
practices and quality of food produced Consumers are becoming more conscious as
5
they are aware of the harmful effects of food produced with irrational pesticides use on
their health Many research endeavors have corroborated that fresh fruit and vegetables
confers health related benefits and provide protection against the risk associated with
different types of diseases like diabetes stroke and cancer(Van and Pivonka 2000 Stan
Kar Stoner Singh 2008) Likewise the world health organization (WHO) has
revealed in their research carried out in 2002 that the fruits and vegetables
contaminated with pesticides can cause about 31 percent of diseases related to heart and
11 percent stroke in all over the world However if best quality of fruit and vegetable
consumption is adequately increased it is projected that about 27 million of lives can
be protected each year Pesticides free food contains higher level of antioxidants which
fight against various diseases and provide different essential vitamins More
importantly pesticides free food products also aimed to prevent from some allergies
and diseases common in human being It is corroborated by other research studies that
chemical fertilizer free food are beneficial for human health as well as for the animals
wildlife and for the ecosystem To encourage such agricultural management techniques
in developing countries in general and Pakistan in particular still there is long way to
go but such research studies can provide the paved way to open new avenues for the
concerned policy makers and stakeholder in the realm of Agriculture
In addition locally grown pesticide free produce tends to fetch higher prices due to
sanitation concerns of the consumer and improved quality of the product Subsequently
such produce are preferred by the household and they are agree to pay a price premium
for such food produced free from pesticides compared to prevailing regular market
price of conventional food products Thus it is important to measure householdlsquos
willingness to pay for locally produced pesticide free fruit To acquire a good or
service consumerslsquo wants to sacrifice an extra amount of money which show their
willingness to pay Willingness to pay can also be defined more categorically as the
extra amount of money that an individual wants to pay for best quality of food (Lusk
and Hudson 2004) The commonly used model for eliciting householdlsquos willingness to
pay information is Contingent Valuation Method (CVM) Contingent valuation (CV) is
a survey-based method which is used to elicit householdlsquos willingness to pay for
environmental and natural resources
6
12 Justification of the Study
With the every passing year the demand for agriculture products is hiking due to rapid
increase in the worldlsquos population Pakistan being an agrarian country is striving hard
to fulfill the domestic and international demand for agricultural food To overcome the
escalating demand for agricultural product farmers mainly depend on chemical
technologies to manage pests and to provide enough food Besides their benefits now it
is clear that pesticides are negatively influencing human health and also the natural
environment The food that we are eating has gained more discussion in all over the
world including developing countries like Pakistan that whether this food is safer for
human health and for natural environment Consumers are facing with problemslsquo which
food is safe to eat and which is not safe Which food processing is beneficial for human
and environment and which is worse (Bold et al 2015 Chiew Shi Wee et al 2014
Sirieix 2011 and Butt et al 2015) Most of people are turning towards the production
and consumption of pesticides free food to resolve these issues
In developed countries consumers are highly concerned about the excessive use of
chemicals on food and its negative impact on health and natural environment thatlsquos
why the production of food produced without the use of pesticides Large numbers of
studies are conducted on consumerslsquo perception regarding pesticides- free food in
developed countries like Europe Australia United State and New Zealand but in
developing countries very little is known about consumerslsquo perception regarding
pesticides-free food
Despite the fact that food production without pesticides and other chemicals are safe for
health and environment its production and consumption is very low In Pakistan only
few farmers are using chemicals free technology for food production It has only 28
farms producing pesticides-free food which they just growing for their own
consumption not for commercial purpose In Pakistan there is high gape of information
about consumerlsquos perception and awareness regarding pesticides-free food and
consumerslsquo willingness to pay for pesticides-free food (Panhwar 2004)
Keeping in view the human health hazards and environmental vulnerability owing to
irrational use of pesticides alternative farming systems such as pesticides free farming
integrated pest management (IPM) and organic farming is becoming progressively
7
more popular in the global context However in the country like Pakistan where costly
input and lower output agriculture was a historic focus Following the Green
Revolution in 1960s adoption of certified organic production is expected to be fairly
low Nevertheless aforementioned agriculture practices could be an alternative system
in convincing farmers towards safe and sustainable agriculture and to comply with the
strict regulations and mandates of certified organic system and WTO Moreover due to
conducive and diversified weather and climatic condition of the country and relatively
cheaper labor force availability production of such safer food seems feasible
Pesticides free food is supposed to be having high prices however it is important to
examine whether households are willing to pay a higher price for these pesticides free
fruit According to the research study conducted in different countries of the world on
pesticides free food this study also focus to investigate a price premium that
households are willing to pay for pesticides-free fruit and factors influencing their
decision For this purpose Khyber Pakhtunkhwa (KP) is selected as a research area
Khyber Pakhtunkhwa (KP) is blessed with fertile soil and plenty of water for irrigation
and is famous for production of delicious fruit such as peach apple guava plum
mango Pear apricot date and citrus Fruit farming has been an important business of
Khyber Pakhtunkhwa and the total fruit production during 2015-16 was 411448 tons
from 44737 hectare (GOKP 2015-16) Given that the region is one of the important
fruit growing regions with relatively readily available agricultural labor growers has
the potential to produce pesticides free fruit in this region In this direction more
research work is required to estimate a price premium householdslsquo willing to pay for
fruit free of chemicals and pesticides Thatlsquos why this study is designed to measure
what price premium households would be willing to pay for pesticides free fruit and
improvement in apple peach and mango quality produced by farmers
14 Purpose and objectives of the Study
The irrational and overuse of pesticides in agricultural food production causes severe
damages to human as well as animal health and to the environment too Thus a new
production and new system is needed to overcome these problems and to limiting the
use of these hazardous chemicals during production process The risk of harmful effects
on health and environment are generally reduced with pesticides free farming compared
8
to conventional farming methods Hence pesticides-free farming has the potential to
provide a healthy and safer environment The purpose of conducting this study is to
understand the factors that influence householdlsquos behavior in purchasing pesticide free
food and their willingness to pay for such food The main theme to carry out this study
is to discuss on the variables which determines householdlsquos behavior in the buying
pattern of pesticide free food Besides this research also aims to increase the
understanding on householdlsquos awareness attitude and perceptions towards pesticide
free products
The general objective of this study was to investigate what price premium householdslsquo
are willing to pay for pesticides free fruit produced locally
The specific objectives of this research study are mentioned as below
To study socio-economic characteristics of household and their expenditure on
fruit
To investigate householdlsquos perception towards the use of pesticides on fruit
production
To identify factors influencing householdlsquos willingness to pay (WTP) for
pesticides free fruit
To compare householdlsquos willingness to pay across urban and rural regions of
the study area
To examine the effect of different contingent valuation elicitation format on
householdlsquos WTP
15 Research Questions
1 Do householdlsquos willingness to pay a price premium for pesticide free fruit
produced locally is affected by their socio-economic characteristics
2 Do householdslsquo willingness to pay price premium for pesticide free fruit
produced locally are different in rural and urban regions
3 Do householdslsquo willingness to pay price premium for pesticide free fruit
produced locally are affected by WTP question format
9
16 Hypotheses
Hypothesis is a proper statement that shows the expected association between an
exogenous and endogenous variable (Creswell 1994) Hypothesis is mainly of two
types the null (Ho) and the alternative (H1) hypothesis The null hypothesis is a
statement about the relationship between the dependent and independent variables
while the alternative hypothesis is tested for the acceptance or for the rejection of null
hypothesis through using different test-statistics and usually opposite to the null
hypothesis
161 Hypotheses to be tested
Hypothesis 1
H1 Socioeconomic characteristics have significant effect on householdlsquos WTP
for pesticides free fruit produced locally
Hypothesis 2
H1 Rural and urban locations have significant effect on householdlsquos WTP for
pesticides free fruit produced locally
Hypothesis 3
H1 WTP question format have significant effect on householdlsquos WTP for
pesticides free fruit produced locally
17 Contribution of the Study
The major findings of this research endeavor could be lucrative to pesticides-free food
industry players in designing and implementing programs relating to the production
marketing and consumer behavior regarding fruit and vegetable The study is providing
information regarding householdlsquos willingness to pay an extra amount for pesticides
free fruit at market place The identification of factors influencing purchase of
pesticides free food provides valuable information in formulating short and long term
marketing programs Also the outcomes of the study provide benefits to Government
in their policy making towards pesticides-free farming and pesticides free products
Pesticides free fruit could contribute significantly to wealth formation poverty
lessening and can assess to export market Pesticides free fruit provide healthy food and
natural environment to the society
10
18 Organization of thesis
This study is organized into five chapters In the first chapter background of the study
research questions study hypothesis research justification and contribution of this
study is discussed Chapter two is consist of review of literature related to consumerslsquo
perception market potential and market prospects empirical research studies on
consumerlsquos willingness to pay and consumer knowledge about pesticides free food
socio-demographic variables and their effects on willingness to pay price premium are
discussed Chapter three discuss in detail the study area conceptual and empirical
framework on consumerslsquo willingness to pay and contingent valuation methods are
discussed Chapter four presents descriptive analysis and results obtained from
empirical findings and Chapter five provide summary conclusion and recommendation
and future suggestions on the basis of research findings
11
II LITERATURE REVIEW
Literature review is a synthesis of previous study in the content of a thesis In this
chapter different past investigation are reviewed Mostly this chapter concern on the
methods adopted by different researchers while measuring willingness to pay It also
figure-out various explanatory variables which have been found influencing
householdslsquo willingness to pay an extra amount of money for pesticides-free food
Previous researches on perception questions are also discussed
21 Illustration of Contingent Valuation Method (CVM)
A number of research studies are undertaken across globe to investigate about
consumerslsquo WTP for safer foods such as organically produced pesticides free or
naturally grown Most of the WTP studies use contingent valuation methods where
hypothetical market scenario is developed and subjects are asked to name their WTP
price as compared to existing market price Different techniquesquestionnaires are
used in contingent valuation method where respondents are directly asked to state their
maximum amount of money they are willing to pay for specified improvements in
environmental or health quality The methods used in CVM includes personnel
interview mail and survey that elicit consumerlsquos WTP for those goods yet not available
in the market Survey questions include single bounded double bounded dichotomous
choice and open ended or closed ended (Lusk and Hudson 2004)
Misra et al (1991) studied consumer preferences and their willingness to pay for
pesticides free fresh produce by applying contingent valuation method An ordered
probit model was adopted to know householdlsquos stated willingness to pay for products
free from pesticides residual The study also aimed to know the factors affecting the
probability of householdslsquo WTP for a number of alternative price premiums The
results indicated that householdlsquos willingness to pay was different across different
factors The study concluded that testing and certification was the recommendation of
the households Results also showed that consumers in the study area opposed higher
prices for certified-FPR fresh produce
In another study Gil et al (2000) adopted contingent valuation method and studied
consumerslsquo willingness to pay for pesticides free fruit in Spanish regions Results
showed that consumerslsquo concern over health and environment was increased Results
12
also suggested that due to the adverse impact of conventional food on health and
environment demand for pesticides-free food has raised Results of the study also
showed that consumerslsquo were willing to pay more prices for fruits vegetables and
meats which were free of pesticides
Boccaletti and Nardella (2000) used contingent valuation method to assess householdlsquos
willingness to pay for pesticides free fresh fruit and vegetables To know the impacts of
explanatory variables on the probability of householdslsquo willingness to pay different
price premium an ordered logit model was used and results were reported A
significant and positive effect of income on householdlsquos willingness to pay was
observed Results of the study also suggest that householdlsquos education and associated
risk concern has an inverse relation with households WTP
In another study Millock et al (2002) conducted a research study by using contingent
valuation technique to estimate willingness to pay for pesticides free products through
panel data The information collected was based on weekly report of householdslsquo
purchases of 2000 Danish families Questionnaires were sent to households and asked
them to differentiate different food attributes The food product attributes were included
environmental issues animal welfare and food safety The result showed that
household had given high value to food free from pesticideslsquo residues
Similarly in a relevant study Cranfield and Magnussan (2003) studied willingness to
pay of the Canadian householdlsquos for those products which were free from pesticides
residuals by applying an Ordered Probit Analysis model A contingent valuation (CV)
study was attempted to know that if Canadian households would pay a price premium
for pesticides free food products About sixty five (65) percent of the householdlsquos were
willing to pay a 1 to 10 percent extra amount of compared to those products
contaminated with pesticides residuals About five percent of the total respondents were
willing to pay more than 20 percent price premium The main determinants that switch
over the households to pay higher premiums for pesticides free products were
householdslsquo health concern and environmental concern
In a relevant study John and Eric (2004) developed a survey based research to find out
householdlsquos choice of paying an extra amount for fresh and pesticides free products by
using a contingent valuation technique According to their research 65 percent of
13
households were willing to pay one to ten percent extra prices for pesticides-free
products as compare to conventionally produce one five percent respondents willing
to pay more than twenty percent Health and natural environmental issues youth and
grocery stores were the important factors influencing consumers to pay higher prices
Masias et al (2012) carried out a research study in Spain to analyze the level of
knowledge consumption and consumerlsquos willingness to pay for organic vegetables
such as organic tomatoes By using contingent valuation method three distinct
consumerslsquo groups were identified The results showed consumerlsquos lack of knowledge
regarding organic vegetable Result of the study revealed a clear relationship between
level of knowledge and organic food consumption and consumerslsquo potential willingness
to pay
Boys et al (2014) conduct a research study in Dominica to assess willingness of the
consumerslsquo and their opinion for organic or locally grown produce By adopting
contingent valuation method (CVM) maximum likelihood estimation (MLE) procedure
was applied Findings from the study reported that respondents in Dominica were
willing to pay 175 percent for organic and 12 percent price premium for locally
produced food Results of the study showed that consumer response towards
willingness to pay was different across socio-demographic characteristics family health
status and experience regarding adoption of organic food products
22 Crux of the Double bounded dichotomous choice model
Many recent research studies deployed double bounded dichotomous choice model to
study consumerslsquo willingness to pay for pesticides free organic and related food
Owusu (2010) studied and analyzed market possibility for new pesticides free lettuce
and water melon by using a double bounded dichotomous choice contingent valuation
technique in the city of Kumasi in Ghana The information of the respondents was
collected By applying a Tobit model householdslsquo willingness to pay was assessed
More than 50 percent price premium were paid by 71 percent of the respondents for
natural vegetables and 82 were willing to pay 1 to 50 percent higher premiums for
natural fruits Results showed that human capital food qualities and householdlsquos
recognition impact householdlsquos willingness to pay for pesticide free commodities The
14
evaluated market possibility for pesticide free fruits were (GHcent32117113 US$
26453433) for every annum and for naturally produced vegetable was GHcent1991224
(US$1640083) per year suggested an immense market possibility for naturally
produced fruits in Ghana
sum
(
)
(
)
Where
are binary valued (0 or 1) indicators and the formulas
for the corresponding response probabilities are given above The model was estimated
through maximum likelihood estimation method and the results were used to find out
the mean and individual WTP (s) for pesticides free fruits
Where ƒ(WTP) is a function X is a set of socio-economic characteristics are
coefficients and is error term
In another study Cerda et al (2012) investigated different markets regarding
respondentlsquos preferences and willingness pay a price premium for products free from
pesticide in Chile Conjoint analysis was also used to estimate the marginal willingness
to pay of the consumer for pesticide-free apple A total of 400 individuals were
interviewed to know householdlsquos willingness to pay and to determine different
attributes that consumer search when purchasing apple by using a logistic probability
function and single-bound dichotomous elicitation format The output showed sweet
apple lowest price and pesticides free production attributes were preferred by
households Results of the study revealed that consumers in the study area were willing
to pay about 130 Chilean pesos kilogram for pesticide free apple
By using double bounded dichotomous choice approach Minh et al (2013) conducted
a research study on consumption and willingness to pay a price premium for pesticides
free vegetables in Vietnam Under contingent valuation method 185 respondents were
surveyed and analyzed Results showed that about 15 percent of the consumers had
already used pesticides free vegetables and 88 percent sought to try and purchase such
products if available in the market Result revealed that consumerslsquo were willing to pay
15
on average 70 percent more amount for pesticides free vegetable than the convention
price Findings also showed that respondents with more concerned about pesticides free
food and high purchasing power were more likely to pay extra amount of money
Findings of the study showed most of the consumers were still worrying about safe
food because of chemical residues in vegetables Results suggest that control of
pesticides level was difficult for state agencies because of insufficient capabilities
Some recommendations were suggested based on findings of the study such as the
consumers should be informed regarding organic vegetables and information should be
publicized to consumers and to expand organic market share in the future new shops
should be open
Hai et al (2013) conducted a research study on consumption of organic vegetables and
consumer WTP for vegetables produced without the use of pesticides in Vietnam They
reported in their study that most of the consumers were still worrying about safe food
because of chemical residues in vegetables Control of pesticides level was difficult for
state agencies because of insufficient capabilities By using double bounded
dichotomous choice approach under contingent valuation method 185 respondents
were surveyed and analyzed The results showed that about 15 percent of the
consumers had already used pesticides-free vegetables and 88 percent of the total
respondents desired to try and purchase if such pesticides free products were available
in the market On average consumers were willing to pay 70 percent more price than
the convention price Findings of the study also showed that respondents with high
income and more concerned about pesticides-free food were more likely to pay price
premium
23 Overview of the Ordered Logit Model
Regarding discrete nature and ordinal ranking of the WTP variables in payment card
method an ordered logistic regression was applied in many research studies Ordered
logistic regression is the most appropriate choice in studying these issues (Green
2007) Under latent variable framework the willingness to pay model can be written as
follows
16
Where is an unobserved latent variable reflecting the WTP for pesticides-free fruits
for household i expressed in terms of utility to switch from the traditionally grown
fruits consumption to pesticide free fruits is a parameterlsquos vector reflecting the
relationship between WTP captures a set of socioeconomic and demographic
variables influencing WTP and is the unobserved disturbance term reflecting
stochastic differences between households not controlled for The relationship between
the unobserved and the observed outcome for household ( =0 1 2hellipj) can
be summarized as follows
It is presumed that ɛ is normally distributed across observation
With regards to ordered logistic model Valchovska S (2004) investigated Dutch
householdlsquos attitudes and behavioral intentions to purchase pesticides-free olive oil By
applying CVM to assess consumer willingness to pay a price premium for pesticides
free olive oil on the Dutch consumer an ordered logit regression model was used
Results suggested that willingness to pay did not depend on socio-demographic factors
but rather on consumers awareness and experience with the product Results also
showed that experience regarding the product was significantly related to purchase
intention and willingness to pay Most of the consumers considered pesticide-free olive
oil to be too expensive Results suggested high prices appeared the biggest constraint
on consumption Results clearly verified that consumerslsquo familiarity with pesticide-free
olive oil in the Netherlands was low at present This situation may however be
changed by a possible increased availability of the product in the supermarkets
17
Rodriguez et al (2008) carried out a research study to measure consumers WTP for the
available pesticides free products in Argentina domestic market The data was collected
through a survey from the consumers of Buenos Aires city For the analysis of data a
binomial multiple logistic regression model was applied Five different organic
products such as regular milk leafy vegetables whole wheat flour and fresh chicken
and aromatic herbs were selected for the research The method of contingent valuation
(CVM) was adopted to estimate consumerslsquo stated willingness to pay The result
revealed that pesticide free agriculture has undergone momentous expansion and
consumers in the study area were willing to pay a higher amount of money for such
organic products Research results suggest that along with price that play a significant
rule while consuming organic products non availability of stores for organic products
and a reliable regulatory system limits the consumption of pesticides free organic
products in the study area
According to Kalogeras et al (2009) carried out a research study that concentrates on
the identification of Dutch householdslsquo willingness to pay (WTP) for natural olive oil
The study was carried out in 5 biggest Dutch cities in Netherland To evaluate the
impact of explanatory variables on householdslsquo willingness to pay a price premium for
natural produced olive oil an ordered logit regression model was constructed Results
suggest that experience awareness and consumerslsquo personnel satisfaction were the
variables influencing consumerslsquo WTP for natural olive oil
Travis et al (2009) conduct a research on consumer purchasing behavior for pesticides
free fruits and vegetables To identify the impact of socio-economic and socio-
demographic characteristics on the probability of consumers belonging to certain
groups like devoted casual or nonuser an ordered logistic model was used Results
showed that factors like price and income were influencing householdlsquos willingness to
purchase pesticides-free fruits and vegetables to some extent The results also showed
that respondents with a college degree children aged more than six years and aged
above than fifty years were willing to purchase pesticides-free fruits and vegetables
Zeki and Zia (2009) carried out a research study to investigate consumerslsquo stated WTP
for tomatoes produced free from pesticides residues The study also aimed to measure
the impacts of socio-demographic and hazard variables on WTP Ordered Probit model
18
was used to figure out the likelihood of WTP for pesticide free tomatoes The
information was acquired from 666 respondents by survey method in Ankara and Tokat
regions at same occasion The study results revealed that 3423 percent of Turkish
households were not willing to pay 7702 percent willing to pay a 30 percent higher
amount of money and 22 97 percent would be willing to pay more than 30 percent
premium According to the results Turkish households were paying a little price
premium for tomatoes produced free from pesticides Furthermore the important
factors significantly influencing willingness to pay for pesticides free tomatoes were
gender education statue of mother recognizes for ecologic agriculture solid
sustenance and risk
Oyawole et al (2016) conducted a study in Nigeria to asseslsquo consumer awareness
benefits and willingness to pay for organic vegetables Descriptive statistics and logit
model was used for the analysis of data According to the research findings about 70
percent of consumers were aware of the benefits of organic agriculture and hence they
were willing to pay price premium Results showed that factors influencing willingness
to pay positively were higher education and consumer awareness regarding organic
food while age income and gender had no significant influence on consumer
willingness to pay
Hayati et al (2017) conducted a research study in Marand city to identify factors
effecting consumerslsquo WTP for pesticides-free fruits and vegetables To assess
respondentlsquos willingness to pay an ordered logistic regression model was applied By
using Contingent valuation method data was collected from 394 respondents The
results revealed that 33 of the respondents were willing to pay 20 more price
premium 64 showed 5 to 20 more price premium while only a small portion 3
of the total sample of the consumers were not willing to pay more price for pesticides
free fruits and vegetables Findings of the study also revealed that factors such as
income of the respondent environmental and health concern and consumerlsquos
knowledge regarding pesticides free fruits and vegetables were significantly affecting
respondentslsquo willingness to pay for vegetables and fruits free from pesticides residues
19
24 Factors influencing Householdsrsquo Willingness to Pay
Based on the literature review factors influencing households WTP a price premium
are discussed below
WTPj = β0 +β1Agej + β2Genj + β3Eduj+ β4Hsizej + β5Incj + β6Locj + β7Healthconj+
β8Envirconcernj +
Where
WTP = Willingness to pay for pesticides free fruit = Householdslsquo head age in years
= Gender status of the householdslsquo head = Education level of householdslsquo head in
years = Householdslsquo size = Income of the household = Householdslsquo
location = Health concerned = Environment concerned micro=Error term
Govindasamy and Italia (1991) investigated households in different grocery retail
markets in New Jersy to know their different opinion regarding pesticides free
products The main theme of the research study was to know demographic
characteristics that caused the household to pay a price premium for products free from
pesticides residues than the price prevailing in the market The result showed the
influencing factors that caused the individual to pay more price premium for pesticides
free products were demographics characteristics such as females those having higher
income and young individuals The result also showed that number of member in
households had an inverse relation with willingness to pay More individual in a house
were not willing to pay higher prices for pesticides free products
Piyasiri and Ariyawardana (2002) conduct a research study to identify market potential
and consumerslsquo expectations for pesticides free food in Kandy Sri Lanka The study
also aimed to identify factors influencing consumerslsquo willingness to pay price premium
for pesticides-free food Results revealed that most of consumers in the study area were
aware of the use of pesticides free food and this awareness influenced their
consumption of organic food and willingness to pay more for organic food Results
showed that socio-demographic characteristics like income education of the
respondents beside environment knowledge were the important factors influencing
consumerslsquo WTP for pesticides-free food Study suggested that market for organic food
could be enhanced by availability of organic food in easily accessible shops and market
20
should also direct awareness in consumer regarding demand and consumption of
organic food
Qingbin and Junjie (2003) conduct a study to identify market potential for pesticides
free apple and milk by adopting a conjoint analysis technique in Vermont State of
USA Results found that there was a significant niche market for pesticides free apple
and milk The results also suggested that especially those consumers who were
regularly purchased pesticides free products were willing to pay price premium for
apple and milk produced without the use of chemicals and certified by NOFA
Heo and Kim (2004) investigated green marketing strategies and willingness to pay for
environment-friendly agricultural products in the Metropolitan area The results
revealed consumerlsquos WTP for grain vegetables fruit and processed foodstuffs were
206 percent 202 percent 193 percent and 172 percent respectively higher than
agricultural products produced by conventional farming method
Gracia and Magistris (2007) conduct a research study to know consumerslsquo purchasing
behavior regarding pesticide-free food and also factors influencing food purchasing in
Iran A multivariate limited dependent variable model was used Results showed that
households purchasing pattern was more for pesticides free products and they
purchased such safer products in large quantity Findings of the study showed that
purchase of pesticide free products depends on householdlsquos behavior and information
regarding the product Moreover householdlsquos behavior regarding health concern and
environment concerns given by pesticides-free products were the factors that explained
both intension and final decision to purchase pesticide free products Income and
information about pesticide free products had a significant positive influence on the
decision of the consumer to purchase pesticides free products
Kamal et al (2009) studied householdlsquos willingness to pay a higher price for
pesticides-free products in Kathmandu valley About 180 respondents were interviewed
by using well designed questionnaires to find out their perception for pesticide-free
food commodities and asses their willingness to pay The study revealed that almost all
the respondents were willing to pay a higher price for such food but the level of
acceptability varied Up to 58 of the respondents were willing to pay 6- 20 more
price while 13 were willing to pay half premium The average price premium was
21
noted about 30 Over 39 of the respondents suggest the extra price is reasonable for
pesticide-free food while 27 suggest it a really higher price However results showed
that the consumption of pesticide free food had increased
Morteza et al (2009) conducted a study to examine consumerslsquo willingness to pay for
pesticides free fruits and vegetables The results showed that variables such as socio-
demographic characteristics and perception of the respondents regarding environment
and health concern were influencing consumerslsquo WTP for pesticides free food
Environment concern was the important factor of consumer willingness to pay but
results from this study showed that respondents in New Brunswick gave more priority
to health as compare to environment Results also indicated a positive influence of
income and health concern on consumer willingness to pay for organic food
Ghorbani and Harnraz (2009) carried out a research study on factors influencing
consumer WTP for pesticides free products in Iran By applying Tobit model the
results showed that physical look and information of consumerslsquo were the influencing
factors affecting willingness to pay higher price Consumerlsquos concern of chemicals
residues in diets were also positively affecting willingness to pay In demographic
characteristics such as education of the respondents had negative effect on WTP The
study suggested that farmers and consumers should be encouraged to produce and
consume pesticides-free food Study also suggests that marketing strategies should be
encouraged for the marketing of such organic food products
Akgungor et al (2010) carried out a research study to estimate consumerslsquo perception
regarding safe food and the trade-off that urban Turkish consumer made between good
quality and chemicallsquos free fresh fruits and vegetables The date was gathered from a
representative sample of urban consumers The results suggested higher income and
more educated respondents were highly interested and they had more knowledge
regarding organic products Results showed suggested reason for choosing organic
products was consumerslsquo perception regarding organic products of low health risk and
higher nutritional value Results showed 36 percent higher price premium consumers
were willing to pay for organic food that suggests urban Turkish consumerslsquo demand
for organic products
22
Oraman and Unakitan (2010) analyzed factors influencing Turkish consumerslsquo
purchasing decisions for fruits and vegetables The survey conducted in Istanbul by
applying logistic model Results of the survey showed that health and safety concern
were the important factors influencing consumerslsquo preferences regarding organic food
Findings of the study would help organic food producer in targeting factors that were
influencing consumerslsquo decisions to purchase organic food products
Bektas et al (2011) conducted a research study to determine level of consumerslsquo
awareness regarding food safety in Izmir Turkey by applying Probit model Results
revealed that consumerslsquo with high income and more education were more aware
regarding safer food Outcome of the study also identified aged respondents had more
probability for healthy and safe food products Results suggested that awareness for
safer food should be passed through informative campaign targeting especially low and
middle income groups as well as low education level population
Coulibaly et al (2011) studied the health risk caused by using large quantity of
chemicals and pesticides on vegetables By using a hedonic pricing model they
identified the determinants of the householdlsquos WTP for pesticide free products
Information was collected through a well designed questionnaire on householdlsquos
perception awareness and consumerslsquo willingness to pay for pesticide free vegetables
The perception of householdlsquos for good quality vegetables included color freshness no
external damage and firmness The most important factor effecting householdlsquos choice
to pay more for pesticide-free vegetables were awareness about the health hazards
caused by those chemical Households were willing to pay more than fifty percent for
those products free of such pesticides and chemicals
Joyce et al (2011) conduct a survey to examine consumerslsquo perceptions and to assess
their willingness to pay for pesticides-free product They surveyed 100 households in
Morogoro municipal The results presented showed that 78 of the respondents were
willing to pay a higher price for pesticides-free food The results revealed that
environment and health concern were the most important factors effecting householdlsquos
willingness to pay for organic food Results from the survey suggested that
consumption of pesticides free food were increasing but need certification labeling
processing and packaging to boost up the demand
23
Sangkumchaliang and Huang (2012) conducted a survey on consumerslsquo perception and
attitude towards organic food products Results showed that consumers were
purchasing organic food products because of the expectations that organic food is
healthier and safer to the environment Results also revealed that respondents with old
aged and more educated were more willing to purchase organic food products The
study suggested that consumerlsquos information needed to purchases organic food
Owusua and Anifori (2013) analyzed the willingness of householdlsquos to pay an extra
amount of money to watermelon and lettuce produced naturally or free from pesticides
by applying a (CV) contingent valuation information starting with urban Kumasi in
Ghana The impacts of the determinants of the householdlsquos willingness to pay a higher
price were examined with a Bivariate Tobit model Results showed socioeconomic
characteristics as well as freshness and cleanness of products had a great influence on
householdlsquos choice to pay a higher price than they pay for conventional products
While householdslsquo size has a negative impact on consumerslsquo willingness on paying
premium to natural lettuce The estimated mean householdlsquos willingness to pay for
pesticide free watermelon was Ghcent05554 (US$ 0 4575) and for natural lettuce was
GHcent12579 (US$1 0361)
Haghjou (2013) investigated that the demand for those products that was grown without
the use of pesticides has increased amazingly in the recent years The study was carried
out to assess the factors effecting householdlsquos willingness to pay a higher price for
organic products accessible in the Argentinean provincial market The output of the
study reveals that 95 of the respondents were willing to pay a higher price while 10
of the householdlsquos were like to pay about 35 percent higher price than the market
existed price for naturally grown products The results suggested that householdslsquo
income family size ecological problems including respondentslsquo knowledge has
enhanced their desire to pay higher price for pesticide-free products than the
conventional one The result also showed that female as well as house wives were
agreed to pay more price premium
HUI et al (2013) conduct a survey on householdslsquo WTP a price premium for
pesticides-free products in Klang valley The study was based on householdlsquos
purchases by 2012 on their demographic and social-economic characteristics To study
the householdlsquos perception and WTP for pesticide free products 500 households were
24
interviewed by using well designed questionnaires The data collected were analyzed to
find what determined the presence of pesticide-free products The main theme of the
research study was to know the determinants that playing rule in willingness to pay for
products free from pesticides residues The result revealed that majority of the
households were agreed to pay a higher price premium for pesticide free products
Different factors like environment psychology food free from pesticide residuals and
health conscious were related to explain household willingness to pay for organic
products However the result also showed that social demographic and level of
knowledge did not explain the WTP for products free from pesticide
Syed et al (2014) studied different level of pesticides in different vegetables and fruits
in Pakistan The results obtained showed that more than half of the collected samples
were contaminated with organophosphate pyrethroids and more organochlorines
pesticides Numerous research studies found that tomato apple melon mango grapes
and plum among fruits and vegetables has crossed the maximum residual levels of
FAO and World Health Organization (WHO) The comparison with other areas showed
that in 50 of the sample the residual level was above than the stated level but was in
agreement with neighboring countries like china and Bangladesh Higher hazard risk
index (HRI) values were calculated for dieldrin methamidophos op-DDT diazinon
and pp-DDT in apple mango banana melon potato and onion
Vidogbena et al (2015) carried out a research study in major cities in Benin to asseslsquo
consumer perceptions about cabbage produced by a physical barriers method to protect
cabbage from pesticides Results showed that consumers were aware of the impacts of
pesticides on health and environment but they were not able to differentiate between
cabbage produced conventionally and through this net method Results of the study
revealed that consumer were willing to pay higher price for cabbage produced with
minimum application of pesticides as compared to one produced with pesticides
application Consumers were willing to pay 38 more price than the existed market
price Results indicated that females more educated and aged respondents were willing
to pay more prices for better quality cabbage
Safdar et al (2015) studied pesticide free food consumption and consumerslsquo WTP in
the United Arab Emirates To recognize major determinants of respondentlsquos willing to
pay more price for products free from pesticides residues a regression model was used
25
Around 300 hundred respondents were interviewed and information was collected The
results showed that the consumption of such food was increased in the study area This
increment was due to high per person price premium more knowledge about nourished
food products and different household population Consumers were paid price premium
for the food free from pesticides residuals Results showed that majority of the
respondents respond when inquired as to whether they were willing to pay more for
pesticide-free products Age nationality instruction family size and salary were main
factors influencing consumerslsquo to pay higher price for the pesticides-free food products
Hiren et al (2016) carried out a survey in Tennessee State USA The data were
collected on a random sample from grocery shoppers to assess consumer general
knowledge about pesticides-free food and to know their willingness to pay For this
study binary logistic regression model was used The survey showed that most of the
consumer had a fair knowledge about pesticides free food Results indicated that
number of those respondents who had never been used organic food was higher than
those who usually used The results showed that income and environmental concern
were the factors that effectively determine to pay more for pesticides-free food
Aguiar et al (2016) studied factors influencing consumerslsquo purchasing behavior
regarding organic food in Brazil by using structural equation modeling (SEM)
approach Results revealed that most of the consumerslsquo were willing to buy organic
food Respondents were willing to pay 25 percent price premium for organic food as
compared to food produced conventionally Results suggest the main determinants of
consumerslsquo willingness to pay were their beliefs of positive effects of organic food on
health and environment
Mangan et al (2016) studied level of awareness and willingness to pay for organic
vegetables in Sindh province of Pakistan Result of the study reported that majority of
the respondents had knowledge about the beneficial effect of organic vegetables while
less than half of the respondents had never heard about organic vegetables Results also
showed that most of the respondents (82) were not aware of the benefits of organic
vegetables to the environment Majority of the respondents were willing to pay price
for organic vegetables
26
Nandi et al (2016) studied consumer willingness to pay for organic fruits and
vegetables and also factors influencing consumerslsquo WTP in India For the estimation of
respondentlsquos willingness to pay contingent valuation method (CVM) was used For the
data analysis 250 respondents were selected A binomial regression model was used to
know respondents willingness to pay and the factors influencing on WTP Results
revealed that most of the respondents were confronted with environment problem
health related issues and safe environment and food The respondents were increasingly
desired to have more healthier and environmental friendly food To acquire better
quality of fruits and vegetables about 90 percent of consumers were willing to pay a
price premium ranging from 5 percent to 100 percent Factors like income of
respondents householdlsquos size gender and other opinion variables such as pesticides
residues in food taste and environmental concern were significantly influencing
consumer willingness to pay a price premium
Slamet et al (2016) conducted a research study to identify factors influencing
consumerslsquo willingness to purchase pesticides free vegetables in Jabodetabek region
(Jakarta) Data was obtained through a householdlsquos survey Three methods binary logit
model descriptive analysis and factor analysis were used for analysis of data The
results showed that respondents with more income minimum householdlsquos size and
price tolerant were more likely to purchase pesticides-free vegetables The study also
indicated other factors determining consumerlsquos willingness to purchase for pesticides-
free vegetables were positive attitude health concern environment concern as well as
positive belief in pesticides-free vegetables
Gumber and Joyti (2017) conduct a research study in national capital region of India to
find out price premium and factors effecting consumerslsquo WTP for pesticides free food
Results of the study showed that consumerlsquo demographic characteristics like education
income of the respondents environmental concern and health related issues were the
important factors influencing consumers to pay higher price for organic food Besides
other variables like taste physical look certification packaging and promotion were
found to have no influence on consumer willingness to pay for pesticides-free food
Results suggested organic food producer to design communication strategies and
suitable pricing strategies in the study area
27
25 Essence of the Literature Reviewed
The above literature reported that several studies have been conducted on
consumerhouseholds willingness to pay for pesticides-free fruits with contingent
valuation method (Govindasamy and Italia 1999 Krystallis and Chryssohoidis 2005
Quagrainie 2006 Kimenju and De Groote 2008) In this type of models a
hypothetical market scenario is developed in which consumer are asked about their
stated WTP a price premium Misra et al (1991) and Boccaletti and Nardella (2000)
used contingent valuation method and analyzed household willingness to pay for
organic products in Italy and USA Gil et al (2000) also used the contingent valuation
model in Spain and reported that respondents in that study area were willing to pay a
price premium for pesticide-free fruits
Regarding the socio-demographic profile of pesticides-free products the above
underline research study showed that mostly female respondents were willing to pay
price premium more frequently than male respondents Age factors also played an
important role with older consumers observed more WTP due to their health concern
On the other hand income played a vital role while buying safer food Literature also
supported that more educated respondents are willing to pay more price premium for
healthier and environmental friendly food products
The preceding review presents valuable information on contingent valuation method
and consumer willingness to pay price premium for organic foods and environment
resources Since most of the work had done on consumer willingness to pay for
pesticide-free fruits in developed countries but not a few studied paid much attention to
conduct research on householdslsquo willingness to pay for pesticides-free fruits in
developing countries like Pakistan
A few facts emerge the literature review One the coverage of consumerslsquo WTP for
organic and pesticide-free food is rather thin in the literature The lack of this
information could inhibit governmental and developmental agencieslsquo decision Second
the consumer WTP is a factor demographics and consumerslsquo perception This study
uses CVM to explore Pakistani consumer WTP for pesticide-free fruit We found socio-
demographic factors such as age education income householdlsquos size householdlsquos
head education and perception significantly influencing householdslsquo WTP Findings of
28
WTP
Environmental
concern
Socio-demoghr
aphic characte
risitcs
consumer knowledge of PFF
Health
concern
this study almost showed 26 percent price premium that suggest a strong indication of
consumerslsquo demand for pesticide-free fruit This is a convincing message for
agriculture policymakers to encourage and educate farmers for production of pesticide-
free fruits Thus this study is timely relevant and provided additional information on
understanding consumerlsquos attitudinal behavior choice and factors effecting willingness
to pay for pesticide free fruits in Khyber Pakhtunkhwa (Pakistan)
Review of literature highlighted different influencing factors that affect the consumers
willingness to pay for pesticides-free food are shown in figure 1 It shows that
perception of consumers regarding human health and environment and socio-economic
and socio-demographic characteristics have an influential affect on consumer
willingness to pay
Figure 1 Factors effecting consumerrsquos WTP for pesticides free fruits
29
III MATERIALS AND METHODS
This chapter consists of two sections The first section describes the study area while
the second section presents the conceptual frame of the study The second section
provides a detailed discussion about the methodology being employed for the research
In the beginning of this section a brief debates provided on Contingent Valuation
Method (CVM) used to analyze householdslsquo willingness to pay (WTP) and later on
elaborate specification of the empirical models used for capturing the factors
influencing householdlsquos willingness to pay for pesticides-free fruit and vegetables is
given followed by a discussion on how the data was collected in the study area
31 Khyber Pakhtunkhwa
Khyber Pakhtunkhwa (KP) occupies a north-west position in Pakistan with a total area
of about 74521 square km Gilgit-Baltistan is situated on its northeast Punjab on the
southeast and Azad Kashmir on the east A long and narrow piece of land belongs to
the Federally Administered Tribal Areas (FATA) borders situated to its south and
Baluchistan directly below it On its west Federally Administered Tribal Areas are
situated and Afghanistan is situated on its northwest According to census report 1998
the total population of KP was 177 million According to the 2011 Census Bureau of
Pakistan house listing operation the population of KP was estimated to be more
than 268 million There are a total of 26 districts in KP Naturally KP has been
endowed with abundant cultural and tourism friendly environment It has the capability
to become a charming area for the tourist in the world Due to its beautiful and
attractive scenery geographical location climate and God gifted natural resources KP
is exceptionally abundant in terms of multitudes of tourist attraction The core of this
charm is clear from the striking natural picturesque consisting of beautiful rivers
attractive and splendid waterfalls spiral lakes mostly in the hilly areas and ever green
valleylsquos in most parts of the province TCKP (Tourism Corporation Khyber
Pakhtunkhwa(2015)Districts of KP is shown in figure31
30
Figure 31 District Peshawar and Mardan of Khyber Pakhtunkhwa
31
32 Sampling Technique
Three stage stratified sampling technique was used for the collection of data
from study area
321 Stage 1 _Selection of district Peshawar and Mardan
In the first stage as KP is comprised of 26 districts Peshawar and Mardan was
purposively selected The purpose behind this selection was huge population in these
two districts
322 Stage 2 _ Selection of Union Councils (UCs)
In the second stage from each selected district one urban and one rural union
council were randomly selected Thus a total of 4 union councils were taken as a
sample location from both districts
323 Stage 3 _Selection of households from each Union Council
In the third and final stage a list of households was obtained from local union
councillsquos health department (BHU) The following Yamanelsquos (1967) formula was
used to decide sample size of households
Where
- r is the sample size for households
- N is the total households in selected UCs and
- e is the minimum probability of error
The value of ―e was selected at e = 003 with the intension to keep the error at lowest
possible level and select a best representative sample from the given population of
10020 households
The Yamanelsquos formula suggests a sample size of 1000 households from two districts
After deciding sample size households was taken from selected union councils (UCs)
using proportional allocation sampling technique The allocation is said to be
32
proportional when the total sample size n is distributed among the different union
councils in proportion to the size of strata
=
____________________ (2)
Where
- = no of sampled respondents in each stratum
- Ni =population size of ith UCs
- N = the total number of households in selected UCs
- n = total number of households
The number of sampled households selected through proportional allocation method is
given in table 31
Table 31 Total population and sampled households from selected UCrsquos
District Union councils Total households Sampled
households
Mardan Urban 3090 309
Rural 1910 191
Peshawar Urban 3000 300
Rural 2020 202
Total 4UClsquos 10020 1000
Source Local Basic Health Unit (BHU) Peshawar and Mardan
33 Allocation of Sample Size for Different Models
A total of 1000 sampled respondents were selected for this research study from urban
and rural areas of the two districts namely Peshawar and Mardan of Khyber
Pakhtunkhwa Pakistan A sample of 600 respondents was reserved for double
bounded dichotomous choice model For the best estimation of parameters double
bounded model requires large sample size compared to open ended and payment card
model (Calia and Strazzera 2000) Out of total respondents a sample of 400
households were allocated for linear regression model and ordered logit model 200
for each model
33
34Contingent Valuation Survey Designing
CVM produces values contingent upon the description of the resource and the method
of payment The accurate measurement of any resource requires a detailed description
of the resource (Loomis et al 2000) The survey designed for this study started with the
description of the conventional food commodities and uses of different varieties of
chemical pesticides on fruit and vegetables before and after harvest After the
description of pesticides its harmful effects on human being as well as on environment
then pesticide free fruits were discussed with the households After describing the
benefits of pesticides free fruit respondents were asked to rank the relative importance
of each benefit The main reason for asking this question was to reveal householdlsquos
preferences their non-monetary value for use and nonuse benefits and to compare
them with their stated WTP response
Results in CVM are sensitive to the valuation question format and payment mechanism
(Carson and Hanemann 2005) The National Oceanic and Atmospheric Administration
(NOAA) Blue Ribbon Panel recommended the use of single bounded dichotomous
choice CV questions with mandatory payment vehicles (Arrow et al 1993) However
recent studies show that the single bounded dichotomous choice method provides
limited information about householdlsquos WTP and produces higher WTP compared to
open-ended question and payment card method (Zhongmin et al 2006) The single
question dichotomous choice method requires a large number of respondents to obtain
an accurate estimate of WTP (Carson and Hanemann 2005) People in the study area
were not familiar with CV Survey The use of an open-ended question format may
generate high zero WTP responses Consequently this study used the entire three
payment format to elicit householdlsquos WTP for pesticides-free products
35 Householdsrsquo Survey
This research mainly based on primary data The primary data was amassed through
interview schedule On the basis of objectives of the study a well-defined questionnaire
was prepared and was pre-tested in the field A small Pre-test was conducted before the
final data collection About 1000 households from Peshawar and Mardan were face to
face interviewed In contingent valuation studies face to face interview is more reliable
(Carson 2000) Socio-demographic characteristics attitudinal and behavioral
34
information of the households were collected Through this survey the data was
gathered both from rural and urban areas of the selected districts District Peshawar and
urban areas were taken equal to one and district Mardan and rural areas were taken
equal to zero Before asking the respondents for their willingness to pay a price
premium they were briefed about the differences among the conventional and
pesticides free fruit The attitudes of the consumers and knowledge about the minimum
use of pesticides on fruit were also gathered to better know how the respondents relate
different aspects of pesticides free fruit These attitudinal behavior questions were
posed using a modified Likert scale response (where a one equals agree and zero equals
disagree) Different values were assigned to each response according to a well-defined
method in the literature (Cranfield and Magnusson 2003)
36 Conceptual Framework
This section is devoted to the conceptual framework of the study Households utility
and willingness to pay willingness to pay and contingent valuation method and the
estimation of mean WTP are discussed The empirical discussion on the factors
influencing householdlsquos willingness to pay a price premium is also discussed
361 Householdrsquos Utility and Willingness to Pay
Willingness to pay could be analyzed as a householdlsquos choice problem Following
Canfield et al 2003 the study assumes that a household who buys and consumes a
conventionally produced food products encounters the same food products but in
pesticide free form on the market The household who decides to purchase pesticide-
free fruits instead of the conventional one does so because it is assumed that hisher
utility is higher for the pesticide-free food (Magnusson et al 2005) If the utility does
not change then a rational household will not be willing to pay as an increase in the
price results in a lower level of utility compared to the base level of utility Also if the
utility increases then the household may be willing to pay more for pesticides-free
food on the basis that the price increase does not lower the utility beyond the base level
(Cranfield et al 2003) The householdlsquos willingness to pay is therefore a function of
the change in utility arising from the consumption of pesticides-free food Thus
35
Where ∆U is the change in utility
Since the choice of one product over another is a discrete one it is convenient to look at
householdlsquos choice problem in a random utility setting Random utility models have
been used extensively in the valuation literature in the analysis of householdlsquos food
safety valuation and assessment of householdlsquos response to new (or different) products
(Eom 1994 Veeman and Adamowicz 2000 Kuperis et al 1999 Quagrainie et al
1998) Following the random utility framework proposed by Cranfield et al (2003) it
is assumed that a household faces a choice between buying either the conventional or
pesticides-free food variety of the same product The utility derived from consuming a
given product by a household is given as
Where
Where is the utility arising from choosing the ith alternative is the deterministic
component of the utility function is a vector of observable alternative specific
factors that influence utility is a vector of parameters and is the stochastic
component The households choose alternative if and only if for all (or
that without loss of generality
The utility of the household is however not observable What is observed is whether or
not the household chooses to pay a premium for the pesticide free product
362 WTP and CVM
On the basis of stated preferences consumer willingness to pay can be measured by
several methods To extensively elicit consumer preferences for food labels on different
attributes economist and market researchers have used contingent valuation (CV)
choice experiment (CE) and experimental auction (EA) or combination of all the three
methods (Fox et al 1994 Fox 1995 Huffman et al 1996 Hossain et al 2003
Loureiro and Umberger2003 2005) To estimate willingness to pay (WTP) economist
must turn to hypothetical due to unavailability of markets for the good or service
Historically Contingent Valuation Method (CVM) has been used for the evaluation of
consumerlsquos preferences for those goods not available in the market
36
Contingent Valuation Method is a survey based method where respondents are
presented with a hypothetical payment scenario for pesticide free products in this study
pesticides-free fruits Methods used in contingent valuation include face to face
interview surveys and mail to elicit consumerlsquos willingness to pay for organic and
pesticide-free food Contingent valuation method based on a survey approach was
presented by SVCiariacy-Wantrup (1947) however contingent valuation method was
first time empirically used by Davis (1963) Due to its proficiency most of the
researchers and policy makers used this technique to elicit consumerlsquos valuation for
those goods which are not available in the market such as research concerns to
environment health and recreation (Jakobsson ampDragun 1996)
The classification of framework to measure WTP based on the data collection methods
are as presented in Figure 32 We employed contingent valuation method (CVM) to
measure householdslsquo willingness to pay for pesticides-free fruits among the different
available alternative methods in the literature CVM was the most widely used
approach (Hanemann 1984)
Figure 32 Classification framework of methods to measure willingness-to-pay
Source (Breidert Hahsler ampReutterer 2006)
37 Elicitation Techniques
According to Portney(1994)to draw out the value of good and service different
elicitation techniques are used to design CV question scenario It is the important part
37
of any CVM study The elicitation used in contingent valuation methods are of various
types The most popular ones are bidding game approach open ended payment card
and dichotomous choice approach
371 Bidding Game Approach
In this approach a bid is randomly assigned to each respondent from a list of
predetermined bids The assigned bid may be a lower bid or higher bid Respondents
are to answer the bid and the process is continuous until the highest positive response is
recorded (Randall et al 1974 as cited in Venkatachalam 2004) Since this approach
provides market like situation and the respondents can research their preferences so the
results obtained through this approach are quite better
372 Open-ended Elicitation Method
In open ended questions format respondents are asked to identify a single amount
without suggesting them any value Respondents are asked to give their opinion on
―How much they willing to pay for a certain attribute Mitchell and Carson (1989)
found certain drawbacks in using this question format They reported that this method
provides maximum no response no answer and outliers In this method respondents do
not know what value heshe has to select
373 Payment Card Approach
Another technique in contingent valuation method is the payment card approach In this
question format respondents are asked to select an amount in willingness to pay from a
checklist given in absolute value or in percentage of prices (Boccaletti ampNardella
2000 Lacaze Rodriguez and Lupin 2009)This approach is used for small sample
size However it has been noted that the respondents could easily be confused if the
survey is not carefully designed (Wang and Whittington 2005)
374 Dichotomous Choice Model
In this format two choices are provided to respondents ―Yes or ―No This format
resembles the market choice behavior It included single bounded double bounded and
multiple bounded questions format
38
A Single Bounded Method
The single bounded format was first used by (Bishop and Heberlein 1979) The
consumers are asked whether they would be willing to pay a single amount for a certain
goods having an extra quality attribute The answer expected might be ―yes or ―no to
the given amount This format is easy to use but it provides limited information for
willingness to pay amount and the bidding game stop after a single information
provided
Most of the research work done on willingness to pay has suggested that respondents in
contingent valuation methods do not have a single value of price but they might have a
range of economic values in their mind (Cameron ampQiggim 1994 Dobourg Jones-lee
and Loomes 1994)
B Double Bounded Method
In double-bounded questions format respondents are presented with follow-up
questions after asking the first question For example if respondentlsquos answered to the
first question is ―yes willingness to pay a $X the next question might be whether
respondents willing to pay $Y (typically $Y gt $X) On the other hand if respondents
say ―No the first question than heshe might ask whether the respondents willing to
pay $Z (typically $Z lt $X) This questionlsquos approach is also called doubled-bounded
referendum approach (Cameron ampQiggim 1994) In comparison with single bounded
model more statistical efficiency can be seen by estimating doubled-bounded
willingness to pay data with the help of interval based econometric model (Heinemann
et al 1991) Figure 33 shows double bounded choice format
This study used all the three question scenarios to elicit WTP for pesticide free fruits
39
WTP
Yes
wtp
1st bid
yes
wtp 2nd
higher bid
yes No
No
wtp 2nd lower bid
yes No
No
Figure 33 Double Bounded Choice formats
38 Empirical Estimation of WTP by Payment Card using Ordered Logit Model
Regarding discrete nature and ordinal ranking of the WTP variables in payment card
method an ordered logistic regression was applied as the most appropriate choice in
studying these issues (Green 2007) The WTP model can be written under latent
variable framework as follows
Where is an unobserved latent variable reflecting the WTP for pesticides-free fruits
for household i expressed in terms of utility to switch from the traditionally grown
fruits consumption to pesticide free fruits is a vector of parameters reflecting the
relationship between WTP captures a set of socioeconomic and
demographicvariables influencing WTP and is the unobserved disturbance term
reflecting stochastic differences between households not controlled for The
40
relationship between the unobserved and the observedoutcome for household
( =0 12hellipj) can be summarized as follows
It is presumed that ɛ is normally distributed across observation By normalizing the
mean and variance of ɛ to zero and one the following probabilities can be calculated
Where F () indicates distribution function and microlsquos are unknown parameters to be
estimated with β
A natural question arises that when a variable influencing outcome changes than how
this variable influences the probabilities of different outcome For example if age is a
factor which influence consumer willingness to pay different choices then how would a
personlsquos probability of being WTP different choices be effected if heshe was a year
older Aldrich and Nelson stated that the estimated coefficients only determine the
direction of the effect but not the magnitude The magnitude of ordered logit cannot be
simply interpreted but signs and statistical significance agree with linear regression
(Wooldridge 2001) To answer the above question and take the idea marginal effects
can be calculated The marginal effects show that how a change in explanatory
variables affects the probability of willingness to pay that consumers are willing to pay
for different WTP classes In this model the coefficients are not equal to the marginal
41
effects of explanatory variables on probabilities Since the marginal effects can be
calculated by the following equation
There are two broad Cumulative density function (CDF) choices Logistic density
function and standard normal density function The model is said to be ordered logit if
the distribution is cumulative standard logistic (F) and the model is said to be ordered
Probit if the distribution is cumulative standard normal (Φ) Results obtained from
both of these models are same only the difference is in the tail The logistic distribution
has heavier tail than the standard normal distribution As Green (2000) reported ―It is
difficult to justify choice of one distribution over other on theoretical grounds in most
applications it seems not much difference The results obtained from both models
may be quite similar because of the similar distribution However an ordered logit
model is applied in this study
Empirically we estimated ordered logit model where WTPj is an ordered dependent
variable with ten WTP price premium categories
Table 32 Payment card format
Price premium classes (PKR)
WTP
= 0
WTP
1-5
WTP
6-10
WTP
11-15
WTP
16-20
WTP
21-25
WTP
26-30
WTP
31-35
WTP
36-40
Above
40
Source Pre- tested field survey (2017)
42
39 Empirical Estimation of WTP using Double Bounded Dichotomous Choice
Model
For Dichotomous choice question Following Chen et al (2002) and Kimenju et al
(2005) a double bounded dichotomous choice model was used in this study to assess
householdslsquo willingness to pay and the influence of explanatory variables on
householdlsquos WTP a price premium for pesticides-free fruits This model was used
because the dependent variable was double dichotomous whether the respondents
would be willing to pay or not so they provide answer with ―yes or ―no Many
researchers used double-bounded dichotomous choice method in their research such as
(Ara 2002 Rodriguez et al 2007 Abdullah and Jeanty 2011 and Claudy et al
2011)
The double-bounded method confronts each respondent with two dichotomous choice
WTP questions (bids) The 2nd
bid value is contingent on the respondentlsquos reply to 1st
bid If the respondent responds in ―yes to the first bid (B) than the second bid (Bu) is
some amount higher than the first bid (Bu
gt B) If the respondent says ―no to the first
bid the second bid (Bd) is then some lower amount (B
d lt B) Thus there are the
following four possible outcomes for the double-bounded WTP question ―yes-yes
―yes-no ―no-yes and ―no-no
According to Hanemann et al (1991) the probability of answering ―yes-yes (Pryy) is
= )
Where Pryy is the probability of answering ―yes-yes WTP is the respondentlsquos
willingness to pay for the product and F is the cumulative distribution function with
parameter vector Similarly the probability for each of the other three outcome
responses is
]
43
Where and are the probabilities for saying ―yes-no ―no-yes and ―no-
no to the double-bounded question respectively Thus the log-likelihood function for
the ith
respondent can be written as
sum
(
)
(
)
Where
are binary valued (0 or 1) indicators and the formulas
for the corresponding response probabilities are given above The model was estimated
through maximum likelihood estimation method and the results were used to find out
the mean and individual WTP (s) for pesticides free fruits
Where ƒ(WTP) is a function X is a set of socio-economic characteristics are
coefficients and is error term The models were estimated using maximum
likelihood estimation method
391 Factors which could Influence WTP
As Kimenju et al (2005) has indicated WTP is influenced by householdlsquos knowledge
and perception in addition to price and socio-economic factors Moreover
householdlsquos WTP may be influenced by individuals tastes and preferences income
and perceptions on the products in addition to household and socio-economic
characteristics (Cranfield and Magnusson 2003)
A number of different explanatory variables were included in the WTP model These
include demographic variables regional variables and perceptional variables The
variables that are included may depend on the manner by which the data is gathered
(ie contingent valuation surveys experimental methods etc) Factors which
influence householdlsquos willingness to pay for pesticides-free fruits are formally specified
as
44
392 Bids Design
In this study hypothetical prices (bids) for double-bounded dichotomous choice model
were designed based on the prices available for conventional fruit in the market On
average (Rs100kg) To minimize starting bids bias bidding system was used in table
31 Respondents were asked different bid
Table33 Bid system for Pesticides free fruits
First bid High bid Low bid
10 20 5
20 30 10
30 40 20
40 Above 30
Source Field Survey (2017)
310Empirical Estimation of WTP using Linear Regression Model
For open ended questions data a linear WTP model was used to estimate WTP and
identified its determinants
sum
Where
= is the WTP of the jth household for Pesticides-free fruits
= Set of socioeconomic characteristics of the jth household
Factors effecting consumerslsquo willingness to pay for pesticides free fruits can be written
as
Willingness to pay is actually represents the demand of the household The difference
in both is only the consumer surplus If we suppose zero consumerslsquo surplus than the
two identities are the same Therefore willingness to pay in the above model showed
percentage of expenditure on pesticides free fruit of the total food expenditure The
explanatory variables included were age gender education householdlsquos size income
45
location health concern environment concern and awareness Since the dependant
variable in the model is continuous so the appropriate method of estimation was
ordinary least square (OLS)
311Description of Variables
Table 34 presents a list of explanatory variables used in estimation of willingness to
pay a price premium for pesticides-free fruits
Table34 Description of explanatory variables
Respondents willingness to pay
WTP ( Price Premium)
0= Not willing to pay
1= Willingness to pay 1-5
2= Willingness to pay 6-10
3= willingness to pay 11-15
4= willingness to pay 16-20
5= willingness to pay 21-25
6= willingness to pay 26-30
7= willingness to pay 31-35
8= willingness to pay 36-40
9= willingness to pay above
Age of the householdlsquos head
Age Age of the householdlsquos head measured in years
Gender of respondents (Dummy variable)
Gender 0= Female
1= Male
Householdlsquos head education
Education Education of the householdlsquos head in years
Member in each household
Householdslsquo Size In number including all family members
Households location 0 = Rural households
1= Urban households
Awareness Household knowledge regarding pesticides uses on fruits
where 1 shows aware respondents and 0 shows unaware
respondents
Income Income of the households in Pakistani rupees
Consumer attitude towards impact of pesticides on health
Health concern 1 if respondents concern to health 0 if not concerned
Consumer attitude towards impact of pesticides on environment
Environment concern 1 if respondents concern to environment 0 if not
concerned
46
1V RESULTS AND DISCUSSION
This chapter illustrates the major finding of this research endeavor These findings are
computed in the light of major objectives and hypotheses constructed for this research
The collected primary data was punched into the computer and was estimated
encompassing double bounded dichotomous choice model ordered logit model and
linear regression model in the STATA econometric software This chapter is further
bifurcated into three sections In the first section a descriptive statistics is computed to
elaborate the respondentlsquos traits of the study area that includes socio-economic and
demographic aspects as well Followed by the analysis of major attributes such as
attitudinal behavior perception about pesticides free fruit and householdlsquos consumption
behavior that has attain the specific objectives of this study The empirical results on
willingness to pay are underscored in section two Moreover the three different
questionnaires ie dichotomous choice open ended and payment card are adopted and
their results are discussed and compared with each other in section three
41 Descriptive Analysis
Descriptive analysis is a statistical tool that is used to summarize the collected data in
tabulated form The range of data mean value median standard error and variance
coefficients are highlighted via statistical analysis This helps the researcher and readers
to get understanding about the pattern of data This section consists of the descriptive
part of the analysis Socio-demographic characteristics such as age gender education
and other attributes of the respondents are shown in the tabulated form Moreover
socio-economic portfolio that includes income consumption and certain perception
along their attitudinal trend regarding organic and conventional fruits are given and
discussed
411 Demographic and Socio-economic Characteristics
This section demonstrates the demographic and socio-economic characteristics of the
respondents The information was gathered from 1000 household of the study area
47
Age of the householdrsquos head
Householdslsquo age is an essential demographic characteristic and an important factor that
can influence householdslsquo willingness to pay An average age of the household in
district Peshawar and Mardan is computed and given in Table 41 The computation
depicts that an average age of the respondents in Peshawar is reported around 40 years
while in Mardan an average age is observed as 54 years Result reveals a significant
difference in the mean age of rural and urban location of Peshawar with a probability of
(0001) Whereas no significant difference was found in householdlsquos age in urban and
rural region of district Mardan
Table 41 Age of the householdrsquos head (Years)
District Age of the Respondents
Mean Rural Urban T-test
Peshawar 3997 35382 42333 7217
(0000)
Mardan 5402 53188 55870 1104
(0136)
All 46995 47310 46659
Source Authorrsquos calculation based on Survey Data 2016-17
Educational Level of the Householdrsquos Head
An individual entails modern education about developments in technology science and
an array of other managerial skills that drives consumerlsquos behavior Education can also
play a pivotal role in consumerlsquos awareness while choosing improved quality of food
Therefore education can be considered as an imperative factor influencing consumerlsquos
decision to pay higher price for pesticides free fruit Several research studies carried out
across the globe have corroborated that an educated households with higher
qualification are more conscious while making purchasing decision and prefer to
choose pesticides free fruit
Keeping in view an education as a substantial factor persuading consumer behavior the
householdlsquos head education level was analyzed and is presented in Table 42The
descriptive statistics divulged that the mean educational level was observed as 978 and
1138 years of schooling of the household head in Mardan and Peshawar respectively
Estimates of t-test further depicts a significant difference in educational level in rural
48
and urban region of both districts with a p-value of (0001) and (0000) for Mardan and
Peshawar respectively These findings suggest a higher level of education in urban
households compared to rural households These results are in line with Shah et al
(2016)
Table 42 Educational Level of the Householdrsquos Head (Years)
Districts Educational Level
Mean Rural Urban T-test
Mardan 978 8782 12012 3780
(0001)
Peshawar 1138 7735 13257 8016
(0000)
All 1058 8436 12855
Source Authorrsquos calculation based on Survey Data 2016-17
Households Size in the Study Area
Householdslsquo size is an important demographic characteristic which shape households
purchasing behavior Large householdslsquo size increases the consumption without taking
quality in consideration The probability of choosing an improved version of fruit
quality decreases with an increase a member in a household Small size households are
more concerned about good quality of fruit
An estimation of household size data illustrates that an average household size in
district Peshawar and district Mardan was reported as 06 and 09 members respectively
The results shown in Table 43 have suggested no significant difference in householdslsquo
size in urban and rural areas of both districts The average householdlsquos size was
computed as 715 members These results are consistent with Shah et al (2016) who
depicted similar findings for household size in KP
Table 43 Householdsrsquo size of the Respondents (Member in Number)
District
Mean Rural Urban T-test
Mardan 863 8666 8548 0965
(0400)
Peshawar 567 6029 5484 -2122
(0018)
All 715 7796 6463
Source Authorrsquos calculation based on Survey Data 2016-17
49
Income of the Households
The household income level is one of the driving aspects that manipulate the
consumption and saving behavior of an individual Those societies where individuals
earn high income are usually deemed as food secured societies across the globe
however low income group of the poor societies are generally reported as food
insecure It is worth-mentioning that surge in an income can subsequently leads to
choose high quality food (that includes cereals fruits vegetables pulses and their
byproducts) by individuals Likewise householdlsquos income has considered as an
important determinant of willingness to pay for quality attributes such as pesticides
free
An income status of the households in the study area is outlined in Table 44 The mean
income of the Household was calculated as Rs62130 and 42430 in district Mardan and
Peshawar respectively There was a significant difference in the mean income of
respondents from urban and rural areas of both the districts The T-value of Mardan
region was signified as 6018 and had a probability of (0000) while in Peshawar region
was 950 with P-value of (0000)
Table 44 Householdsrsquo Income in Pakistanrsquos Rupee (PKR)
District
Mean Rural Urban T-test
Mardan 63130 5489855 8145161 6018
(0000)
Peshawar 42430 2923529 4922727 9504
(0000)
All 52780 4642718 5952577
Source Authorrsquos calculation based on Survey Data 2016-17
Householdrsquos Expenditure on Food
Food consumption expenditure is the monetary expense incurred by household to
purchase food items Such food expenditure is the key component of current
expenditure to buy consumable goods The data regarding householdlsquos expenditure on
food is estimated and is shown in Table 45 The mean expenditure incurred on food by
the household in Mardan and Peshawar was determined as Rs 49280 and 34860
respectively A significant difference in rural and urban householdlsquos food expenditure
has been reported The computed t-value observed as 425 and 743 with a p-value
0000 which implies that householdlsquos expenditure in urban region was higher as
compared to rural households
50
Table 45 Households expenditure on food (PKR)
District
Mean Rural Urban T-test
Mardan 49280 4511594 5854839 4256
(0000)
Peshawar 34860 2544118 3971212 7435
(0000)
Total 42070 3862136 4573196
Source Authorrsquos calculation based on Survey Data 2016-17
Note Values in parenthesis is P-Value
Householdrsquos Monthly Expenditure Share on Fresh Fruit
Expenditure share is an amount of income that is incurred by an individual on certain
goods out of total spending Households in the study area have allocated their income
share to make an expense for fresh fruits which is shown in Table 46 It has been
observed that in districts Mardan an average spending for fresh fruit was computed as
4172 (PKR) per month by the household Whereas expenditure share for fresh fruit by
Peshawarlsquos household was 3800 (PKR) which was less as compared to Mardan The
given t-values of the estimates confirm a significant difference in expenditure share
incurred for fresh fruits by rural and urban region households of both the districts This
significant difference implies that householdlsquos expenditure share for fresh fruit in urban
area is higher as compared to rural households
Table 46 Householdrsquos monthly expenditure share on fresh fruits (PKR)
Respondents
Mean Rural Urban T-test
Mardan 4172 3798551 5003226 3055
(0000)
Peshawar 3800 2411765 4515152 5103
(0000)
All 3986 3340777 4671134
Source Authorrsquos calculation based on Survey Data 2016-17
51
412 Householdrsquos Awareness and Perceptions about Pesticides Application on
Fruit
This research endeavor was mainly designed to assess the consumer willingness to pay
for pesticides free fruit Therefore it was pertain to glean data about their awareness
about pesticide use on locally produced fruit in the study area These fruit include
Apple Peach and Mango Due to irrational use of pesticides environmental hazards are
also reported by previous research studies therefore there respondents were asked about
their perception about environmental hazards Major findings about the aforementioned
aspects are underscored in Table 47 which reveals that 61 percent of respondents have
a perception that there is an irrational and intensive use of pesticides on fruit by the
local fruitlsquos farmers Around 88 percent of the respondents perceived environmental
and health concerns over pesticides residues in food Similarly 91 percent of the
respondents believed that farmer should engage in environmental friendly agricultural
production practices which have a minimum adverse impact on health and the
environment
However the overall results indicate that sampled households were not entirely
cognizant about an intensive use of pesticide on local fruits however they were
correctly perceived over the impacts of pesticides on human health and environment
Table 47 Householdrsquos Awareness and Perceptions of Pesticides use on Fruit
Grown
Statements Agreed Disagreed
Local farmers are intensively using pesticides on
Apple Peach and Mango fruits
61 39
I feel the use of pesticides in agriculture has
negative effect on the environment
881
119
I am concerned about pesticide residue in our
food supply
876 124
I believe farmer should engage in environmental
friendly agricultural production practices with
minimum impact on human health
901
99
Source Authorrsquos calculation based on Survey Data 2016-17
52
42 Empirical Results of this Research Endeavour
The empirical analysis of the gleaned data was made to achieve the major objectives
and to address the research questions of this research endeavor Major estimates on
―willingness to pay for pesticide free fruits have been made and conferred in this
section Different elicitation techniques were employed to assess householdlsquos
willingness to pay price premium These estimation techniques encompassed double
bounded dichotomous choice model ordered logit model and linear regression model to
appraise dichotomous choice payment card and open ended question
421 Distribution of responses on householdsrsquo willingness to pay
(WTP)
Householdlsquos preferences to pay higher prices for pesticides free fruit were investigated
and highlighted in Figure 41 which demonstrates the distribution of response about
WTP price premium for pesticide free fruit in the survey area The households were
asked whether and how much they were willing to pay higher prices for pesticide free
fruit than conventional produced fruit The primary data estimates confirm that about
935 percent of respondents are willing to pay a higher price premium for pesticide free
fruit in the sampled districts These results are similar with the previous research study
undertaken by Hayati et al(2017) in Iran by using contingent valuation method
Furthermore an ordered logistic regression model was employed which depicts that out
of 394 respondents who were interviewed 97 percent of respondents were willing to
pay price premium for pesticides free fruits and vegetables These results are supported
by Nandi et al(2017) who conducted a study in India by using contingent valuation
method and applying binomial logistic regression model Data was obtained from 250
respondents and reported that more than 90 percent of the respondents were willing to
pay higher price for better quality fruits and vegetables Decomposing the responses 35
percent of the households are willing to pay 16 to 20 percent higher prices for
pesticides free fruits than the conventional 24 percent willing to pay 6 to 10 percent
higher price and 65 are not willing to pay higher price A plausible reason for higher
WTP for significant portion of the population is due to awareness As most of the
respondents in the study area were aware they may have some knowledge about
adverse effects of chemical pesticides Therefore they were willing to pay higher prices
for pesticide free fruits if available
53
NotWTP
1_5 6_10 11_15 16_20 21_25 26_30 31_35 36_40 Above40
650 4
24
9
35
6 550 150
550 3
Figure 41 Distribution of willingness to pay responses (Rskg)
422 Householdrsquos willingness to pay using ordered logit model
Estimated parameters and coefficients of ordered logit model are presented in table 48
Model is specified on the bases of R2 estimated from restricted and unrestricted
likelihood function The likelihood ratio test is used to test the null hypothesis that the
overall effect of coefficients is zero The p-value is 0000 shows that the model is
statistically significant at 95 level of significance The estimated model with a scaled
R2
about 022 which is in consist with the generally R2 value mostly observed in cross
sectional data In cross sectional data like the one used for this study the value of
Pseudo R2 is typically low The conventionally computed R
2 is of limited value in those
models having qualitative nature In most cases this value is low and use of coefficient
of determination as a summary statistics should be avoided in those cases where the
response variables are qualitative (Gujrati 1995)This pseudo R2 cannot be interpreted
separately or across the dataset but could be used when evaluating multiple models
which predict the same results on the same set of data It has only meaningful when
compared to some other pseudo R2 in the same data on the same type and predicting
the same results In this case pseudo R2 indicates which model better predict the results
(Bruin J 2006)This value pointed out overall ability of the model for the correct
prediction of willingness to pay of the consumer based on explanatory variables The
null hypothesis that the joint influence of explanatory variables was zero on the bases
of chi-squire value null hypothesis was rejected
Predicted probabilities and marginal effects are calculated separately because of the
non-linear behavior of logit model Most of the coefficients are statistically significant
54
The variables like householdlsquos age education level of the respondents awareness
income and health concern variables and household size are significant at five percent
The negative sign showed that as the size of numbers in a family increased the log
odds for willingness to pay decreased The same was reported in a relevant study by
Govindasamy and Italia 1999 carried out a research study in New Jearsy to provide
opinion on organic produce Objective of the study was to evaluate demographic
characteristics caused consumers to pay higher prices to obtained organic food
products Findings of the study showed female respondents consumer with higher
annual income and younger individual were more likely to pay higher premiums for
organic produce Our finding shows variables gender was not significant because most
of the respondents in the study area were male
Positive sign on income showed that consumer with higher income were more likely be
willing to pay higher prices for pesticides free fruit It has been also noted that with
increased in income purchasing power of the respondents increased that changed the
purchasing pattern of the respondents This was also confirmed by Roitner-
Schobesberger et al(2008) They conduct a study on consumerslsquo perception regarding
organic food in Bangkok and found that more than a third of the 848 respondents
reported having purchased organic fruits or vegetables and the main reason for buying
organic food was the expectation of the consumers that the food are healthier and
environmentally friendly The respondents who purchased organic vegetables were
those having more aged higher income and more education
Findings of our study also showed that respondents with friendly attitude regarding
environment would be willing to pay higher price for such fruit These results were in
line with Haghjou et al (2013) carried out a research study on factors effecting
consumerlsquos potential willingness to pay for organic food in Tabriz Iran By adapting an
ordered logistic regression model results showed that factors like income of the
respondent family dimension environmental concern and wholesome diet besides
consumerslsquo awareness were significantly increases consumerslsquo willingness to pay for
organic food Results revealed that consumers with higher care about their health were
more likely to be willing a higher price for such pesticides free fruit
55
Table 48 Factors influencing respondent householdrsquos WTP (Ordered logit
model)
Variables Estimated
Coefficient
Std Error Z-ratio P-value
Age 00698807 00147356 474 0000
Gender -02469171 08432503 -029 0770
Education 00821316 00223365 368 0000
Household size -00975395 00502583 -194 0052
Location
Urban
02783974 02961745 094 0347
Income 00000277 000000502 551 0000
Health concern 2600153 05346547 486 0000
Environment
concern
03993532 0574947 069 0487
Awareness 09595126 02836742 338 0001
Source Authorrsquos calculation based on Survey Data 2016-17
Log likelihood = -29863 Pseudo R-squared = 020 LR chi2 (9) = 15849
Number of observation = 200 Probability gt chi2 = 0000
Note indicate statistical significance at 5
56
423 Predicted probabilities and Marginal effects of ordered logit
model
Predicted probabilities and marginal effects of explanatory variables are underscored in
Table 49 These predicted probabilities indicate a strong likelihood that the average
respondent is willing to pay more prices for pesticides free fruit Producers usually
expect high price for their production so if they sought high premiums than marketing
efforts would be diverted to such fraction of consumer where they would probably
willing to pay high price than the conventional price Alone these predicted
probabilities are not too much informative what is more informative is the impact of a
change in predictors on the predicted probabilities (ie marginal effects)
Due to the non-linear behavior of ordered logit model to measure the impact of a
change in particular independent variable on householdslsquo willingness to pay marginal
effects of explanatory variables are calculated Marginal effects show the change in
predicted probabilities for different class of willingness to pay regarding an average
household concerning the particular variable For qualitative choice model estimated
coefficients affect marginal probabilities These marginal probabilities (probability
derivatives) were calculated from the estimated model They measure the change in the
probabilities of each willingness to pay outcome with respect to change in each
explanatory variable The sum of marginal probability is zero in each row because an
increase of the probability in one category must be set off a decrease in the other
category or categories
For continuous variables the interpretation is simple and straight forward Keeping all
other variables fixed a unit change in explanatory variable will results an increase or
decrease in the predicted probability equal to the degree of marginal effect of the stated
variable However in case of binary variable marginal effects shows change in
predicted probabilities based on whether the respondents falls in that category or not
Our results suggest some meaningful insight into the role of socio-economic and
demographic variables on householdlsquos WTP for pesticides-free fruit
Age has a positive and significant influence on householdlsquos WTP for pesticides free
fruit The results show that with an increase in age WTP also increases This finding is
consistent with other researchers who reported that WTP of organic and healthy food
57
increases with age beyond 30-40 years (Hayati et al 2017 Boccaletti and Nardella
2000 and Zellner and Denger 1989)With increase in age people are more concerned
about their health as they may perceive that they are prompt to low immunity and
higher risk for diseases With realization of aging they are more likely to pay higher
price premium for safer foods Our result suggests that the marginal effects of age is
negative for first three WTP classes (ie Not willing to pay WTP 1-5 percent WTP 6-
10 percent and WTP11-15 percent) while positive for the rest of the four classes in
upper tailsmdashindicating that higher age is associated with higher likelihood of paying
premium on upper tails The highest marginal effect of age 0007 is found for category
16-20 percent higher premium This indicates that an increase in age by one year is
associated with 07 percentage point increase in likelihood of paying 16-20 percent
higher premium for pesticides free fruits over conventional These results are in
contrast with Cranfield and Magnusson (2003) conducted a research study on
consumerlsquos willingness to pay for pesticides free food products in Canada by using
contingent valuation method and reported that younger consumers have the strongest
marginal effects (those consumers had an age less than 35 years younger) followed by
those consumers had an age less than 50 years Results showed younger consumers pay
more for healthy foods as compared to older in case of Canadian consumers However
our results are in consistent with several other studies (Hayati et al 2017 Zellner and
Denger 1989) finding a positive influence of age on consumerlsquos WTP for organic and
healthy foods In another study Boccaletti and Nardella (2000) conducted a study on
consumer willingness to pay for organic produce in Northern Italy By adapting an
ordered logit model the impacts of relevant explanatory variables were reported
Results suggests a positive impact of consumerlsquos age on WTP a price premium
The marginal effects for gender indicate female respondents are less likely to be willing
to pay more prices or likely to pay less amount for pesticides free fruit Female
respondents like to pay a price premium but less as compared to male respondents (no
premium or 1 to 5 percent premium) One can observe that most of the respondents in
the study area were male which support our findings These results are in contrast with
Cranfield and Magnusson (2003) The probability of marginal willingness to pay
decreased by (-0001 percent) for higher amount
58
Another significant variable affecting WTP in our study is the years of education of the
householdlsquos head Our result suggests a positive relationship of education on WTP for
pesticides free fruit Households with more formal education have better understanding
of the adverse effect of consuming fruit contaminated with pesticides So they may
better understand the benefits of pesticides free fruit Marginal effects of education are
positive as WTP progresses for higher classes (categories) beyond 16-20 percent (table
49) Among these the highest effect of education 0020 is shown for WTP category
36-40 percent which implies that an additional year of schooling of the household head
increases likelihood of paying 36-40 percent higher price premium for pesticides free
fruit over conventional by around 2 percentage These results are in line with the
findings of Haghjou et al (2013) who found a positive effect of education on WTP for
organic food products in Iran However these results are in contrast with Boccaletti and
Nardella (2000) who reported an inverse relation of consumer education with WTP a
price premium
We also found a significant effect of the household size and household income on WTP
for pesticides free fruit The effect of household size is negative Marginal effect in
table 49 shows that the highest negative effect of 012 is shown for 16-20 WTP
categories which indicate that an additional household member decreases the likelihood
of paying 16-20 percent higher premium for pesticides free fruits by 12 percent One of
the convincing reasons for this negative effect of household size can be the householdlsquos
budget constraint Budget constraint limits the extent to which consumer pay higher
prices for food products (Cranfield and Magnusson 2003) Our findings are consistent
with previous studies Ariyawardana et al (2009) conduct a study on consumerslsquo
willingness to pay for organic ethnic specialty produce in USA reported that marginal
effect of price premium decreases with an increase in householdslsquo member
In regards to income households with higher income are more willing to pay higher
premiums for pesticides free fruit Income always played a significant role in changing
consumerlsquos behavior to change hisher decision from not willing to pay or less willing
to pay to higher willing to pay for organic products Households in highest income
class showed a strong propensity to pay more prices Marginal effects of income for the
first four classes emerged negative Our results suggest a strong propensity to pay
higher prices as household income increases Our marginal effects of income show a
59
monotonic increase in the income effect as WTP premium level progresses beyond 16-
20 percent It implies that at low level of income households are unwilling to pay more
but with rise in income households are ready to pay higher premium for pesticides free
fruit a significantly higher magnitude is shown for the highest category (010 income
coefficient for more than 40 percent premium) Overall it clearly suggests that
household with higher level of income would pay more prices for pesticides free fruit
These results are in line with Hayati et al (2017) and Cranfield and Magnusson (2003)
who found that an increase in income increases purchasing power of consumer which
results a change in purchasing pattern Boccaletti and Nardella (2000) conducted a
study on consumerslsquo willingness to pay for pesticides free fresh fruits and vegetables in
Italy and found that willingness to pay is significantly and positively related to income
We also included variables indicating health and environmental concern of the
respondent Results indicated that the more the households were concerned about the
impact of pesticides in fruits on health and environment the more the probability of
willingness to pay The marginal effects for health concern is negative for first three
willingness to pay classes (ie not willingness to pay willingness to pay 1_5 wiliness
to pay 6_10 percent) and for environment concern it is negative for first four classes
while for the remaining WTP classes it is positive Strikingly the highest magnitude of
marginal effects up to 041 among all variables is found from the health concern
variable On one hand a significantly positive effect suggests that the health concerned
householdslsquo are more likely to pay higher premium for WTP than those not concerned
A magnitude of higher scale on marginal effect on the other hand strongly supports
the distinct difference in WTP between health concerned and non-concerned
individuals Overall this also highlights the importance of this variable on modeling
WTP for pesticides free fruits For example a 041 marginal effect of health concern
variable on 16-20 premium category of WTP suggest that health concerned individual
are 41 percent more likely to pay 16 to 20 percent higher premium for pesticides free
fruit as compared to non-concerned households The effect of health concern on WTP
is consistent and distinctly higher in magnitude from previous similar studies in other
countries For example Hayati et al (2017) found that health concerned individual were
26 percent more likely to pay 16 to 20 percent in Iran This indicates that health
concern factor is an important motivation to premium price for pesticides free fruits in
Pakistan
60
Finally we found a significant effect of awareness variable Recall that our awareness
variable is represented by dummies Our result suggests that the households in the study
area were aware of the fact that farmers are intensively using pesticides on fruits so
they were willing to pay more price premium for pesticides free fruits Marginal effects
show a negative signs for modest price premiums on WTP categories 1-5 and 6-10
while positive signs for all higher categories 16-20 21-25 26-30 31-35 36-40 and
above 40 This may indicate that households are more aware of the adverse impact of
pesticides on health and environment Probably awareness comes from education as our
results shows that the average years of education is higher in the study area
424 Matrix of Correlation Coefficient
Income is generally related with age and education of the households in the study area
(table 410) This result may indicate that more aged households have higher income
and advanced education Households in high income and more educated class shows
high propensity of willingness to pay for pesticides free fruit As the results indicated
that more aged people do care more about their health and high class income
respondents have more discretionary income to spend on fruit Overall the results show
that explanatory variables are not highly correlated hence no problem of
Multicollinearity was diagnosed in the data
61
Table 49 Predicted probabilities and marginal effects from the estimated ordered logit model
Not WTP
()
WTP 1-5
()
WTP 6-
10 ()
WTP 11-
15 ()
WTP 16-
20 ()
WTP 21-
25 ()
WTP 26-
30 ()
WTP 31-
35 ()
WTP 36-
40 ()
WTP
Above 40
()
Predicted Probabilities
00122 00179 02616 01183 04434 00620 00510 00110 00201 00026
Marginal effects
Age -0000 -0001 -0011 -0002 0007 0003 0003 0006 0001 0001
Gender 00039 00054 00623 0015 -0033 -0019 -0019 -0004 -0008 -0001
Education -0000 -0001 -0013 -0002 0010 0003 0003 0010 0020 0002
Household size 0002 0002 0012 0004 -0012 -0004 -0004 -0001 -0020 -0002
Urban rural -0003 -0004 -0049 -0009 0031 0013 0013 0002 0005 0001
Income -0003 -0004 -0004 -0010 0003 0001 0001 0002 0005 0010
Health concern -0103 -0113 -0372 0030 0410 0100 0100 0014 0030 0003
Environment
concern
-0005 -0007 -0072 -0010 0052 0017 0015 0003 0006 0008
Awareness -0014 -0020 -0120 -0030 0122 0045 0041 0010 0020 0002
Source Authorrsquos calculation based on Survey Data 2016-17
62
Table 410 Matrix of correlation coefficient between explanatory variables
Source Authorrsquos calculation based on Survey Data 2016-17
Variables Age Gender Education Location Households
size
Income Health
Concern
Environment
Concern
Age 10000
Gender -00193 10000
Education 00872 -00147 10000
Location 00725 00689 01047 10000
Households size -00294 00277 -00161 -01704 10000
Income 04123 -00690 02133 - 00405 01583 10000
Health Concern 01604 00224 02229 00660 - 00422 02102 10000
Environment Concern -00786 00944 -00245 00570 -00059 -00350 00118 10000
63
43 Householdrsquos willingness to pay using double bounded dichotomous
choice model
The double bounded dichotomous choice model was used to find out how much
households are willing to pay a price premium for pesticides free fruit The model has
been proved useful for the determination of the contribution of independent variables in
householdslsquo willingness to pay for pesticides free fruit Mainly those factors that
influenced the householdslsquo willingness to pay are age of the householdlsquos head
householdlsquos size gender awareness income head education and their perceptions
The Likelihood Ratio test statistic the Wald Chi2 value is 27228 with a p-value of lt
0001 confirmed that the model with all the explanatory variables has good prediction
power of householdslsquo choice and WTP for pesticides free fruit (table 411) The
estimated coefficients for most of the explanatory variables are statistically significant
and have signs consistent with prior expectations Headslsquo characteristics such as age
education level and awareness of pesticides use on fruits perception of health and
environmental concerns of pesticides are the most import determinants of the
householdlsquos WTP for pesticides free fruit Householdlsquos income and number of
individuals have significant effect on their price premium for fruits free of pesticide
residue
The coefficient for Age is positive and its value is 0294 which reveals that a one year
increase in headlsquos age would increase householdlsquos willingness to pay a price premium
of 0294 rupees for pesticides free fruit at constant level of other variables This
generally implies that household headed by an old individual has strong preferences
and high WTP for pesticides free fruits as compared to others These results are
supported by Vidogbena et al 2015 reported a positive significant effect of consumerslsquo
age WTP in Benin for minimized pesticides residues Results suggest older households
are more concerned about health benefits associated with fresh pesticides free food
This positive correlation of householdslsquo age and Willingness to pay a high price
premium for pesticides freeorganic food is also in agreement with findings of (Anifori
2013 Haghiri et al 2009 Misra et al 1991) However these findings are in contrast
with (Govindasamy and Italia 1999) carried out a research study on consumerslsquo
willingness to pay for organically produced fresh produce in New Jersey to find
64
opinion on organic produce and found that all the three age category younger people
like to pay a high price premium
Headlsquos education level has a positive significant association with householdlsquos
willingness to pay a price premium for pesticides free fruit A likely explanation is that
education increases consumerslsquo awareness regarding the adverse effect of pesticides on
human health and natural environment Consumerslsquo with a high level of education can
better understand the benefits attached to the consumption of food produced without the
use of pesticides These results are also in line with Vidogbena et al (2015) studied
consumerslsquo willingness to pay for cabbage with minimized pesticides residues in
Southern Benin and reported that consumers with high level of education were
positively affected WTP In some other related studies Darby et al (2008)Liu et al
(2009) and Misra et al(1991) also confirmed positive association of consumerlsquos
education and willingness to pay price premium for pesticides free organic fruits
Headlsquos awareness of pesticides use on local fruits production and their health and
environmental concerns over pesticides use are also the most important determinants of
householdlsquos willingness to pay for pesticides free fruits As discussed in the previous
section householdlsquos awareness and perception of pesticides use on fruits and their
education level are connected and have significant influence for creating market for
pesticides free organic fruits
Householdlsquos demand for best quality fruit is expected to rise with increase in their
income level The estimated coefficient for householdlsquos income is positive which
implies direct association with their price premium for pesticides free fruits and is
consistent with general theory and our prior expectations In future with economic
growth increased in per capita income is expected and this increase in per-capita
income will increase the demand for pesticides free fruits
We found a negative significant effect of the householdlsquos size on WTP for pesticides-
free fruit As the number of members increases household become less likely to pay a
price premium for pesticides free fruit More mouths to feed reduces budget for best
quality fruits as noted previously by (Oyawole et al 2016 Ghorbani and Harnraz
2009) In another study Govindasamy et al (2001) findings suggests that each
member in a lager household has less discretionary income to spend compared to a
65
smaller household and may consider paying a premium for integrated pest management
a luxury
Table 411 Factors influencing consumersrsquo WTP (double-bounded dichotomous
choice model)
Variables Coefficient Std Error z-statistic Pgt|z|
Constant -8614601 3640408 -237 0018
Age 0294755 00638171 462 0000
Gender -0133885 - 4628428 003 0977
Education 04521878 01574002 287 0004
Income 00001208 00000284 426 0000
Householdlsquos
Size
-06690743 2499154 -268 0007
Health concern 6165207 1882292 328 0001
Environment
concern
6739389
2053786 328 0001
Awareness 8194937 1693789 484 0000
Urban Rural 02295739 1339268 017 0864
Source Authorrsquos calculation based on Survey Data 2016-17
Log likelihood = -61347 Number of observation = 600
Wald chi2 (9) = 27226 Probabilitygt chi2 = 0000
Note indicate statistical significance at 5
431 Householdsrsquo estimated Mean WTP
The estimated model was used to derive each householdlsquos willingness to pay price
premium for pesticides free fruits Table 412 and figure 42 presents the summary
statistics for the estimated price premium The Table shows that householdlsquos estimated
mean willingness to pay price premium is around 26 rupees with a standard deviation
of 106 and the estimated minimum and maximum price premium are 0 and 445
rupees respectively These statistics reveals that householdslsquo on average are willing to
pay 26 percent more price premium for pesticide-free fruits than the existed market
producing pesticide free fruits
66
2
125 115
38
325
35
-5
0
5
10
15
20
25
30
35
40
45
0 1-10 11-20 21-30 31-40 gt40
Fre
qu
en
cy o
f th
e h
ou
seh
old
s
WTP bins
Table 412 Households mean estimated WTP
Mean Std Dev Min Max
WTP 25798 10601 0 44511
Source Authorrsquos calculation based on Survey Data 2016-17
Figure 42 householdsrsquo estimate WTP bids
432 Households Response to First Bid (Amount)
Table 413 and figure 43 shows households response to first bid of the WTP question
The Table clearly show the sensitivity of a householdlsquos yes - no response to the bid
amount As the bid amount goes up the probability of acceptance is expected to
decrease Results show that higher bids reduced the likelihood of acceptance For
example for a bid amount of Rs10 as price premium for pesticides free fruits 8833
percent of the households are willing to pay while it dropped to 222 percent when the
bid amount is increased to Rs40 which is consistent with the standard theory
67
0
01
02
03
04
05
06
10 20 30 40
Table 413 Householdsrsquo Response to First Bid (Amount)
Households
with YesNo
response
First bid amount (PKR)
10 20 30 40
Households
with No
response
21 (1167) 24 (2581) 141 (5732) 63 (7778)
Households
with Yes
response
159 (8833) 69 (7419) 105 (4268) 18 (2222)
Total
Households
180 93 246 81
Source Authorrsquos calculation based on Survey Data 2016-17
Figure 43 Probability of WTP given bids
44 Post Estimation Diagnostic Test
The model was tested against Multicollinearity by using (variance inflating factor
criteria) and for Heteroskedasticty (Breusch-Pagan test) and the results are presented in
table 414 Rule of thumb for VIF is that if the value is ge 10 than the problem of
Multicollinearity is severe According to our findings the mean value of variance
inflating factor is 114 less than the critical value suggests that there is no
Multicollinearity problem in the model Breusch-Pagan test is used for detecting
Heteroskedasticty problem The (χ2) value is 066 and p- value is 041 This p-value
suggests that the probability of rejecting the presence of Heteroskedasticty is 41percent
68
Table 414 Diagnostic test results
Problems Diagnostic Test Mean value P-value
Multicollinearity VIF 112 _
Heteroskedasticty Breusch-Pagan 066 041
Source Authorrsquos calculation based on Survey Data 2016-17
441 Householdsrsquo willingness to pay by using linear regression model Results of householdlsquos willingness to pay for pesticides-free fruits using linear
regression model is shown in table 415 Variables such as age education awareness
income householdslsquo size and consumer perceptions regarding health and friendly
environment are significantly influencing consumerslsquo WTP for pesticide-free fruits
Age has a positive and significant influence on willingness to pay ie the result shows
that with an increase in age willingness to pay also increases This result is slightly
different from few findings of other researchers who reported a high WTP in young and
middle age consumerslsquo (30-40) years Govindasamy and Italia (1999) But there are
some logical reasons behind our findings As young people are not so much health
conscious but with getting older and older the disease of aging caught their minds and
they keep more care about their health Another reason with an increase in age
education and experience increases as a result an increase in WTP for pesticides free
fruits These results are supported by Muhammad et al (2015) found a positive and
significant association between age and consumer willingness to pay Their results was
supported by the fact that young individual health consciousness is a rare phenomena
but as the people get older and older many diseases related to health induce them to
pay more attention towards safe and healthy food such as pesticides free organic food
Education and monthly income are the other factors positively and significantly
influencing householdslsquo WTP Households with more formal education have more
concern and better understanding of the risk associated with consuming food
contaminated with pesticides So they better understand that fruits produced without the
use of chemicals pesticides could be beneficial for health Results show that a one year
increase in formal education householdslsquo WTP increases by rupees 025 for pesticides
free fruit as compared to those having no education In regards to income respondents
with higher income are willing to pay more price premium A one rupee increase in
income will increase householdlsquos WTP by 0001 Muhammad et al (2015) reported a
69
significant effect of income and education on householdslsquo stated willingness to pay for
organic food in Arab Emirates consumer
Householdslsquo size is usually reported as negative influence on WTP Findings of our
study show a negative significant influence on householdlsquos willingness to pay This is
likely due to larger households requiring additional funds to satisfy households demand
for pesticides free fruit which may induce households to buy conventional fruit Other
reason may be as with limited resources feeding more mouths is increasingly difficult
These results are in contrast with Muhammad et al (2015) conducted a study on
factors affecting consumerlsquos willingness to pay for certified organic food products in
United Arab Emirates and reported a positive relationship of willingness to pay and
householdlsquos size Usually householdslsquo size is large in Arab Emirates and hence more
earning resources compared to small households which support their findings Our
finding shows a decrease of 085 rupees by an addition of one member in a household
Other important variables are householdslsquo concern regarding health and environment
Results show that respondentslsquo are highly concerned about residual effect of pesticides
on human health and environment Our results support these findings by positive WTP
Table 415 shows householdslsquo concerned regarding health and environment Results
suggest that households with more concerned for health and environment are willing to
pay Rs582 and Rs020 respectively higher prices for pesticides free fruit compared to
those not concerned
Finally we found variable awareness positively and significantly influencing
householdslsquo WTP for pesticides free fruit in survey area The result shows that more
aware households are willing to pay more price premium compared to unaware
households Awareness usually increases with education and age as can be evidence
from our findings a positive and significant influence of education and income on
householdlsquos WTP When households education level and age increases their awareness
regarding pesticidelsquos negative impact on health increase and hence an increase in WTP
for pesticides free fruit
70
Table 415 Estimated parameters using liner regression model
Variables Coefficient Std Error t-Statistics P-value
Constant -6174109 - 4353038 142 0158
Age 02348861 00467651 502 0000
Gender -2828394 3096026 - 091 0362
Education 0243413 00772618 315 0002
Income 00001237 00000157 790 0000
Householdlsquos
size
-03936806 01755667 -224 0026
Health concern 5567941 1465789 380 0000
Environment
concern
02999708 2023651 015 0882
Awareness 3567843 1001883 356 0000
Urban rural 0587075 1047051 056 0576
Source Authorrsquos calculation based on Survey Data 2016-17
Note indicate statistical significance at 5
No of observation = 200 F (9) = 2859 Probgt F = 0000 R-squired adjusted = 055
45 Comparison of elicitation questions formats Mean WTP by using double dichotomous payment card and open ended elicitation
format are reported in table 416The willingness to pay evaluated using average values
for the explanatory variables are Rs2576 for double bounded 1632 is for payment
card and 1437 for linear regression Results indicated that householdslsquo evaluated
through double dichotomous choice payment card scenario and open ended format are
willing to pay 26 16 and 14 more price for pesticides free fruits in the study area
These results are in line with Ngo et al (2013) conducted a study on consumerslsquo
willingness to pay for organic vegetables in Vietnam and found 70 more price
premium Rodriguez et al (2008) carried out a research study in Argentina on
consumerslsquo willingness to pay for organic food products and reported that consumers
were willing to pay a higher premium of 87 for leafy vegetables Mean willingness to
pay for double dichotomous model was calculated by maximum likelihood estimation
mentioned in the model while for payment card and open ended format logit regression
of response on bid amount was used All mean WTP values are significantly different
71
from zero and are different across the three questions format The probability (Plt
0000) between double bounded open ended and payment card method shows a
significant difference in estimated mean values of all the three questions elicitation
formats A t-value of 1483 250 and 1222 means that the mean values calculated
through different methods are significantly different from each other
Table 416 Mean willingness to pay comparison from CV question format
CV questions format Open ended
Mean WTP (1437)
Payment card
Means WTP (1632)
Payment card
Mean WTP (1632)
MD (194)
t-value (250)
P-value (0006)
--------
Double bounded
Mean WTP (2576)
MD (1143)
t-value (1483)
P-value (0000)
MD (949)
t-value (1222)
P-value (0000) Source Authorrsquos calculation based on Survey Data 2016-17
1MD = Mean difference 1US$=105 PKR in 2017
451 Response rate for zero WTP
Table 417 shows householdlsquos response rate to different elicitation formats The
response rate of payment card format is more than both DC and OE questions formats
Results show that 87 of the respondents respond to the willingness to pay question for
payment card method For dichotomous choice the response rate is 58 and for open
ended respondentslsquo response rate is 46 Taken together these results suggest that the
payment card format is easy for valuation task faced by respondents and lead to
efficiency in data collection
Table 417 Comparison of response rates by CV question format
Percent Response
to WTP question
Double dichotomous
choice
Payment card
method
Open ended
method
Yes 5850 87 4650
No 4150 13 5350
Source Authorrsquos calculation based on Survey Data 2016-17
72
46 Discussion about Major Findings This study was design to explore householdlsquos preferences and willingness to pay for
pesticides free fruit in Khyber Pakhtunkhwa Pakistan For this study a detailed
questionnaire was designed to obtained information from the households on their socio-
demographic characteristics perception regarding pesticides used on conventional fruit
and their willingness to pay a price premium for pesticides free fruit The overall
objective of the study was to know householdslsquo willingness to pay a price premium for
pesticides free fruit such as Apple Peach and Mango In response to willingness to pay
question 93 percent of the households were willing to pay a price premium while a
negligible portion were unwilling to pay any premium for pesticides free fruit Out of
total WTP 35 percent of the households were willing to pay16-20 percent higher
amount for pesticides free fruit
With regards to gender status of the households findings of the research showed most
of the respondents in the study area were male and a minor portion were female
Variable gender was not significant in this study because of the area structure where
male households are the primary purchaser of householdlsquos food items In this research
we found that majority of the respondents were educated most of them were highly
educated while a negligible portion of the respondents had no formal education The
mean education in Mardan and Peshawar was almost 10 and 12 years of schooling
respectively A significant difference was observed in urban and rural householdslsquo
education level in both the districts
Householdslsquo expenditure on food and fresh fruits were also calculated The mean
expenditure on food in district Mardan was PKR- 49280 and in district Peshawar was
PKR- 34860 Based on t-test a significant difference was observed on the consumption
of fresh fruit in urban and rural areas of the two districts Total expenditure on fresh
fruits in Mardan and Peshawar was 3340 and 4671 respectively Based on findings of
the study it could be concluded that respondents in urban region spent more income on
fresh fruit and consume more fresh fruits compared to rural region
Householdslsquo awareness of pesticides use on locally produced fruit such as Apple
Peach and Mango and their health and environmental concerns over pesticides use
were estimated The results revealed that 61 percent of the respondents were agreed that
local farmers use intensive pesticides on fruit Around 88 percent of the respondents
perceived environmental and health concerns over pesticides residues in food
Similarly 91 percent of the respondents believed that farmer should engage in
73
environmental friendly agricultural production practices which have a minimum
adverse impact on health and the environment These results induced households to pay
higher prices for such pesticides free fruit if available in the market The overall results
indicated that sampled households were not fully aware of the intensive pesticides use
on local fruit however they were correctly perceived over the impacts of pesticides on
human health and environment
The empirical findings of the study revealed socio-demographic characteristics had a
significant influence on householdslsquo willingness to pay a price premium for pesticides
free fruit Results showed more aged householdslsquo head were willing to pay more price
premium This is supported by the fact that older people are more health concern
compared to young individual Householdslsquo head education level also played a positive
and significant role with high education consumers seems slightly more willing to pay
These results are in line with Haghjou et al (2013) Householdlsquos size was negatively
influencing householdlsquos WTP and accord with the expectation Due to income
constraint with increase a member in a household will decrease WTP for pesticides-
free fruit because feeding more mouths with limited resources would be difficult These
results are in line with Oyawole et al 2016 Many Conflicting results are also reported
regarding household size Some studies indicated the presence of more children
positively influencing WTP for organic food while some results reported an inverse
relationship between WTP and householdslsquo size Findings of our research revealed a
negative significant influence on householdslsquo willingness to pay for pesticides free
fruits These results were also according to our expectation With an increase in family
size the households do not care much about quality but mostly quantity
Income of the householdslsquo head was taken as continuous variable in this research study
In most cases especially in willingness to pay research studies a positive association of
income and households WTP was observed Any increase in householdslsquo income leads
to rise in their willingness to pay for safer healthier and pesticides free fruit Despite
high prices for pesticides free food products householdslsquo with high income showed
likelihood to pay a price premium Our findings also showed a positive effect of
income on householdslsquo WTP for pesticides free fruit An increase in income changes
householdslsquo purchasing behavior and choose better quality of food So with an increase
in income households were willing to pay more price premium Same results were
reported by Cranfield and Magnusson 2003
74
Variable awareness played a significant role while consuming better quality of food
Findings of our study also showed a positive and significant influence of variable
awareness on householdslsquo WTP for pesticides free fruit More than half of the
respondents were aware of the intensive use of pesticides on fruit Majority of the
households knew about the risk attached with fruits produced with agrochemicals The
more aware households were willing to pay more price premium for pesticides free
fruit compared to unaware households These results are also supported by Oyawole et
al2016
Moreover results of this study are also consistent with previous studies that health and
environmental concern are the important factors in householdlsquos preferences for
pesticides free food and reduced input food products We also found a positive
significant influence of health concern and environment concern on WTP These results
suggest that respondents in the study area are more conscious about health and
environment They are willing to pay more prices for such fruit free from pesticides
residues Based on above results most of socio-demographic characteristics have
positive influence on householdlsquos willingness to pay for pesticides-free fruit in the
study area On the basis of these findings we reject the null hypothesis and accept the
alternative hypothesis by concluding that socio-demographic characteristics have
influencing behavior on householdslsquo WTP
Willingness to pay across urban and rural regions shows no significant difference The
P-value of 0864 showed that WTP of households in urban regions were not statistically
different from those in rural regions Although we had expected a positive and
significant difference among urban and rural households willingness to pay for
pesticides free fruit and the difference in householdslsquo income education and
expenditure across urban and rural households support our expectation One of the
reasons for no significant difference is the selection of rural union councils which are
nearby urban union councils If the study is spread to more rural union councils than an
expected difference in urban and rural households may be observed Based on these
results the null hypothesis of no significant difference between urban and rural
households is accepted and can be concluded that no significant difference was found
in willingness to pay amount across rural and urban households
75
A Payment Card Approach
In this approach respondents are asked to select their WTP from a payment card given
in absolute value or in percentage of prices (Boccaletti amp Nardella 2000 Lacaze
Rodriguez and Lupin 2009) Payment card requires smaller sample sizes for the
efficient estimation of parameters than the double bounded model A recent research
found that payment card is to be free of range and centering biases when the
willingness to pay values on the payment card is sufficiently large and the respondents
are not constrained (Rowe et al 1996) However choosing an amount from payment
card may be more cognitively burdensome on the respondents and difficult than simply
yes or no response
B Open Ended Approach
In open ended question respondents are asked to state their WTP for a certain attribute
without suggesting them any value This technique does not require an interviewer and
does not result in any starting bias This approach is easy for the respondents to answer
Due to non provision of any value respondents find it difficult to answer and results
large non- response rate
C Double Bounded Approach
The dichotomous choice contingent valuation method is an important method in
contingent valuation surveys Due to simplicity this method is popular and widely used
for data collection Two questions formats are used in this method single bound and
double bounded questions are asked from the respondents For single bound question
format the respondentlsquos only reply in yes or no while in double bounded approach
second question contingent on the first response is asked
Hanemann et al (1991) recommended double bounded dichotomous choice model for
eliciting householdslsquo WTP In the double bounded formate each respondent is
presented with two bids The level of the second bid is contingent upon the response to
the first bid If an individual responds in ― yes to the first bid Bi the second bid (Bu) is
some amount greater than the first bid (Bi lt Bu) is askedIf the respondent responds
―no to the first bid the second bid (Bl) is some amount smaller than the first bid (B
llt
Bi) is asked
76
Henemann et al (1991) and Leon (1995) confirmed that double bounded model is more
effcient than single bound model For the correction of poor choice of the initial vector
double bounded model was suggested Researchers also found that double bounded
method produce more precise point estimates of parameters Double bounded model
requires more sample size due to the statistical inefficiency imposed by the data
compared to payment card and open ended model If sample size is large enough
double bounded model estimates accurate results
Due to its potttential inconsistency with response to the first binary question and larger
scope for biased results double bounded model is contravartial Bateman et al (2001)
concluded that the respondents feel fury and guilt when the second question is asked
making the response of the double bounded internally inconsistence One of the main
disadvantage of double bounded model is that response of the respondents may be
influenced by the first offered amount which is generally called starting point bias
(Flachaire and Hollard 2005)
There are few notable patterens while studying consumerlsquos willingness to pay by using
different elicitation formats Estimated willingess to pay based on double bounded
format and payment card format tend to be large compared to open ended questins
format Furthermore estimated willingness to pay from double bounded model would
be larger than payment card format
Not surprisingly as shown in table 416 the estimated mean willingness to pay for
pesticides free fruit based on the models were significantly different across the three
elicitation format Estimated WTP for double bounded format payment card format
and open ended was 25 percent 16 percent and 14 percent respectively The estimated
mean WTP for double dichotomous model is higher than twice the estimated mean
willingness to pay based on payment card and open ended data
When comparing response rate of households to the willingness to pay questions
format was different across the three elicitation methods In double bounded method
the question was whether the households were willing to pay a specific amount in
payment card method households were asked to select the amount from a specified
values provided on a card whereas in open ended question households were asked to
say how much extra they were willing to pay for pesticides free fruits The difference in
questions leads us to expect that more individual would respond positively to
willingness to pay question in payment card method because in this elicitation format
consumers had to select from payment level The response rate of payment card format
77
is more than both DC and OE questions formats Results show that 87 of the
respondents respond to the willingness to pay question for payment card method For
dichotomous choice the response rate is 58 and for open ended respondentslsquo response
rate is 46 Taken together these results suggest that the payment card format is easy
for valuation task faced by respondents and lead to efficiency in data collection
It has been remained an unresolved issue that which CV questions format is best to use
While the NOAA panel (Federal Register 1993) recommended using double bounded
dichotomous choice model due to its easy use and resemblances in day to day decision
making In this study we found that the response rate in double dichotomous choice
model is lower than payment card format and higher mean willingness to pay than both
open ended and payment card format In contrast payment card format has desirable
response properties
One elicitation format is not clearly better than the others on priority ground The
appropriateness of any elicitation format depends upon the circumstances of the study
For example payment card elicitation format better suits if the sample size is small If
the sample size is large enough double bounded elicitation format is preferred
78
V SUMMARY CONCLUSION AND RECOMMENDATION
This chapter presents findings of the research study as well as policy recommendations
This chapter also outlined limitation in this research and suggestion for further research
in future
51 Summary
Conventional agriculture has gained the power of providing food to majority of the
world population but at the cost of damaging the environment and human health While
pesticides free farming on the other side is environmental and human health friendly
farming that avoids the use of such hazardous chemicals which are harmful for human
plants and animal planet Pesticides free farming system is increasingly becoming
popular in producers as well as in consumer The term pesticides free denote production
of fruit without the use of pesticides and play a vital rule in future agriculture
commodities production It has been observed that fruit produced without the use of
chemicals pesticides are generally higher in prices than the conventional fruit
production in most part of the world However pesticides free farming and pesticides
free food is a relatively new phenomenon and very few people especially in developing
countries are aware about the beneficial impacts of such food on health and
environment Willingness to pay for pesticides free fruit is different from fruits
produced through the use of chemicals pesticides because pesticides free fruits are
relatively expansive
The main theme of this study was to investigate householdslsquo awareness and willingness
to pay for pesticides free fruit and to determine socio-economic and socio-demographic
characteristics in relation to their impact on willingness to pay a price premium This
study was carried out in two districts of Khyber Pakhtunkhwa (Pakistan) namely
Peshawar and Mardan The household level data employed in this study were obtained
from 1000 households through face to face interview by employing pretested
questionnaires Householdslsquo perception and attitude about pesticides free fruit were
also analyzed Three questionnaire elicitation formats ie dichotomous choice payment
card and open ended were used in this study For the estimation of dichotomous choice
data double bounded dichotomous choice model was used An ordered logit model was
used for the estimation of payment card type data and for the estimation of open ended
79
questionnaires linear regression model was used to estimate householdslsquo willingness to
pay price premium for pesticides free fruits
52 Conclusions
Adoption of technological advancement in agriculture has attracted considerable
attention in many developing countries because majority of population in less
developed countries derives its likelihood from agricultural production New
technologies provide farmers an opportunity to increase production and enhance
economic growth (Carvalho 2006) Although the green revolution spread across
developing countries in Asia and resultant in increased food production by adopting
technological inputs like fertilizer and pesticides However the high usage of these
chemicals to bring this spectacular growth in agriculture production is not without its
problems In most countries it has been observed that using commercial agricultural
practices causes many problems like environmental degradation and human health
effects (Wilson 2000) Coordinated efforts are needed to increase food production
with a view to enhance food safety and quality Although chemicals free agriculture is
gaining more and more support for safer food but still not providing enough food to
support need of the population in developing countries
Demand and markets for pesticides free fruit has gained a significant and valuable
interest of research scientist in all over the world Several research studies have been
identified price premium that consumers are willing to pay for pesticides free fruit and
also showed some socio-demographic factors influencing their decision to pay more
price premiums Different approaches are adopted in these studies depending on their
objectives These research studies mainly focused on attitudes and perception towards
these foods and not their actual purchase According to our knowledge studies on
householdlsquos willingness to pay and the most relevant factors influencing their decision
to pay more price premium are limited in developing countries such as Pakistan
The general objective of this survey was to study the socio-demographic and socio-
economic characteristics of the householdslsquo and to investigate factors influencing their
willingness to pay for pesticides free fruit A variety of factors including respondentlsquos
age gender householdlsquos size respondentlsquos income householdlsquos head education
awareness and certain attitudinal questions like health concern and environment
concern appear to influence householdlsquos willingness to pay a price premium Findings
80
of the study suggest health concern and environment concern has significant influence
on householdslsquo willingness to pay Hence it can be concluded that households in the
study area are more concern about their health and surrounding environment Results of
the study also indicated no significant difference in willingness to pay across rural and
urban regions of the study area
Study concluded that the most relevant explanatory variables positively influencing
householdslsquo willingness to pay for pesticides free fruit are age of the householdlsquo head
income of the household headlsquos education householdslsquo awareness health concern and
environmental concern while householdlsquos size is negatively significant which usually
reported that householdslsquo with more members do not care much about quality but more
quantity because feeding more people with limited resources are difficult Majority of
the households are willing to pay price premium for pesticides free fruit especially
those with high level of income household leads to high degree of willingness to pay
Education level also became an important factor in willingness to pay higher price for
pesticides free fruit More aged people have always been concern about their health As
the people get aged more and more the diseases of aging caught their minds so they
like to pay more for safer food While when it become to pay more price variable
gender shows insignificant affect due to the limited availability of female respondents
in the sample data
Results of the households awareness regarding pesticides used on conventional fruit
and its impact on health and natural environment are positive Most of the households
are highly concern about health and environment Results suggest that more than half of
the households are aware of the adverse impact of pesticides on health and
environment Survey suggested that more than half of the households are strongly
agreed that farmers should produce such an agricultural food product which has
minimum adverse impact on human health and natural environment Results of the
study are consistent with other findings conducted on consumerslsquo willingness to pay for
organic food and pesticides free food and reported that health and environmental
concern were the most important factors
Health and environmental concern is an important factor constituted a significant
influence which inclined households towards willingness to pay for pesticides free fruit
Krisoff (1998) reported that consumers perceived pesticides free food as healthier safer
and environmental friendly as compare to food produced by conventional method
81
From this study it is observed that households perceived pesticides free food as
healthier they are willing to pay more price premium
Results obtained from this study concluded that 93 percent of the households are
willing to pay more prices for pesticides free fruit Out of this proportion 35 percent of
households are willing to pay 16 to 20 percent more price above the regular price while
24 percent are willing to pay 6 to 10 percent higher price for pesticides free fruit
Households are willing to pay above than 20 percent comprised of 215 percent of the
sample data Results show that out of total willingness to pay 4 percent of the
households are willing to pay 1 to 5 percent price premium and 9 percent are willing to
pay 11 to 15 percent more price premium Results also show that only a minor portion
65 percent of the sampled respondents is unwilling to pay any more
Householdslsquo willingness to pay was also assessed The study revealed that on average
the respondents are willing to pay 26 percent higher price for pesticides free fruit than
the regular price which concluded that households in the study area are responsive
towards safer food and they like to pay higher premium for such fruit
53 Recommendations
This study is one of the first analytical attempts to measure householdslsquo willingness to
pay for pesticides free fruit in Pakistan Since not much research work is done on
pesticides free fruit in Pakistan so this study would contribute a little for future
researchers Findings of the survey suggest some recommendations for consumers and
producers Researchers may consider this study as basis for further research
An important task is to provide more information to consumers regarding
pesticides free fruit and the perceived benefits by consuming these fruit This
research study also provides information to consumers that how pesticides free
fruit is differ from fruit produced conventionally The sampled studied shows
that there is a potential for market growth of pesticides free fruit To identify
these potential consumers knowledge about their socio-demographic and socio-
economic characteristics is important
With potential demand and high price premium pesticides free fruit production
could be one of the lucrative strategies for producers to earn higher net margin
from their production so like other new technologies management practices
and production system pesticides free fruit production also needs government
82
assistance such as advertisement consumers awareness campaigns financial
aids as well as green subsides and loans to the producers to develop well
established market and efficient supply chain in Pakistan
By adopting new agricultural practices and comply with standards of World
Trade Organization (WTO) this will not only abridge the supply demand gap
for pesticide free fruit sat domestic level but also will boost the economy of the
country due to increase in fruit and vegetables exports
Contribution in the field of pesticides free fruit production from academics
research workers extension graduates scientist and other professionals are
necessary to brief producers as well as consumers about the negative impact of
pesticides due to incorrectly use of these hazardous chemicals on human and
animals health as well as effect on natural environment
Based on the findings from this research government non-government
organization and other stakeholders should formulate policies and would
promote and encourage the production of pesticides free fruit in Pakistan
Demonstration centers should be established within the agriculturist community
for the awareness of farmers regarding the production of pesticides free food
As the results identified householdlsquos willingness to pay is effected by
explanatory variables so more independent variables should be included in the
model to further explain willingness to pay for pesticides free fruit
In addition the area of sampling could be more spread and not be limited to only
two districts of Khyber Pakhtunkhwa If data are collected from different
provinces and districts all over Pakistan the results obtained might be a better
representation of the whole population
As this research study conducted only at few fruit such as Apple Peach and
Mango future research should focus on more fruit as well as on vegetables
54 Limitation and Suggestion for Future Envisage
A couple of limitations were encountered during this research study
This research study has investigated willingness to pay for fruit only due to
time and budget constraint In future a large scale research study should be
carried out both on fruit and vegetable
83
Second since only two districts of Khyber Pakhtunkhwa were examined in
the future such studies should be replicated to other districts and provinces of
Pakistan to determine householdslsquo willingness to pay for pesticides free fruit
Third some variables employed in this study were not statistically significant
presumably due to small sample size To overcome this problem in future
study large sample size should be taken into consideration in order to enhance
the degree of freedom
56 Suggestions
The future of pesticides free agriculture production is very bright To lead a healthy life
human being needs pure food and pollution free environment It has been proved that
pesticides free agriculture is the only solution to provide safe and healthy food to the
world population Chemicals free agricultural system is a natural phenomena and
human being can feel its importance By adopting pesticides free farming soil fertility
can also be maintained Farmers can provide healthy and safer environment by
strengthening the sustainable and pesticides free agriculture Now a daylsquos demand for
pesticides free food is increasing very fast and in the future it would be necessary to get
rid of food produced by using chemical fertilizer and pesticides
To inform consumers long term investment in promotion and education campaigns
would help to develop individual concern regarding the risk associated with pesticides
on food products This concern will translate individual willingness to pay towards a
positive price premium
84
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environmental pollution International Journal of Environmental and Ecological
Engineering4 12-25
KalogerasN S Valchovska G Baourakis and P Kalaitzis2009Dutch householdlsquos
willingness to pay for pesticide free olive oilJournal of International Food amp
Agribusiness Marketing 21(4) 286-311
Kimenju S C and HD Groote 2008 Householdlsquos willingness to pay for genetically
modified food in Kenya Agricultural economics 38(1) 35-46
Krystallis A and G Chryssoidis 2005 Consumers willingness to pay for organic
food Factors that affect it and variation per organic product type British Food
Journal 107(5) 320-343
Kuperis A P M MVeeman and W L Adamowicz 1999 Householdlsquosresponse to
the potential use of Bovine Somatotrophin in Canadian dairy production
Canadian Journal of Agricultural Economics47(2) 151-163
KmentaJ 1997Elements of Econometrics University of Michigan Press Second
edition
91
Lusk JL and Hudson D 2004 Willingness-to-pay estimates and their relevance to
agribusiness decision making Review of Agricultural Economics 26(2) 152-
169
Liu Y Y Zeng and X Yu 2009Consumer willingness to pay for food safety in
Beijing a case study of food additives In Contributed paper prepared for
presentation at the international association of agricultural economists
conference Beijing China (pp 16-22)
Loureiro M L and W J Umberger 2005 Assessing consumer preferences for
country-of-origin labeling Journal of Agricultural and Applied
Economics 37(1) 49-63
Loureiro M L and W JUmberger 2003 Estimating consumer willingness to pay for
country-of-origin labeling Journal of Agricultural and Resource
Economics28(2) 287-301
Loomis J P Kent L Strange K Fausch and A Covich 2000 Measuring the total
economic value of restoring ecosystem services in an impaired river basin
results from a contingent valuation survey Ecological Economics 33(1) 103ndash
117
MuhammadS E Fathelrahman and RUT Ullah 2015 Factors affecting
householdlsquoslsquo willingness to pay for certified pesticide free food products in
United Arab Emirates Journal of Food Distribution Research 46(1)37-45
MagnussonE and J A L Cranfield 2005 Householdlsquos demand for pesticide free food
products in Canada A Probit Analysis Canadian Journal of Agricultural
Economics53(1) 67ndash81
MagnussonK MA Arvola UKKHursti L Aringberg PO Sjoumldeacuten 2003 Choice
oforganic foods is related to perceived consequences for human health and to
environmentallyfriendly behavior Appetite40 (2)109ndash117
92
Millock K H and L G Hansen 2002 Willingness to pay for pesticide-freefoods A
Comparison between Survey Data and Panel Data from Denmark Available at
httpmpraubuni-muenchende47588
Mitchell R C and R T Carson 1989 Using surveys to value public goods the
contingent valuation method Resources for the FutureResources for the Future
Maddala G S 1986 Limited-dependent and qualitative variables in econometrics (No
3)Cambridge university press
Mitchell R C amp Carson R T 1984 A contingent valuation estimate of national
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Agency Washington DC Resources for the Future
Nandi R W Bokelmann N VGowdruand G Dias2017 Factors influencing
consumerslsquo willingness to pay for organic fruits and vegetables Empirical
evidence from a consumer survey in India Journal of Food Products
Marketing 23(4) 430-451
Ngo Minh H M Masahiro andF Susumu 2013 Willingness to pay for organic
vegetables in Vietnam An empirical analysis in Hanoi capital J Fac Agr
Kyushu Univ 58(2) 449-458
NouhoheflinT O Coulibaly A J Cherry R A Hassan and PYAdegbola2004
Consumerslsquo perception and willingness to pay for pesticide free vegetable in
Benin and Ghana African Association of Agricultural EconomistsThe role of
social scientistsProceedings of the Inaugural SymposiumGrand Regency
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Oyawole F P D Akerele and A O Dipeolu 2016 Factors influencing willingness to
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OwusuV and M OAnifori2013Consumerwillingness to pay a premium for pesticide
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93
OwusuV and A M Owusu 2010Measuring market potential for fresh pesticide free
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South Africa
OramanY and G Unakitan 2010Analysis of factors influencing organic fruit and
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452-466
PiyasiriAGSA and A Ariyawardan2011 Market potentials and willingness to pay
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PanhwarF 2004Organic farming in PakistanPublished by City Farmer Canadalsquos
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Farminghtml
Portney P R 1994 The contingent valuation debate why economists should care The
Journal of Economic Perspectives 8(4)3ndash 17
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selected demographics on householdlsquoschoice of red meats Canadian Journal of
Agricultural Economics46(2)201-216
RodriacuteguezE V Lacaze and B Lupiacuten 2008Contingent valuation of householdslsquo
willingness to pay for pesticide free food in Argentina12th Congress of the
European Association of Agricultural Economists
Roitner-Schobesberger B I Darnhofer SSomsook and C R Vogl2008Consumer
perceptions of organic foods in Bangkok Thailand Food policy33(2) 112-121
Randall A B Ives and C Eastman1974 Bidding games for valuation of
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94
Salmet A S A k Nakayasu and H Bai 2016The determinants of organic vegetables
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103390foods5040085
SyedJ H A Alamdar A Muhammad K Ahad Z Shabir HAhmad SM Ali SG
A S Sani HBokhari KDGallagher IAhmad and SA M A SEqani
2014Pesticide residues in fruits and vegetables from Pakistan a review of the
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pollution research 21(23)13367-13393
SangkumchaliangP and W C Huang 2012 Consumerslsquo perceptions and attitudes of
organic food products in Northern Thailand International Food and
Agribusiness Management Review 15(1) 87ndash102
Syed J H and R N Malik 2011 Occurrence and source identification of
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Chemical Industries KalashahKaku Pakistan Environmental Earth Science
62(6)1311ndash1321
Smith A T C L Hung and B H Lin 2009 Does Price or Income Affect Organic
Choice Analysis of US Fresh Produce Users Journal of Agricultural and
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Taiba B M Khan M Nazir M Sajjad D Jan and A U Jan 2011 Estimation of
demand for processed fruit and vegetables products Interdisciplinary journal of
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Vidogbena F A Adeacutegbidi R Tossou F A KomlanAnselme T Martin M
Ngouajio S Simon L Parrot and K K Zander 2015Consumerslsquo
Willingness to Pay for Cabbage with minimized pesticide residues in Southern
Benin Environments 2(4) 449-470
Valerian J E Domonko S Mwita and A Shirima 2011Assessment of the
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MunicipalReport of the original work done for Sustainable Agriculture
Tanzania (SAT)
95
Veeman M and W Adamowicz 2000Consumerlsquos perceptions of environmental risks
and the demand for food safety httpsdoiorg107939R3ZS2KG11
Wooldridge J M 2010 Econometric analysis of cross section and panel data MIT
press London
Wang Q and J Sun 2003 Consumer preference and demand for organic food
Evidence from a Vermont survey Paper prepared for American Agricultural
Economics Association Annual Meeting 12
Zia M S M J Khan M QasimandARehman 2009Pesticide residue in the food
chain and human body inside Pakistan J Chem Soc Pak 31(2) 284ndash291
Zhongmin X U J Loomis Z Zhiqiang and K Hamamura 2006Evaluating the
performance of different willingness to pay question formats for valuing
environmental restoration in rural ChinaEnvironment and Development
Economics 11(5) 585ndash601 httpsdoiorg101017S1355770X06003147
Zellner JA and RL Degner1989Consumer willingness to pay for food safety Paper
presented at the Southern Agricultural Economics Meeting Nashville TN
96
Appendix- 1 Questionnaire
Q1Socio-economic characteristics
1 Location
o Rural
o Urban
2 Name ____________________
3 Age ____________________(years)
4 Gender
o Male
o Female
5 Educational status ______________ Years
6 Household Size_________________ No
7 Monthly income _______________________________Rs
8 Monthly consumption expenditure _________________Rs
9 How much you spend on Fresh Fruits Rs __________month
10 How much you consume the following fruits
Fruits Quantity
Apple
Mango
Peaches
11 Local farmers are intensively using pesticides on Apple Peach and Mango fruits
o Aware
o Not aware
97
12 Attitudinal question responses
Householdrsquos Awareness Perceptions of Pesticides use
Questions Agreed Disagreed
Local farmers are intensively using pesticides on
Apple Peach and Mango fruits
I feel the use of pesticides in agriculture has negative
effect on the environment
I am concerned about pesticide residue in our food
supply
I believe farmer should engage in environmental
friendly agricultural production practices with
minimum impact on human health
The effect of pesticides residues on human health
The use of pesticides can badly affect the agro-ecological system as well as human
health Human health related problems may vary with the composition of chemicals
The most common problems are skin flue and headache while severe health hazards
include paralysis cancer etc Studies show that globally around 30 lakh people are
poisoned annually from consumption of pesticides contaminated food and 2 lakh of
them die from different heath problems caused by pesticides residues Most of the
pesticides used on agricultural crops are banned by the WHO
13 Householdrsquos willingness to pay for pesticide free fruit
Wording for Dichotomous choice question
Suppose your favorite fruit such as apple mango and peach regularly cost on average
Rs 100kg Assuming no difference in taste and nutritional content would you pay Rs
X more to consume pesticide free version of the same fruits
Yes No
Wording for open ended question
Suppose your favorite fruit such as apple mango and peach regularly cost on average
Rs 100kg Assuming no difference in taste and nutritional content how much would
you pay for pesticides-free version of the same fruits
Rs _________
98
Wording for payment card question
Suppose your favorite fruit such as apple mango and peaches regularly costs on
average Rs 100kg you purchase Assuming no difference in taste and nutritional
content would you pay slightly more for a pesticides free version of the same fruits
Yes No
If yes how much would you pay to consume pesticide free version of the same fruit
Select from the given payment card
1 WTP= 0
2 WTP= 1-5
3 WTP= 6-10
4 WTP= 11-15
5 WTP= 16-20
6 WTP= 21-25
7 WTP= 26-30
8 WTP= 31-35
9 WTP= 36-40
10 WTP= Above than 40
If no what are the reasons for not paying price premium for pesticide free
commodities (PFC) Please select the most relevant one
o I canlsquot afford to pay price premium on PFC
o The pesticide have no harmful effect on health
o We do not use fresh fruits
o Other reasons ___________________________
99
PLAGIRIASM UNDERTAKING
It is certified that the research work presented in the Ph D dissertation of Mr Jahangir
Khan C No 45 University Registration No2006-Agr-U-13234 Session 2014-2017
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar under the titled ―HOUSEHOLD
PREFRENCES AND WILLINGNESS TO PAY FOR PESTICIDES FREE FRUIT IN
KHYBER PAKHTUNKHAWA (KP) PAKISTAN was conducted under the
supervision of Dr Abbas Ullah Jan
I understand the zero-tolerance policy of HEC and the University of Agriculture
Peshawar towards plagiarism Therefore I as an author of the above titled research
thesis declared that no portion of my thesis has been plagiarized and the material used
for references is properly cited
I undertake that I found guilty at any time and any statement is found to be incorrect or
plagiarized in the above mentioned titled thesis even after my graduation the
University has the right to withdraw my Ph D degree and the HEC has the right to
publish my name on the HECUniversity website on the list of persons who submitted
plagiarized thesis of guilty under plagiarism policy
Jahangir Khan
100
AUTHORrsquoS DECLARATION
I Mr Jahangir Khan C No 45 Session 2014-2017 hereby stated that my Ph D
dissertation titled ―Household Preferences and Willingness to Pay for Pesticides free
Fruit in Khyber Pakhtunkhwa (KP) Pakistan is my own work and not been submitted
previously by me or anyone else for taking degree from The university of Agriculture
Peshawar or any other University in the country world At any time if any statement
found to be incorrect even after my graduation the university has the right to withdraw
my Ph D Degree
Jahangir khan
Date
101
CERTIFICATE OF APPROVAL
It is certified that the research work presented in the Ph D dissertation of Mr Jahangir
Khan C No 45 University Registration No 2006 -Agr-U-13234 Session 2014-2017
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar under the titled ―HOUSEHOLD
PREFRENCES AND WILLINGNESS TO PAY FOR PESTICIDES FREE FRUIT IN
KHYBER PAKHTUNKHAWA (KP) PAKISTAN was conducted under the
supervision of Dr Abbas Ullah Jan
No part of this dissertation has been submitted anywhere else for any degree The
dissertation is submitted for the award of degree of Doctor of Philosophy in the
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar
Ph D Scholar Jahangir Khan
APPROVED BY
1 External Examiner _________________ Lal K Almas Ph D
Associate Dean and Regents
Professor Agricultural Business amp
Economics University of West Texas
AampM USA
2 External Examiner ___________________ Prof Dr Harun Ucak
Alanya Alaadin Keykubat
University Turkey
Major Supervisor ___________________ Dr Abbas Ullah Jan
Head of Department ________________
Dr Ghaffar Ali
iii
HOUSEHOLDrsquoS PREFRENCES AND WILLINGNESS TO PAY
FOR PESTICIDES FREE FRUIT IN KHYBER
PAKHTUNKHAWA PAKISTAN
Jahangir Khan and Abbas Ullah Jan
Department of Agricultural amp Applied Economics
Faculty of Rural Social Sciences
The University of Agriculture
Peshawar-Pakistan
May 2018
ABSTRACT
The over use of fertilizers and pesticides in agriculture are degrading natural ecosystem
and human health The substantial association of health risk with pesticide residues and
its adverse impact on environment has fetched attention of researchers across the globe
In this alarming scenario pesticide free farming is deemed as panacea to
environmental human and animal health friendly production system Pesticide free
fruit are considered to be superior in quality as compared to fruit produced
conventionally and helps in preventing several health and environmental hazards
Therefore the demand for pesticide free fruit is increasing throughout the world Given
this increasing demand for pesticide free fruit this study is designed to measure what
price premium household would be willing to pay (WTP) for fruit free from pesticides
such as apple peach and mango This study also aims to identify factors influencing
householdslsquo WTP decision of pesticide free fruit in Khyber Pakhtunkhwa (KP)
Pakistan The primary data was gleaned from 1000 sampled respondents through face
to face interview from two selected districts namely Peshawar and Mardan KP
Pakistan To elicit householdlsquos WTP information Contingent Valuation Method
(CVM) was employed Contingent valuation is a survey based method used for eliciting
willingness to pay of the householdslsquo for environmental and natural resources
Different elicitation techniques are used to design CV question scenario such as
payment card question double dichotomous choice question and open ended question
Consequently this study used the entire three payment format to elicit householdlsquos
WTP for pesticide free fruit The ordered logit model was employed to appraise the
payment card method However linear regression model was adopted to identify
factors influencing householdlsquos willingness to pay for pesticides free fruit
Nevertheless the double bounded dichotomous choice model was performed to
measure dichotomous choice questions The major results demonstrate that 935 percent
households were willing to pay higher prices for fruit pesticides free in the study area
Estimates remarkably reveal that around 35 percent households were willing to pay 16
to 20 percent higher prices and 24 percent households were willing to pay 6 to 10
percent higher prices for pesticides free fruit than the prevailing prices of conventional
produce It is reported by 61 percent of the households that local farmers use irrational
pesticides on fruit Major findings have also corroborated that 881 percent sampled
household have perceived health concerns over pesticides residues in food Similarly
911 percent of the households have supported the idea that farmer should be engaged
in environmental benign agricultural production practices which have a minimum
adverse impact on health and the environment Socio economic and demographic traits
have confirmed positive significant effects on householdlsquos willingness to pay The
iv
results of householdlsquos head awareness on WTP are according to the prior expectations
that awareness of householdlsquos head has significant contribution in willingness to pay
for pesticides free fruit While householdlsquos size has a significant but inverse effect on
willingness to pay for pesticides free fruit Furthermore householdlsquos perception
regarding health and environment concern has a propensity to positively influence the
willingness to pay for pesticides free fruit It is also depicted by the results that mean
WTP by using double dichotomous payment card and open ended elicitation format
validates consumer demand for pesticide free fruit in the study area Three separate
mean WTP were computed for each double dichotomous choice payment card and
open ended format which were figured as Rs2576 1632 and 1437 respectively
These results reveal market potential for pesticides free fruit in the study area This
research study is expected to contribute in the three different aspects Firstly this study
has figured out the potential for pesticides free markets in Pakistan This study has also
abridged the research gap regarding consumerlsquos preferences and willingness to pay for
pesticides free fruit which can be generalized and replicated to other areas In addition
results have provided insight to fruit producers helping them to strategize production
system decisions Based on the findings from this research government non-
government organization and other stakeholders should formulate policies and would
promote and encourage the production of pesticides free fruit in Pakistan
1
I INTRODUCTION
Pesticides are agrochemical formulated to cope with the severe problems diseases
caused by insects fungi virus and self-grown weeds The term pesticide can be defined
as any chemical or natural substance applied with the objective to repel destroy or
control pests and regulate plant growth (FAO 2002) In modern agriculture arena
pesticides are intensively used on crops before and after harvest The application of
pesticides surged with the passage of time due to an increase in the demand for
agricultural commodities by the burgeoning population of the world The overall
pesticidelsquos consumption across the globe is observed as about 2 million tons per year
While this massive pesticides consumption demonstrates that about 69 percent is used
by European countries and the remaining 31 percent is utilized by the rest of the world
as mentioned by Abhilash and Singh (2009) The more alarming situation is that the
aforementioned magnitude of pesticides consumption is increasing with the every
passing year as reported by FAO (2002)
The green revolution as well as a huge increase in the application of pesticides in the
agriculture realm had enhanced food and non-food crop production Resultantly the
significant surge in the economic growth of several agricultural based economies was
reported over the last few decades as demonstrated by Carvalho (2006) Despite the
substantial contribution of pesticides to diminish the food insecurity societies around
the world are cognizant and concerned about the food sanitation safety and
environmental externalities owing to irrational use of pesticides and other croplsquos input
(Wilson 2000) More categorically the food safety realization in developed countries
has been led to organic agriculture Whereas in many developing countries which
include but not limited to Pakistan the pesticides-free and organic food markets
remained underdeveloped due to several reasons One of the obvious reasons is the
uncertainty among consumerlsquos preference that led to their concern if an organic market
can be self-sustained Similarly a dearth of proper market structures and institutional
support failed to provide environment-friendly agriculture practices in developing
countries (Rehber and Turhan 2002) The current scenario of agriculture sector in
developing countries has raised several considerable questions to acquire the
anticipated implications for this sector However the most relevant query drifted that
2
―Is there sufficient consumerlsquos willingness to pay (WTP) available in a developing
country for grass-roots development of pesticide-free agriculture
11 Background of the Research Endeavor
Agriculture sector is the mainstay of Pakistanlsquos economy which significantly
contributes as 192 percent to overall Gross Domestic Product (GDP) of its economy
(GOP 2016-17) Despite many efforts and policy reforms still this sector is entangled
with insignificant growth momentum
Since the inception of this country in 1947 there wasnlsquot any notable crop and plant
protection policy adopted by concerned policy makers over a long span of time It is
evident from past timeline that ―Grow More slogan was initiated by the government of
Pakistan back in 1970s to address the escalating foodlsquos demand of rapidly increasing
population of Pakistan Subsequently Grow More policy resulted in ever increasing
pest problem which couldnlsquot be controlled with conventional crop management
practices Therefore the government started to provide the direct subsidy to Pesticides
Industry to provide panacea to croplsquos pest problem But unfortunately the colossal
surge in pesticides utilization had not only destroyed the pests but was also found lethal
for the environment benign organisms that include predators birds etc This irrational
use of pesticides and other crop inputs has caused huge economic loses and health
issues among the farming community
Pakistanlsquos agriculture is endowed with 11 (Eleven) different agro-ecological zones
providing the country an incredible exciting arena for experimentation and state of the
art for agriculture as reported by Altaf (2010) This diversified nature of ecological
zones can be utilized in a lucrative way to attain an optimal output The driving forces
of this sector are striving hard to curtail the gaps by ensuring the adequate production
and supplying the food to meet the demand of rapid growing population of the country
However the emerging challenges such as irrational use of croplsquos input and complying
with world trade organization (WTO) obligations are insisting the concerned policy
makers to focus on paradigm shift for significant contribution of agriculture towards
livelihood welfare and prosperity
3
These different agro ecological conditions provide the encouraging and conducive
environment for the production of cereal crops fruits vegetables and even for non-food
crops Fruits and vegetables grown in Pakistan have a wide domestic demand and have
also attracted the international consumer by exporting these edibles in the international
market Pakistan exports mango apple dates oranges guava and dry fruits like pine
nuts to different countries which include but not limited to Afghanistan UAE Saudi
Arabia and Europe (GOP 2014-15)
The relative importance of agricultural sector can be gauged with high growth rate of
exports of fruits and vegetables from Pakistan to different countries mainly South East
and the Middle East (Khalid Mustafa 2003) where low Sanitary and Phytosanitary
(SPS) standards are comply with Yet several more fruit grown in Pakistan have
enormous potential to be exported in the international market Specifically insect pest
infestation during pre- and post- harvest of fruit and vegetables is a significant problem
To protect from those many kinds of pesticides and agro-chemicals are widely used in
Pakistan These include different types of agro-chemicals which consist more than 100
types of insecticides almost 30 types of fungicides and approximately 39 different
types of herbicides (Zia et al 2009Anwar et al 2011) In 1960 the consumption of
chemical pesticides in Pakistan was 7000 tons per year which has risen to 78 232 tons
per year in 2003 (Syed and Malik 2011)With the development of pest resistance to
those chemicals over years each year new chemical compounds in large amount are
used to protect crops Overuse of these agro-chemicals has caused many adverse health
and environmental effects
However significant variation in consumer behavior in the developed countries has
excelled the demand of high quality food which had encouraged the organic
agriculture Thatlsquos why developing countries who have still adopted obsolete strategies
for pest control are out of race for agriculture export and are at venture to be considered
as ―dirty producer in an international market Similarly in Pakistan massive increase
in the pesticidelsquos use has escorted to two major harms to Pakistanlsquos economy Firstly
Pakistan imports a large quantity of pesticides incurring billions of costs on it and
second overuse of pesticides on agricultural commodities has created many health and
environmental hazards in the farming community of Pakistan Several research
endeavors such as Ahmad et al (2004) Rizwan et al (2005) Parveen and Masud
4
(2001) had divulged that individuals working in field under pesticides exposed
environment specifically women who worked long time in the cotton croplsquos field
sustained more health hazards These health hazard underscored skin irritation
headache nausea and gastroenteritis It is also evident that the hazardous chemical
residues of organo-chlorines organophosphate and synthetic pyrethroids pesticides
were found in 85 percent of the blood samples drawn from 75 sampled individuals
(male and female) in Pakistan
12 Pesticides free Food and Products
Pesticides free fruit and vegetable are those edibles that are grown without the use of
pesticides and can be deemed as major component of an organic farming Due to
awareness among people about advantages of Pesticides free fruit and vegetable which
upshot in food safety and benefit environment as well the production and consumption
of such food products is being highly valued With the consumption of food produced
without the use of pesticides can be helpful in the prevention of some of the health
hazards related with the consumption of conventional food (Nouhoheflin et al 2004)
The term ―Pesticides free was introduced for the first time in a book ―Look to the
Land in 1939 by Lord Northbourne The author narrates pesticides free farm as an
organization that making use of environment balance technique by adopting zero
pesticides In early 20th
century pesticides free food ideology was brought forward
while correspondingly there was an immense use of chemical in food products as well
Householdslsquo were having great concern about their health as well as soil condition and
they began to grow such food which was free from chemical residuals In the era of
70s a noteworthy change was reported in escalating the demand of pesticides free food
and pesticides free farming Therefore in year 1972 ―International Federation of
Pesticide free Agriculture Movement was formed In the same era the producers who
were producing pesticides free food individually commenced the certification process
The obvious aim of the process was to develop rules and to underpin the standards of
pesticides free production
In this modern era where food consumers are highly concerned about their health safety
and environment benign practices they prefer to buy pesticides free food products
This is because of their knowledge about the relationships between the production
practices and quality of food produced Consumers are becoming more conscious as
5
they are aware of the harmful effects of food produced with irrational pesticides use on
their health Many research endeavors have corroborated that fresh fruit and vegetables
confers health related benefits and provide protection against the risk associated with
different types of diseases like diabetes stroke and cancer(Van and Pivonka 2000 Stan
Kar Stoner Singh 2008) Likewise the world health organization (WHO) has
revealed in their research carried out in 2002 that the fruits and vegetables
contaminated with pesticides can cause about 31 percent of diseases related to heart and
11 percent stroke in all over the world However if best quality of fruit and vegetable
consumption is adequately increased it is projected that about 27 million of lives can
be protected each year Pesticides free food contains higher level of antioxidants which
fight against various diseases and provide different essential vitamins More
importantly pesticides free food products also aimed to prevent from some allergies
and diseases common in human being It is corroborated by other research studies that
chemical fertilizer free food are beneficial for human health as well as for the animals
wildlife and for the ecosystem To encourage such agricultural management techniques
in developing countries in general and Pakistan in particular still there is long way to
go but such research studies can provide the paved way to open new avenues for the
concerned policy makers and stakeholder in the realm of Agriculture
In addition locally grown pesticide free produce tends to fetch higher prices due to
sanitation concerns of the consumer and improved quality of the product Subsequently
such produce are preferred by the household and they are agree to pay a price premium
for such food produced free from pesticides compared to prevailing regular market
price of conventional food products Thus it is important to measure householdlsquos
willingness to pay for locally produced pesticide free fruit To acquire a good or
service consumerslsquo wants to sacrifice an extra amount of money which show their
willingness to pay Willingness to pay can also be defined more categorically as the
extra amount of money that an individual wants to pay for best quality of food (Lusk
and Hudson 2004) The commonly used model for eliciting householdlsquos willingness to
pay information is Contingent Valuation Method (CVM) Contingent valuation (CV) is
a survey-based method which is used to elicit householdlsquos willingness to pay for
environmental and natural resources
6
12 Justification of the Study
With the every passing year the demand for agriculture products is hiking due to rapid
increase in the worldlsquos population Pakistan being an agrarian country is striving hard
to fulfill the domestic and international demand for agricultural food To overcome the
escalating demand for agricultural product farmers mainly depend on chemical
technologies to manage pests and to provide enough food Besides their benefits now it
is clear that pesticides are negatively influencing human health and also the natural
environment The food that we are eating has gained more discussion in all over the
world including developing countries like Pakistan that whether this food is safer for
human health and for natural environment Consumers are facing with problemslsquo which
food is safe to eat and which is not safe Which food processing is beneficial for human
and environment and which is worse (Bold et al 2015 Chiew Shi Wee et al 2014
Sirieix 2011 and Butt et al 2015) Most of people are turning towards the production
and consumption of pesticides free food to resolve these issues
In developed countries consumers are highly concerned about the excessive use of
chemicals on food and its negative impact on health and natural environment thatlsquos
why the production of food produced without the use of pesticides Large numbers of
studies are conducted on consumerslsquo perception regarding pesticides- free food in
developed countries like Europe Australia United State and New Zealand but in
developing countries very little is known about consumerslsquo perception regarding
pesticides-free food
Despite the fact that food production without pesticides and other chemicals are safe for
health and environment its production and consumption is very low In Pakistan only
few farmers are using chemicals free technology for food production It has only 28
farms producing pesticides-free food which they just growing for their own
consumption not for commercial purpose In Pakistan there is high gape of information
about consumerlsquos perception and awareness regarding pesticides-free food and
consumerslsquo willingness to pay for pesticides-free food (Panhwar 2004)
Keeping in view the human health hazards and environmental vulnerability owing to
irrational use of pesticides alternative farming systems such as pesticides free farming
integrated pest management (IPM) and organic farming is becoming progressively
7
more popular in the global context However in the country like Pakistan where costly
input and lower output agriculture was a historic focus Following the Green
Revolution in 1960s adoption of certified organic production is expected to be fairly
low Nevertheless aforementioned agriculture practices could be an alternative system
in convincing farmers towards safe and sustainable agriculture and to comply with the
strict regulations and mandates of certified organic system and WTO Moreover due to
conducive and diversified weather and climatic condition of the country and relatively
cheaper labor force availability production of such safer food seems feasible
Pesticides free food is supposed to be having high prices however it is important to
examine whether households are willing to pay a higher price for these pesticides free
fruit According to the research study conducted in different countries of the world on
pesticides free food this study also focus to investigate a price premium that
households are willing to pay for pesticides-free fruit and factors influencing their
decision For this purpose Khyber Pakhtunkhwa (KP) is selected as a research area
Khyber Pakhtunkhwa (KP) is blessed with fertile soil and plenty of water for irrigation
and is famous for production of delicious fruit such as peach apple guava plum
mango Pear apricot date and citrus Fruit farming has been an important business of
Khyber Pakhtunkhwa and the total fruit production during 2015-16 was 411448 tons
from 44737 hectare (GOKP 2015-16) Given that the region is one of the important
fruit growing regions with relatively readily available agricultural labor growers has
the potential to produce pesticides free fruit in this region In this direction more
research work is required to estimate a price premium householdslsquo willing to pay for
fruit free of chemicals and pesticides Thatlsquos why this study is designed to measure
what price premium households would be willing to pay for pesticides free fruit and
improvement in apple peach and mango quality produced by farmers
14 Purpose and objectives of the Study
The irrational and overuse of pesticides in agricultural food production causes severe
damages to human as well as animal health and to the environment too Thus a new
production and new system is needed to overcome these problems and to limiting the
use of these hazardous chemicals during production process The risk of harmful effects
on health and environment are generally reduced with pesticides free farming compared
8
to conventional farming methods Hence pesticides-free farming has the potential to
provide a healthy and safer environment The purpose of conducting this study is to
understand the factors that influence householdlsquos behavior in purchasing pesticide free
food and their willingness to pay for such food The main theme to carry out this study
is to discuss on the variables which determines householdlsquos behavior in the buying
pattern of pesticide free food Besides this research also aims to increase the
understanding on householdlsquos awareness attitude and perceptions towards pesticide
free products
The general objective of this study was to investigate what price premium householdslsquo
are willing to pay for pesticides free fruit produced locally
The specific objectives of this research study are mentioned as below
To study socio-economic characteristics of household and their expenditure on
fruit
To investigate householdlsquos perception towards the use of pesticides on fruit
production
To identify factors influencing householdlsquos willingness to pay (WTP) for
pesticides free fruit
To compare householdlsquos willingness to pay across urban and rural regions of
the study area
To examine the effect of different contingent valuation elicitation format on
householdlsquos WTP
15 Research Questions
1 Do householdlsquos willingness to pay a price premium for pesticide free fruit
produced locally is affected by their socio-economic characteristics
2 Do householdslsquo willingness to pay price premium for pesticide free fruit
produced locally are different in rural and urban regions
3 Do householdslsquo willingness to pay price premium for pesticide free fruit
produced locally are affected by WTP question format
9
16 Hypotheses
Hypothesis is a proper statement that shows the expected association between an
exogenous and endogenous variable (Creswell 1994) Hypothesis is mainly of two
types the null (Ho) and the alternative (H1) hypothesis The null hypothesis is a
statement about the relationship between the dependent and independent variables
while the alternative hypothesis is tested for the acceptance or for the rejection of null
hypothesis through using different test-statistics and usually opposite to the null
hypothesis
161 Hypotheses to be tested
Hypothesis 1
H1 Socioeconomic characteristics have significant effect on householdlsquos WTP
for pesticides free fruit produced locally
Hypothesis 2
H1 Rural and urban locations have significant effect on householdlsquos WTP for
pesticides free fruit produced locally
Hypothesis 3
H1 WTP question format have significant effect on householdlsquos WTP for
pesticides free fruit produced locally
17 Contribution of the Study
The major findings of this research endeavor could be lucrative to pesticides-free food
industry players in designing and implementing programs relating to the production
marketing and consumer behavior regarding fruit and vegetable The study is providing
information regarding householdlsquos willingness to pay an extra amount for pesticides
free fruit at market place The identification of factors influencing purchase of
pesticides free food provides valuable information in formulating short and long term
marketing programs Also the outcomes of the study provide benefits to Government
in their policy making towards pesticides-free farming and pesticides free products
Pesticides free fruit could contribute significantly to wealth formation poverty
lessening and can assess to export market Pesticides free fruit provide healthy food and
natural environment to the society
10
18 Organization of thesis
This study is organized into five chapters In the first chapter background of the study
research questions study hypothesis research justification and contribution of this
study is discussed Chapter two is consist of review of literature related to consumerslsquo
perception market potential and market prospects empirical research studies on
consumerlsquos willingness to pay and consumer knowledge about pesticides free food
socio-demographic variables and their effects on willingness to pay price premium are
discussed Chapter three discuss in detail the study area conceptual and empirical
framework on consumerslsquo willingness to pay and contingent valuation methods are
discussed Chapter four presents descriptive analysis and results obtained from
empirical findings and Chapter five provide summary conclusion and recommendation
and future suggestions on the basis of research findings
11
II LITERATURE REVIEW
Literature review is a synthesis of previous study in the content of a thesis In this
chapter different past investigation are reviewed Mostly this chapter concern on the
methods adopted by different researchers while measuring willingness to pay It also
figure-out various explanatory variables which have been found influencing
householdslsquo willingness to pay an extra amount of money for pesticides-free food
Previous researches on perception questions are also discussed
21 Illustration of Contingent Valuation Method (CVM)
A number of research studies are undertaken across globe to investigate about
consumerslsquo WTP for safer foods such as organically produced pesticides free or
naturally grown Most of the WTP studies use contingent valuation methods where
hypothetical market scenario is developed and subjects are asked to name their WTP
price as compared to existing market price Different techniquesquestionnaires are
used in contingent valuation method where respondents are directly asked to state their
maximum amount of money they are willing to pay for specified improvements in
environmental or health quality The methods used in CVM includes personnel
interview mail and survey that elicit consumerlsquos WTP for those goods yet not available
in the market Survey questions include single bounded double bounded dichotomous
choice and open ended or closed ended (Lusk and Hudson 2004)
Misra et al (1991) studied consumer preferences and their willingness to pay for
pesticides free fresh produce by applying contingent valuation method An ordered
probit model was adopted to know householdlsquos stated willingness to pay for products
free from pesticides residual The study also aimed to know the factors affecting the
probability of householdslsquo WTP for a number of alternative price premiums The
results indicated that householdlsquos willingness to pay was different across different
factors The study concluded that testing and certification was the recommendation of
the households Results also showed that consumers in the study area opposed higher
prices for certified-FPR fresh produce
In another study Gil et al (2000) adopted contingent valuation method and studied
consumerslsquo willingness to pay for pesticides free fruit in Spanish regions Results
showed that consumerslsquo concern over health and environment was increased Results
12
also suggested that due to the adverse impact of conventional food on health and
environment demand for pesticides-free food has raised Results of the study also
showed that consumerslsquo were willing to pay more prices for fruits vegetables and
meats which were free of pesticides
Boccaletti and Nardella (2000) used contingent valuation method to assess householdlsquos
willingness to pay for pesticides free fresh fruit and vegetables To know the impacts of
explanatory variables on the probability of householdslsquo willingness to pay different
price premium an ordered logit model was used and results were reported A
significant and positive effect of income on householdlsquos willingness to pay was
observed Results of the study also suggest that householdlsquos education and associated
risk concern has an inverse relation with households WTP
In another study Millock et al (2002) conducted a research study by using contingent
valuation technique to estimate willingness to pay for pesticides free products through
panel data The information collected was based on weekly report of householdslsquo
purchases of 2000 Danish families Questionnaires were sent to households and asked
them to differentiate different food attributes The food product attributes were included
environmental issues animal welfare and food safety The result showed that
household had given high value to food free from pesticideslsquo residues
Similarly in a relevant study Cranfield and Magnussan (2003) studied willingness to
pay of the Canadian householdlsquos for those products which were free from pesticides
residuals by applying an Ordered Probit Analysis model A contingent valuation (CV)
study was attempted to know that if Canadian households would pay a price premium
for pesticides free food products About sixty five (65) percent of the householdlsquos were
willing to pay a 1 to 10 percent extra amount of compared to those products
contaminated with pesticides residuals About five percent of the total respondents were
willing to pay more than 20 percent price premium The main determinants that switch
over the households to pay higher premiums for pesticides free products were
householdslsquo health concern and environmental concern
In a relevant study John and Eric (2004) developed a survey based research to find out
householdlsquos choice of paying an extra amount for fresh and pesticides free products by
using a contingent valuation technique According to their research 65 percent of
13
households were willing to pay one to ten percent extra prices for pesticides-free
products as compare to conventionally produce one five percent respondents willing
to pay more than twenty percent Health and natural environmental issues youth and
grocery stores were the important factors influencing consumers to pay higher prices
Masias et al (2012) carried out a research study in Spain to analyze the level of
knowledge consumption and consumerlsquos willingness to pay for organic vegetables
such as organic tomatoes By using contingent valuation method three distinct
consumerslsquo groups were identified The results showed consumerlsquos lack of knowledge
regarding organic vegetable Result of the study revealed a clear relationship between
level of knowledge and organic food consumption and consumerslsquo potential willingness
to pay
Boys et al (2014) conduct a research study in Dominica to assess willingness of the
consumerslsquo and their opinion for organic or locally grown produce By adopting
contingent valuation method (CVM) maximum likelihood estimation (MLE) procedure
was applied Findings from the study reported that respondents in Dominica were
willing to pay 175 percent for organic and 12 percent price premium for locally
produced food Results of the study showed that consumer response towards
willingness to pay was different across socio-demographic characteristics family health
status and experience regarding adoption of organic food products
22 Crux of the Double bounded dichotomous choice model
Many recent research studies deployed double bounded dichotomous choice model to
study consumerslsquo willingness to pay for pesticides free organic and related food
Owusu (2010) studied and analyzed market possibility for new pesticides free lettuce
and water melon by using a double bounded dichotomous choice contingent valuation
technique in the city of Kumasi in Ghana The information of the respondents was
collected By applying a Tobit model householdslsquo willingness to pay was assessed
More than 50 percent price premium were paid by 71 percent of the respondents for
natural vegetables and 82 were willing to pay 1 to 50 percent higher premiums for
natural fruits Results showed that human capital food qualities and householdlsquos
recognition impact householdlsquos willingness to pay for pesticide free commodities The
14
evaluated market possibility for pesticide free fruits were (GHcent32117113 US$
26453433) for every annum and for naturally produced vegetable was GHcent1991224
(US$1640083) per year suggested an immense market possibility for naturally
produced fruits in Ghana
sum
(
)
(
)
Where
are binary valued (0 or 1) indicators and the formulas
for the corresponding response probabilities are given above The model was estimated
through maximum likelihood estimation method and the results were used to find out
the mean and individual WTP (s) for pesticides free fruits
Where ƒ(WTP) is a function X is a set of socio-economic characteristics are
coefficients and is error term
In another study Cerda et al (2012) investigated different markets regarding
respondentlsquos preferences and willingness pay a price premium for products free from
pesticide in Chile Conjoint analysis was also used to estimate the marginal willingness
to pay of the consumer for pesticide-free apple A total of 400 individuals were
interviewed to know householdlsquos willingness to pay and to determine different
attributes that consumer search when purchasing apple by using a logistic probability
function and single-bound dichotomous elicitation format The output showed sweet
apple lowest price and pesticides free production attributes were preferred by
households Results of the study revealed that consumers in the study area were willing
to pay about 130 Chilean pesos kilogram for pesticide free apple
By using double bounded dichotomous choice approach Minh et al (2013) conducted
a research study on consumption and willingness to pay a price premium for pesticides
free vegetables in Vietnam Under contingent valuation method 185 respondents were
surveyed and analyzed Results showed that about 15 percent of the consumers had
already used pesticides free vegetables and 88 percent sought to try and purchase such
products if available in the market Result revealed that consumerslsquo were willing to pay
15
on average 70 percent more amount for pesticides free vegetable than the convention
price Findings also showed that respondents with more concerned about pesticides free
food and high purchasing power were more likely to pay extra amount of money
Findings of the study showed most of the consumers were still worrying about safe
food because of chemical residues in vegetables Results suggest that control of
pesticides level was difficult for state agencies because of insufficient capabilities
Some recommendations were suggested based on findings of the study such as the
consumers should be informed regarding organic vegetables and information should be
publicized to consumers and to expand organic market share in the future new shops
should be open
Hai et al (2013) conducted a research study on consumption of organic vegetables and
consumer WTP for vegetables produced without the use of pesticides in Vietnam They
reported in their study that most of the consumers were still worrying about safe food
because of chemical residues in vegetables Control of pesticides level was difficult for
state agencies because of insufficient capabilities By using double bounded
dichotomous choice approach under contingent valuation method 185 respondents
were surveyed and analyzed The results showed that about 15 percent of the
consumers had already used pesticides-free vegetables and 88 percent of the total
respondents desired to try and purchase if such pesticides free products were available
in the market On average consumers were willing to pay 70 percent more price than
the convention price Findings of the study also showed that respondents with high
income and more concerned about pesticides-free food were more likely to pay price
premium
23 Overview of the Ordered Logit Model
Regarding discrete nature and ordinal ranking of the WTP variables in payment card
method an ordered logistic regression was applied in many research studies Ordered
logistic regression is the most appropriate choice in studying these issues (Green
2007) Under latent variable framework the willingness to pay model can be written as
follows
16
Where is an unobserved latent variable reflecting the WTP for pesticides-free fruits
for household i expressed in terms of utility to switch from the traditionally grown
fruits consumption to pesticide free fruits is a parameterlsquos vector reflecting the
relationship between WTP captures a set of socioeconomic and demographic
variables influencing WTP and is the unobserved disturbance term reflecting
stochastic differences between households not controlled for The relationship between
the unobserved and the observed outcome for household ( =0 1 2hellipj) can
be summarized as follows
It is presumed that ɛ is normally distributed across observation
With regards to ordered logistic model Valchovska S (2004) investigated Dutch
householdlsquos attitudes and behavioral intentions to purchase pesticides-free olive oil By
applying CVM to assess consumer willingness to pay a price premium for pesticides
free olive oil on the Dutch consumer an ordered logit regression model was used
Results suggested that willingness to pay did not depend on socio-demographic factors
but rather on consumers awareness and experience with the product Results also
showed that experience regarding the product was significantly related to purchase
intention and willingness to pay Most of the consumers considered pesticide-free olive
oil to be too expensive Results suggested high prices appeared the biggest constraint
on consumption Results clearly verified that consumerslsquo familiarity with pesticide-free
olive oil in the Netherlands was low at present This situation may however be
changed by a possible increased availability of the product in the supermarkets
17
Rodriguez et al (2008) carried out a research study to measure consumers WTP for the
available pesticides free products in Argentina domestic market The data was collected
through a survey from the consumers of Buenos Aires city For the analysis of data a
binomial multiple logistic regression model was applied Five different organic
products such as regular milk leafy vegetables whole wheat flour and fresh chicken
and aromatic herbs were selected for the research The method of contingent valuation
(CVM) was adopted to estimate consumerslsquo stated willingness to pay The result
revealed that pesticide free agriculture has undergone momentous expansion and
consumers in the study area were willing to pay a higher amount of money for such
organic products Research results suggest that along with price that play a significant
rule while consuming organic products non availability of stores for organic products
and a reliable regulatory system limits the consumption of pesticides free organic
products in the study area
According to Kalogeras et al (2009) carried out a research study that concentrates on
the identification of Dutch householdslsquo willingness to pay (WTP) for natural olive oil
The study was carried out in 5 biggest Dutch cities in Netherland To evaluate the
impact of explanatory variables on householdslsquo willingness to pay a price premium for
natural produced olive oil an ordered logit regression model was constructed Results
suggest that experience awareness and consumerslsquo personnel satisfaction were the
variables influencing consumerslsquo WTP for natural olive oil
Travis et al (2009) conduct a research on consumer purchasing behavior for pesticides
free fruits and vegetables To identify the impact of socio-economic and socio-
demographic characteristics on the probability of consumers belonging to certain
groups like devoted casual or nonuser an ordered logistic model was used Results
showed that factors like price and income were influencing householdlsquos willingness to
purchase pesticides-free fruits and vegetables to some extent The results also showed
that respondents with a college degree children aged more than six years and aged
above than fifty years were willing to purchase pesticides-free fruits and vegetables
Zeki and Zia (2009) carried out a research study to investigate consumerslsquo stated WTP
for tomatoes produced free from pesticides residues The study also aimed to measure
the impacts of socio-demographic and hazard variables on WTP Ordered Probit model
18
was used to figure out the likelihood of WTP for pesticide free tomatoes The
information was acquired from 666 respondents by survey method in Ankara and Tokat
regions at same occasion The study results revealed that 3423 percent of Turkish
households were not willing to pay 7702 percent willing to pay a 30 percent higher
amount of money and 22 97 percent would be willing to pay more than 30 percent
premium According to the results Turkish households were paying a little price
premium for tomatoes produced free from pesticides Furthermore the important
factors significantly influencing willingness to pay for pesticides free tomatoes were
gender education statue of mother recognizes for ecologic agriculture solid
sustenance and risk
Oyawole et al (2016) conducted a study in Nigeria to asseslsquo consumer awareness
benefits and willingness to pay for organic vegetables Descriptive statistics and logit
model was used for the analysis of data According to the research findings about 70
percent of consumers were aware of the benefits of organic agriculture and hence they
were willing to pay price premium Results showed that factors influencing willingness
to pay positively were higher education and consumer awareness regarding organic
food while age income and gender had no significant influence on consumer
willingness to pay
Hayati et al (2017) conducted a research study in Marand city to identify factors
effecting consumerslsquo WTP for pesticides-free fruits and vegetables To assess
respondentlsquos willingness to pay an ordered logistic regression model was applied By
using Contingent valuation method data was collected from 394 respondents The
results revealed that 33 of the respondents were willing to pay 20 more price
premium 64 showed 5 to 20 more price premium while only a small portion 3
of the total sample of the consumers were not willing to pay more price for pesticides
free fruits and vegetables Findings of the study also revealed that factors such as
income of the respondent environmental and health concern and consumerlsquos
knowledge regarding pesticides free fruits and vegetables were significantly affecting
respondentslsquo willingness to pay for vegetables and fruits free from pesticides residues
19
24 Factors influencing Householdsrsquo Willingness to Pay
Based on the literature review factors influencing households WTP a price premium
are discussed below
WTPj = β0 +β1Agej + β2Genj + β3Eduj+ β4Hsizej + β5Incj + β6Locj + β7Healthconj+
β8Envirconcernj +
Where
WTP = Willingness to pay for pesticides free fruit = Householdslsquo head age in years
= Gender status of the householdslsquo head = Education level of householdslsquo head in
years = Householdslsquo size = Income of the household = Householdslsquo
location = Health concerned = Environment concerned micro=Error term
Govindasamy and Italia (1991) investigated households in different grocery retail
markets in New Jersy to know their different opinion regarding pesticides free
products The main theme of the research study was to know demographic
characteristics that caused the household to pay a price premium for products free from
pesticides residues than the price prevailing in the market The result showed the
influencing factors that caused the individual to pay more price premium for pesticides
free products were demographics characteristics such as females those having higher
income and young individuals The result also showed that number of member in
households had an inverse relation with willingness to pay More individual in a house
were not willing to pay higher prices for pesticides free products
Piyasiri and Ariyawardana (2002) conduct a research study to identify market potential
and consumerslsquo expectations for pesticides free food in Kandy Sri Lanka The study
also aimed to identify factors influencing consumerslsquo willingness to pay price premium
for pesticides-free food Results revealed that most of consumers in the study area were
aware of the use of pesticides free food and this awareness influenced their
consumption of organic food and willingness to pay more for organic food Results
showed that socio-demographic characteristics like income education of the
respondents beside environment knowledge were the important factors influencing
consumerslsquo WTP for pesticides-free food Study suggested that market for organic food
could be enhanced by availability of organic food in easily accessible shops and market
20
should also direct awareness in consumer regarding demand and consumption of
organic food
Qingbin and Junjie (2003) conduct a study to identify market potential for pesticides
free apple and milk by adopting a conjoint analysis technique in Vermont State of
USA Results found that there was a significant niche market for pesticides free apple
and milk The results also suggested that especially those consumers who were
regularly purchased pesticides free products were willing to pay price premium for
apple and milk produced without the use of chemicals and certified by NOFA
Heo and Kim (2004) investigated green marketing strategies and willingness to pay for
environment-friendly agricultural products in the Metropolitan area The results
revealed consumerlsquos WTP for grain vegetables fruit and processed foodstuffs were
206 percent 202 percent 193 percent and 172 percent respectively higher than
agricultural products produced by conventional farming method
Gracia and Magistris (2007) conduct a research study to know consumerslsquo purchasing
behavior regarding pesticide-free food and also factors influencing food purchasing in
Iran A multivariate limited dependent variable model was used Results showed that
households purchasing pattern was more for pesticides free products and they
purchased such safer products in large quantity Findings of the study showed that
purchase of pesticide free products depends on householdlsquos behavior and information
regarding the product Moreover householdlsquos behavior regarding health concern and
environment concerns given by pesticides-free products were the factors that explained
both intension and final decision to purchase pesticide free products Income and
information about pesticide free products had a significant positive influence on the
decision of the consumer to purchase pesticides free products
Kamal et al (2009) studied householdlsquos willingness to pay a higher price for
pesticides-free products in Kathmandu valley About 180 respondents were interviewed
by using well designed questionnaires to find out their perception for pesticide-free
food commodities and asses their willingness to pay The study revealed that almost all
the respondents were willing to pay a higher price for such food but the level of
acceptability varied Up to 58 of the respondents were willing to pay 6- 20 more
price while 13 were willing to pay half premium The average price premium was
21
noted about 30 Over 39 of the respondents suggest the extra price is reasonable for
pesticide-free food while 27 suggest it a really higher price However results showed
that the consumption of pesticide free food had increased
Morteza et al (2009) conducted a study to examine consumerslsquo willingness to pay for
pesticides free fruits and vegetables The results showed that variables such as socio-
demographic characteristics and perception of the respondents regarding environment
and health concern were influencing consumerslsquo WTP for pesticides free food
Environment concern was the important factor of consumer willingness to pay but
results from this study showed that respondents in New Brunswick gave more priority
to health as compare to environment Results also indicated a positive influence of
income and health concern on consumer willingness to pay for organic food
Ghorbani and Harnraz (2009) carried out a research study on factors influencing
consumer WTP for pesticides free products in Iran By applying Tobit model the
results showed that physical look and information of consumerslsquo were the influencing
factors affecting willingness to pay higher price Consumerlsquos concern of chemicals
residues in diets were also positively affecting willingness to pay In demographic
characteristics such as education of the respondents had negative effect on WTP The
study suggested that farmers and consumers should be encouraged to produce and
consume pesticides-free food Study also suggests that marketing strategies should be
encouraged for the marketing of such organic food products
Akgungor et al (2010) carried out a research study to estimate consumerslsquo perception
regarding safe food and the trade-off that urban Turkish consumer made between good
quality and chemicallsquos free fresh fruits and vegetables The date was gathered from a
representative sample of urban consumers The results suggested higher income and
more educated respondents were highly interested and they had more knowledge
regarding organic products Results showed suggested reason for choosing organic
products was consumerslsquo perception regarding organic products of low health risk and
higher nutritional value Results showed 36 percent higher price premium consumers
were willing to pay for organic food that suggests urban Turkish consumerslsquo demand
for organic products
22
Oraman and Unakitan (2010) analyzed factors influencing Turkish consumerslsquo
purchasing decisions for fruits and vegetables The survey conducted in Istanbul by
applying logistic model Results of the survey showed that health and safety concern
were the important factors influencing consumerslsquo preferences regarding organic food
Findings of the study would help organic food producer in targeting factors that were
influencing consumerslsquo decisions to purchase organic food products
Bektas et al (2011) conducted a research study to determine level of consumerslsquo
awareness regarding food safety in Izmir Turkey by applying Probit model Results
revealed that consumerslsquo with high income and more education were more aware
regarding safer food Outcome of the study also identified aged respondents had more
probability for healthy and safe food products Results suggested that awareness for
safer food should be passed through informative campaign targeting especially low and
middle income groups as well as low education level population
Coulibaly et al (2011) studied the health risk caused by using large quantity of
chemicals and pesticides on vegetables By using a hedonic pricing model they
identified the determinants of the householdlsquos WTP for pesticide free products
Information was collected through a well designed questionnaire on householdlsquos
perception awareness and consumerslsquo willingness to pay for pesticide free vegetables
The perception of householdlsquos for good quality vegetables included color freshness no
external damage and firmness The most important factor effecting householdlsquos choice
to pay more for pesticide-free vegetables were awareness about the health hazards
caused by those chemical Households were willing to pay more than fifty percent for
those products free of such pesticides and chemicals
Joyce et al (2011) conduct a survey to examine consumerslsquo perceptions and to assess
their willingness to pay for pesticides-free product They surveyed 100 households in
Morogoro municipal The results presented showed that 78 of the respondents were
willing to pay a higher price for pesticides-free food The results revealed that
environment and health concern were the most important factors effecting householdlsquos
willingness to pay for organic food Results from the survey suggested that
consumption of pesticides free food were increasing but need certification labeling
processing and packaging to boost up the demand
23
Sangkumchaliang and Huang (2012) conducted a survey on consumerslsquo perception and
attitude towards organic food products Results showed that consumers were
purchasing organic food products because of the expectations that organic food is
healthier and safer to the environment Results also revealed that respondents with old
aged and more educated were more willing to purchase organic food products The
study suggested that consumerlsquos information needed to purchases organic food
Owusua and Anifori (2013) analyzed the willingness of householdlsquos to pay an extra
amount of money to watermelon and lettuce produced naturally or free from pesticides
by applying a (CV) contingent valuation information starting with urban Kumasi in
Ghana The impacts of the determinants of the householdlsquos willingness to pay a higher
price were examined with a Bivariate Tobit model Results showed socioeconomic
characteristics as well as freshness and cleanness of products had a great influence on
householdlsquos choice to pay a higher price than they pay for conventional products
While householdslsquo size has a negative impact on consumerslsquo willingness on paying
premium to natural lettuce The estimated mean householdlsquos willingness to pay for
pesticide free watermelon was Ghcent05554 (US$ 0 4575) and for natural lettuce was
GHcent12579 (US$1 0361)
Haghjou (2013) investigated that the demand for those products that was grown without
the use of pesticides has increased amazingly in the recent years The study was carried
out to assess the factors effecting householdlsquos willingness to pay a higher price for
organic products accessible in the Argentinean provincial market The output of the
study reveals that 95 of the respondents were willing to pay a higher price while 10
of the householdlsquos were like to pay about 35 percent higher price than the market
existed price for naturally grown products The results suggested that householdslsquo
income family size ecological problems including respondentslsquo knowledge has
enhanced their desire to pay higher price for pesticide-free products than the
conventional one The result also showed that female as well as house wives were
agreed to pay more price premium
HUI et al (2013) conduct a survey on householdslsquo WTP a price premium for
pesticides-free products in Klang valley The study was based on householdlsquos
purchases by 2012 on their demographic and social-economic characteristics To study
the householdlsquos perception and WTP for pesticide free products 500 households were
24
interviewed by using well designed questionnaires The data collected were analyzed to
find what determined the presence of pesticide-free products The main theme of the
research study was to know the determinants that playing rule in willingness to pay for
products free from pesticides residues The result revealed that majority of the
households were agreed to pay a higher price premium for pesticide free products
Different factors like environment psychology food free from pesticide residuals and
health conscious were related to explain household willingness to pay for organic
products However the result also showed that social demographic and level of
knowledge did not explain the WTP for products free from pesticide
Syed et al (2014) studied different level of pesticides in different vegetables and fruits
in Pakistan The results obtained showed that more than half of the collected samples
were contaminated with organophosphate pyrethroids and more organochlorines
pesticides Numerous research studies found that tomato apple melon mango grapes
and plum among fruits and vegetables has crossed the maximum residual levels of
FAO and World Health Organization (WHO) The comparison with other areas showed
that in 50 of the sample the residual level was above than the stated level but was in
agreement with neighboring countries like china and Bangladesh Higher hazard risk
index (HRI) values were calculated for dieldrin methamidophos op-DDT diazinon
and pp-DDT in apple mango banana melon potato and onion
Vidogbena et al (2015) carried out a research study in major cities in Benin to asseslsquo
consumer perceptions about cabbage produced by a physical barriers method to protect
cabbage from pesticides Results showed that consumers were aware of the impacts of
pesticides on health and environment but they were not able to differentiate between
cabbage produced conventionally and through this net method Results of the study
revealed that consumer were willing to pay higher price for cabbage produced with
minimum application of pesticides as compared to one produced with pesticides
application Consumers were willing to pay 38 more price than the existed market
price Results indicated that females more educated and aged respondents were willing
to pay more prices for better quality cabbage
Safdar et al (2015) studied pesticide free food consumption and consumerslsquo WTP in
the United Arab Emirates To recognize major determinants of respondentlsquos willing to
pay more price for products free from pesticides residues a regression model was used
25
Around 300 hundred respondents were interviewed and information was collected The
results showed that the consumption of such food was increased in the study area This
increment was due to high per person price premium more knowledge about nourished
food products and different household population Consumers were paid price premium
for the food free from pesticides residuals Results showed that majority of the
respondents respond when inquired as to whether they were willing to pay more for
pesticide-free products Age nationality instruction family size and salary were main
factors influencing consumerslsquo to pay higher price for the pesticides-free food products
Hiren et al (2016) carried out a survey in Tennessee State USA The data were
collected on a random sample from grocery shoppers to assess consumer general
knowledge about pesticides-free food and to know their willingness to pay For this
study binary logistic regression model was used The survey showed that most of the
consumer had a fair knowledge about pesticides free food Results indicated that
number of those respondents who had never been used organic food was higher than
those who usually used The results showed that income and environmental concern
were the factors that effectively determine to pay more for pesticides-free food
Aguiar et al (2016) studied factors influencing consumerslsquo purchasing behavior
regarding organic food in Brazil by using structural equation modeling (SEM)
approach Results revealed that most of the consumerslsquo were willing to buy organic
food Respondents were willing to pay 25 percent price premium for organic food as
compared to food produced conventionally Results suggest the main determinants of
consumerslsquo willingness to pay were their beliefs of positive effects of organic food on
health and environment
Mangan et al (2016) studied level of awareness and willingness to pay for organic
vegetables in Sindh province of Pakistan Result of the study reported that majority of
the respondents had knowledge about the beneficial effect of organic vegetables while
less than half of the respondents had never heard about organic vegetables Results also
showed that most of the respondents (82) were not aware of the benefits of organic
vegetables to the environment Majority of the respondents were willing to pay price
for organic vegetables
26
Nandi et al (2016) studied consumer willingness to pay for organic fruits and
vegetables and also factors influencing consumerslsquo WTP in India For the estimation of
respondentlsquos willingness to pay contingent valuation method (CVM) was used For the
data analysis 250 respondents were selected A binomial regression model was used to
know respondents willingness to pay and the factors influencing on WTP Results
revealed that most of the respondents were confronted with environment problem
health related issues and safe environment and food The respondents were increasingly
desired to have more healthier and environmental friendly food To acquire better
quality of fruits and vegetables about 90 percent of consumers were willing to pay a
price premium ranging from 5 percent to 100 percent Factors like income of
respondents householdlsquos size gender and other opinion variables such as pesticides
residues in food taste and environmental concern were significantly influencing
consumer willingness to pay a price premium
Slamet et al (2016) conducted a research study to identify factors influencing
consumerslsquo willingness to purchase pesticides free vegetables in Jabodetabek region
(Jakarta) Data was obtained through a householdlsquos survey Three methods binary logit
model descriptive analysis and factor analysis were used for analysis of data The
results showed that respondents with more income minimum householdlsquos size and
price tolerant were more likely to purchase pesticides-free vegetables The study also
indicated other factors determining consumerlsquos willingness to purchase for pesticides-
free vegetables were positive attitude health concern environment concern as well as
positive belief in pesticides-free vegetables
Gumber and Joyti (2017) conduct a research study in national capital region of India to
find out price premium and factors effecting consumerslsquo WTP for pesticides free food
Results of the study showed that consumerlsquo demographic characteristics like education
income of the respondents environmental concern and health related issues were the
important factors influencing consumers to pay higher price for organic food Besides
other variables like taste physical look certification packaging and promotion were
found to have no influence on consumer willingness to pay for pesticides-free food
Results suggested organic food producer to design communication strategies and
suitable pricing strategies in the study area
27
25 Essence of the Literature Reviewed
The above literature reported that several studies have been conducted on
consumerhouseholds willingness to pay for pesticides-free fruits with contingent
valuation method (Govindasamy and Italia 1999 Krystallis and Chryssohoidis 2005
Quagrainie 2006 Kimenju and De Groote 2008) In this type of models a
hypothetical market scenario is developed in which consumer are asked about their
stated WTP a price premium Misra et al (1991) and Boccaletti and Nardella (2000)
used contingent valuation method and analyzed household willingness to pay for
organic products in Italy and USA Gil et al (2000) also used the contingent valuation
model in Spain and reported that respondents in that study area were willing to pay a
price premium for pesticide-free fruits
Regarding the socio-demographic profile of pesticides-free products the above
underline research study showed that mostly female respondents were willing to pay
price premium more frequently than male respondents Age factors also played an
important role with older consumers observed more WTP due to their health concern
On the other hand income played a vital role while buying safer food Literature also
supported that more educated respondents are willing to pay more price premium for
healthier and environmental friendly food products
The preceding review presents valuable information on contingent valuation method
and consumer willingness to pay price premium for organic foods and environment
resources Since most of the work had done on consumer willingness to pay for
pesticide-free fruits in developed countries but not a few studied paid much attention to
conduct research on householdslsquo willingness to pay for pesticides-free fruits in
developing countries like Pakistan
A few facts emerge the literature review One the coverage of consumerslsquo WTP for
organic and pesticide-free food is rather thin in the literature The lack of this
information could inhibit governmental and developmental agencieslsquo decision Second
the consumer WTP is a factor demographics and consumerslsquo perception This study
uses CVM to explore Pakistani consumer WTP for pesticide-free fruit We found socio-
demographic factors such as age education income householdlsquos size householdlsquos
head education and perception significantly influencing householdslsquo WTP Findings of
28
WTP
Environmental
concern
Socio-demoghr
aphic characte
risitcs
consumer knowledge of PFF
Health
concern
this study almost showed 26 percent price premium that suggest a strong indication of
consumerslsquo demand for pesticide-free fruit This is a convincing message for
agriculture policymakers to encourage and educate farmers for production of pesticide-
free fruits Thus this study is timely relevant and provided additional information on
understanding consumerlsquos attitudinal behavior choice and factors effecting willingness
to pay for pesticide free fruits in Khyber Pakhtunkhwa (Pakistan)
Review of literature highlighted different influencing factors that affect the consumers
willingness to pay for pesticides-free food are shown in figure 1 It shows that
perception of consumers regarding human health and environment and socio-economic
and socio-demographic characteristics have an influential affect on consumer
willingness to pay
Figure 1 Factors effecting consumerrsquos WTP for pesticides free fruits
29
III MATERIALS AND METHODS
This chapter consists of two sections The first section describes the study area while
the second section presents the conceptual frame of the study The second section
provides a detailed discussion about the methodology being employed for the research
In the beginning of this section a brief debates provided on Contingent Valuation
Method (CVM) used to analyze householdslsquo willingness to pay (WTP) and later on
elaborate specification of the empirical models used for capturing the factors
influencing householdlsquos willingness to pay for pesticides-free fruit and vegetables is
given followed by a discussion on how the data was collected in the study area
31 Khyber Pakhtunkhwa
Khyber Pakhtunkhwa (KP) occupies a north-west position in Pakistan with a total area
of about 74521 square km Gilgit-Baltistan is situated on its northeast Punjab on the
southeast and Azad Kashmir on the east A long and narrow piece of land belongs to
the Federally Administered Tribal Areas (FATA) borders situated to its south and
Baluchistan directly below it On its west Federally Administered Tribal Areas are
situated and Afghanistan is situated on its northwest According to census report 1998
the total population of KP was 177 million According to the 2011 Census Bureau of
Pakistan house listing operation the population of KP was estimated to be more
than 268 million There are a total of 26 districts in KP Naturally KP has been
endowed with abundant cultural and tourism friendly environment It has the capability
to become a charming area for the tourist in the world Due to its beautiful and
attractive scenery geographical location climate and God gifted natural resources KP
is exceptionally abundant in terms of multitudes of tourist attraction The core of this
charm is clear from the striking natural picturesque consisting of beautiful rivers
attractive and splendid waterfalls spiral lakes mostly in the hilly areas and ever green
valleylsquos in most parts of the province TCKP (Tourism Corporation Khyber
Pakhtunkhwa(2015)Districts of KP is shown in figure31
30
Figure 31 District Peshawar and Mardan of Khyber Pakhtunkhwa
31
32 Sampling Technique
Three stage stratified sampling technique was used for the collection of data
from study area
321 Stage 1 _Selection of district Peshawar and Mardan
In the first stage as KP is comprised of 26 districts Peshawar and Mardan was
purposively selected The purpose behind this selection was huge population in these
two districts
322 Stage 2 _ Selection of Union Councils (UCs)
In the second stage from each selected district one urban and one rural union
council were randomly selected Thus a total of 4 union councils were taken as a
sample location from both districts
323 Stage 3 _Selection of households from each Union Council
In the third and final stage a list of households was obtained from local union
councillsquos health department (BHU) The following Yamanelsquos (1967) formula was
used to decide sample size of households
Where
- r is the sample size for households
- N is the total households in selected UCs and
- e is the minimum probability of error
The value of ―e was selected at e = 003 with the intension to keep the error at lowest
possible level and select a best representative sample from the given population of
10020 households
The Yamanelsquos formula suggests a sample size of 1000 households from two districts
After deciding sample size households was taken from selected union councils (UCs)
using proportional allocation sampling technique The allocation is said to be
32
proportional when the total sample size n is distributed among the different union
councils in proportion to the size of strata
=
____________________ (2)
Where
- = no of sampled respondents in each stratum
- Ni =population size of ith UCs
- N = the total number of households in selected UCs
- n = total number of households
The number of sampled households selected through proportional allocation method is
given in table 31
Table 31 Total population and sampled households from selected UCrsquos
District Union councils Total households Sampled
households
Mardan Urban 3090 309
Rural 1910 191
Peshawar Urban 3000 300
Rural 2020 202
Total 4UClsquos 10020 1000
Source Local Basic Health Unit (BHU) Peshawar and Mardan
33 Allocation of Sample Size for Different Models
A total of 1000 sampled respondents were selected for this research study from urban
and rural areas of the two districts namely Peshawar and Mardan of Khyber
Pakhtunkhwa Pakistan A sample of 600 respondents was reserved for double
bounded dichotomous choice model For the best estimation of parameters double
bounded model requires large sample size compared to open ended and payment card
model (Calia and Strazzera 2000) Out of total respondents a sample of 400
households were allocated for linear regression model and ordered logit model 200
for each model
33
34Contingent Valuation Survey Designing
CVM produces values contingent upon the description of the resource and the method
of payment The accurate measurement of any resource requires a detailed description
of the resource (Loomis et al 2000) The survey designed for this study started with the
description of the conventional food commodities and uses of different varieties of
chemical pesticides on fruit and vegetables before and after harvest After the
description of pesticides its harmful effects on human being as well as on environment
then pesticide free fruits were discussed with the households After describing the
benefits of pesticides free fruit respondents were asked to rank the relative importance
of each benefit The main reason for asking this question was to reveal householdlsquos
preferences their non-monetary value for use and nonuse benefits and to compare
them with their stated WTP response
Results in CVM are sensitive to the valuation question format and payment mechanism
(Carson and Hanemann 2005) The National Oceanic and Atmospheric Administration
(NOAA) Blue Ribbon Panel recommended the use of single bounded dichotomous
choice CV questions with mandatory payment vehicles (Arrow et al 1993) However
recent studies show that the single bounded dichotomous choice method provides
limited information about householdlsquos WTP and produces higher WTP compared to
open-ended question and payment card method (Zhongmin et al 2006) The single
question dichotomous choice method requires a large number of respondents to obtain
an accurate estimate of WTP (Carson and Hanemann 2005) People in the study area
were not familiar with CV Survey The use of an open-ended question format may
generate high zero WTP responses Consequently this study used the entire three
payment format to elicit householdlsquos WTP for pesticides-free products
35 Householdsrsquo Survey
This research mainly based on primary data The primary data was amassed through
interview schedule On the basis of objectives of the study a well-defined questionnaire
was prepared and was pre-tested in the field A small Pre-test was conducted before the
final data collection About 1000 households from Peshawar and Mardan were face to
face interviewed In contingent valuation studies face to face interview is more reliable
(Carson 2000) Socio-demographic characteristics attitudinal and behavioral
34
information of the households were collected Through this survey the data was
gathered both from rural and urban areas of the selected districts District Peshawar and
urban areas were taken equal to one and district Mardan and rural areas were taken
equal to zero Before asking the respondents for their willingness to pay a price
premium they were briefed about the differences among the conventional and
pesticides free fruit The attitudes of the consumers and knowledge about the minimum
use of pesticides on fruit were also gathered to better know how the respondents relate
different aspects of pesticides free fruit These attitudinal behavior questions were
posed using a modified Likert scale response (where a one equals agree and zero equals
disagree) Different values were assigned to each response according to a well-defined
method in the literature (Cranfield and Magnusson 2003)
36 Conceptual Framework
This section is devoted to the conceptual framework of the study Households utility
and willingness to pay willingness to pay and contingent valuation method and the
estimation of mean WTP are discussed The empirical discussion on the factors
influencing householdlsquos willingness to pay a price premium is also discussed
361 Householdrsquos Utility and Willingness to Pay
Willingness to pay could be analyzed as a householdlsquos choice problem Following
Canfield et al 2003 the study assumes that a household who buys and consumes a
conventionally produced food products encounters the same food products but in
pesticide free form on the market The household who decides to purchase pesticide-
free fruits instead of the conventional one does so because it is assumed that hisher
utility is higher for the pesticide-free food (Magnusson et al 2005) If the utility does
not change then a rational household will not be willing to pay as an increase in the
price results in a lower level of utility compared to the base level of utility Also if the
utility increases then the household may be willing to pay more for pesticides-free
food on the basis that the price increase does not lower the utility beyond the base level
(Cranfield et al 2003) The householdlsquos willingness to pay is therefore a function of
the change in utility arising from the consumption of pesticides-free food Thus
35
Where ∆U is the change in utility
Since the choice of one product over another is a discrete one it is convenient to look at
householdlsquos choice problem in a random utility setting Random utility models have
been used extensively in the valuation literature in the analysis of householdlsquos food
safety valuation and assessment of householdlsquos response to new (or different) products
(Eom 1994 Veeman and Adamowicz 2000 Kuperis et al 1999 Quagrainie et al
1998) Following the random utility framework proposed by Cranfield et al (2003) it
is assumed that a household faces a choice between buying either the conventional or
pesticides-free food variety of the same product The utility derived from consuming a
given product by a household is given as
Where
Where is the utility arising from choosing the ith alternative is the deterministic
component of the utility function is a vector of observable alternative specific
factors that influence utility is a vector of parameters and is the stochastic
component The households choose alternative if and only if for all (or
that without loss of generality
The utility of the household is however not observable What is observed is whether or
not the household chooses to pay a premium for the pesticide free product
362 WTP and CVM
On the basis of stated preferences consumer willingness to pay can be measured by
several methods To extensively elicit consumer preferences for food labels on different
attributes economist and market researchers have used contingent valuation (CV)
choice experiment (CE) and experimental auction (EA) or combination of all the three
methods (Fox et al 1994 Fox 1995 Huffman et al 1996 Hossain et al 2003
Loureiro and Umberger2003 2005) To estimate willingness to pay (WTP) economist
must turn to hypothetical due to unavailability of markets for the good or service
Historically Contingent Valuation Method (CVM) has been used for the evaluation of
consumerlsquos preferences for those goods not available in the market
36
Contingent Valuation Method is a survey based method where respondents are
presented with a hypothetical payment scenario for pesticide free products in this study
pesticides-free fruits Methods used in contingent valuation include face to face
interview surveys and mail to elicit consumerlsquos willingness to pay for organic and
pesticide-free food Contingent valuation method based on a survey approach was
presented by SVCiariacy-Wantrup (1947) however contingent valuation method was
first time empirically used by Davis (1963) Due to its proficiency most of the
researchers and policy makers used this technique to elicit consumerlsquos valuation for
those goods which are not available in the market such as research concerns to
environment health and recreation (Jakobsson ampDragun 1996)
The classification of framework to measure WTP based on the data collection methods
are as presented in Figure 32 We employed contingent valuation method (CVM) to
measure householdslsquo willingness to pay for pesticides-free fruits among the different
available alternative methods in the literature CVM was the most widely used
approach (Hanemann 1984)
Figure 32 Classification framework of methods to measure willingness-to-pay
Source (Breidert Hahsler ampReutterer 2006)
37 Elicitation Techniques
According to Portney(1994)to draw out the value of good and service different
elicitation techniques are used to design CV question scenario It is the important part
37
of any CVM study The elicitation used in contingent valuation methods are of various
types The most popular ones are bidding game approach open ended payment card
and dichotomous choice approach
371 Bidding Game Approach
In this approach a bid is randomly assigned to each respondent from a list of
predetermined bids The assigned bid may be a lower bid or higher bid Respondents
are to answer the bid and the process is continuous until the highest positive response is
recorded (Randall et al 1974 as cited in Venkatachalam 2004) Since this approach
provides market like situation and the respondents can research their preferences so the
results obtained through this approach are quite better
372 Open-ended Elicitation Method
In open ended questions format respondents are asked to identify a single amount
without suggesting them any value Respondents are asked to give their opinion on
―How much they willing to pay for a certain attribute Mitchell and Carson (1989)
found certain drawbacks in using this question format They reported that this method
provides maximum no response no answer and outliers In this method respondents do
not know what value heshe has to select
373 Payment Card Approach
Another technique in contingent valuation method is the payment card approach In this
question format respondents are asked to select an amount in willingness to pay from a
checklist given in absolute value or in percentage of prices (Boccaletti ampNardella
2000 Lacaze Rodriguez and Lupin 2009)This approach is used for small sample
size However it has been noted that the respondents could easily be confused if the
survey is not carefully designed (Wang and Whittington 2005)
374 Dichotomous Choice Model
In this format two choices are provided to respondents ―Yes or ―No This format
resembles the market choice behavior It included single bounded double bounded and
multiple bounded questions format
38
A Single Bounded Method
The single bounded format was first used by (Bishop and Heberlein 1979) The
consumers are asked whether they would be willing to pay a single amount for a certain
goods having an extra quality attribute The answer expected might be ―yes or ―no to
the given amount This format is easy to use but it provides limited information for
willingness to pay amount and the bidding game stop after a single information
provided
Most of the research work done on willingness to pay has suggested that respondents in
contingent valuation methods do not have a single value of price but they might have a
range of economic values in their mind (Cameron ampQiggim 1994 Dobourg Jones-lee
and Loomes 1994)
B Double Bounded Method
In double-bounded questions format respondents are presented with follow-up
questions after asking the first question For example if respondentlsquos answered to the
first question is ―yes willingness to pay a $X the next question might be whether
respondents willing to pay $Y (typically $Y gt $X) On the other hand if respondents
say ―No the first question than heshe might ask whether the respondents willing to
pay $Z (typically $Z lt $X) This questionlsquos approach is also called doubled-bounded
referendum approach (Cameron ampQiggim 1994) In comparison with single bounded
model more statistical efficiency can be seen by estimating doubled-bounded
willingness to pay data with the help of interval based econometric model (Heinemann
et al 1991) Figure 33 shows double bounded choice format
This study used all the three question scenarios to elicit WTP for pesticide free fruits
39
WTP
Yes
wtp
1st bid
yes
wtp 2nd
higher bid
yes No
No
wtp 2nd lower bid
yes No
No
Figure 33 Double Bounded Choice formats
38 Empirical Estimation of WTP by Payment Card using Ordered Logit Model
Regarding discrete nature and ordinal ranking of the WTP variables in payment card
method an ordered logistic regression was applied as the most appropriate choice in
studying these issues (Green 2007) The WTP model can be written under latent
variable framework as follows
Where is an unobserved latent variable reflecting the WTP for pesticides-free fruits
for household i expressed in terms of utility to switch from the traditionally grown
fruits consumption to pesticide free fruits is a vector of parameters reflecting the
relationship between WTP captures a set of socioeconomic and
demographicvariables influencing WTP and is the unobserved disturbance term
reflecting stochastic differences between households not controlled for The
40
relationship between the unobserved and the observedoutcome for household
( =0 12hellipj) can be summarized as follows
It is presumed that ɛ is normally distributed across observation By normalizing the
mean and variance of ɛ to zero and one the following probabilities can be calculated
Where F () indicates distribution function and microlsquos are unknown parameters to be
estimated with β
A natural question arises that when a variable influencing outcome changes than how
this variable influences the probabilities of different outcome For example if age is a
factor which influence consumer willingness to pay different choices then how would a
personlsquos probability of being WTP different choices be effected if heshe was a year
older Aldrich and Nelson stated that the estimated coefficients only determine the
direction of the effect but not the magnitude The magnitude of ordered logit cannot be
simply interpreted but signs and statistical significance agree with linear regression
(Wooldridge 2001) To answer the above question and take the idea marginal effects
can be calculated The marginal effects show that how a change in explanatory
variables affects the probability of willingness to pay that consumers are willing to pay
for different WTP classes In this model the coefficients are not equal to the marginal
41
effects of explanatory variables on probabilities Since the marginal effects can be
calculated by the following equation
There are two broad Cumulative density function (CDF) choices Logistic density
function and standard normal density function The model is said to be ordered logit if
the distribution is cumulative standard logistic (F) and the model is said to be ordered
Probit if the distribution is cumulative standard normal (Φ) Results obtained from
both of these models are same only the difference is in the tail The logistic distribution
has heavier tail than the standard normal distribution As Green (2000) reported ―It is
difficult to justify choice of one distribution over other on theoretical grounds in most
applications it seems not much difference The results obtained from both models
may be quite similar because of the similar distribution However an ordered logit
model is applied in this study
Empirically we estimated ordered logit model where WTPj is an ordered dependent
variable with ten WTP price premium categories
Table 32 Payment card format
Price premium classes (PKR)
WTP
= 0
WTP
1-5
WTP
6-10
WTP
11-15
WTP
16-20
WTP
21-25
WTP
26-30
WTP
31-35
WTP
36-40
Above
40
Source Pre- tested field survey (2017)
42
39 Empirical Estimation of WTP using Double Bounded Dichotomous Choice
Model
For Dichotomous choice question Following Chen et al (2002) and Kimenju et al
(2005) a double bounded dichotomous choice model was used in this study to assess
householdslsquo willingness to pay and the influence of explanatory variables on
householdlsquos WTP a price premium for pesticides-free fruits This model was used
because the dependent variable was double dichotomous whether the respondents
would be willing to pay or not so they provide answer with ―yes or ―no Many
researchers used double-bounded dichotomous choice method in their research such as
(Ara 2002 Rodriguez et al 2007 Abdullah and Jeanty 2011 and Claudy et al
2011)
The double-bounded method confronts each respondent with two dichotomous choice
WTP questions (bids) The 2nd
bid value is contingent on the respondentlsquos reply to 1st
bid If the respondent responds in ―yes to the first bid (B) than the second bid (Bu) is
some amount higher than the first bid (Bu
gt B) If the respondent says ―no to the first
bid the second bid (Bd) is then some lower amount (B
d lt B) Thus there are the
following four possible outcomes for the double-bounded WTP question ―yes-yes
―yes-no ―no-yes and ―no-no
According to Hanemann et al (1991) the probability of answering ―yes-yes (Pryy) is
= )
Where Pryy is the probability of answering ―yes-yes WTP is the respondentlsquos
willingness to pay for the product and F is the cumulative distribution function with
parameter vector Similarly the probability for each of the other three outcome
responses is
]
43
Where and are the probabilities for saying ―yes-no ―no-yes and ―no-
no to the double-bounded question respectively Thus the log-likelihood function for
the ith
respondent can be written as
sum
(
)
(
)
Where
are binary valued (0 or 1) indicators and the formulas
for the corresponding response probabilities are given above The model was estimated
through maximum likelihood estimation method and the results were used to find out
the mean and individual WTP (s) for pesticides free fruits
Where ƒ(WTP) is a function X is a set of socio-economic characteristics are
coefficients and is error term The models were estimated using maximum
likelihood estimation method
391 Factors which could Influence WTP
As Kimenju et al (2005) has indicated WTP is influenced by householdlsquos knowledge
and perception in addition to price and socio-economic factors Moreover
householdlsquos WTP may be influenced by individuals tastes and preferences income
and perceptions on the products in addition to household and socio-economic
characteristics (Cranfield and Magnusson 2003)
A number of different explanatory variables were included in the WTP model These
include demographic variables regional variables and perceptional variables The
variables that are included may depend on the manner by which the data is gathered
(ie contingent valuation surveys experimental methods etc) Factors which
influence householdlsquos willingness to pay for pesticides-free fruits are formally specified
as
44
392 Bids Design
In this study hypothetical prices (bids) for double-bounded dichotomous choice model
were designed based on the prices available for conventional fruit in the market On
average (Rs100kg) To minimize starting bids bias bidding system was used in table
31 Respondents were asked different bid
Table33 Bid system for Pesticides free fruits
First bid High bid Low bid
10 20 5
20 30 10
30 40 20
40 Above 30
Source Field Survey (2017)
310Empirical Estimation of WTP using Linear Regression Model
For open ended questions data a linear WTP model was used to estimate WTP and
identified its determinants
sum
Where
= is the WTP of the jth household for Pesticides-free fruits
= Set of socioeconomic characteristics of the jth household
Factors effecting consumerslsquo willingness to pay for pesticides free fruits can be written
as
Willingness to pay is actually represents the demand of the household The difference
in both is only the consumer surplus If we suppose zero consumerslsquo surplus than the
two identities are the same Therefore willingness to pay in the above model showed
percentage of expenditure on pesticides free fruit of the total food expenditure The
explanatory variables included were age gender education householdlsquos size income
45
location health concern environment concern and awareness Since the dependant
variable in the model is continuous so the appropriate method of estimation was
ordinary least square (OLS)
311Description of Variables
Table 34 presents a list of explanatory variables used in estimation of willingness to
pay a price premium for pesticides-free fruits
Table34 Description of explanatory variables
Respondents willingness to pay
WTP ( Price Premium)
0= Not willing to pay
1= Willingness to pay 1-5
2= Willingness to pay 6-10
3= willingness to pay 11-15
4= willingness to pay 16-20
5= willingness to pay 21-25
6= willingness to pay 26-30
7= willingness to pay 31-35
8= willingness to pay 36-40
9= willingness to pay above
Age of the householdlsquos head
Age Age of the householdlsquos head measured in years
Gender of respondents (Dummy variable)
Gender 0= Female
1= Male
Householdlsquos head education
Education Education of the householdlsquos head in years
Member in each household
Householdslsquo Size In number including all family members
Households location 0 = Rural households
1= Urban households
Awareness Household knowledge regarding pesticides uses on fruits
where 1 shows aware respondents and 0 shows unaware
respondents
Income Income of the households in Pakistani rupees
Consumer attitude towards impact of pesticides on health
Health concern 1 if respondents concern to health 0 if not concerned
Consumer attitude towards impact of pesticides on environment
Environment concern 1 if respondents concern to environment 0 if not
concerned
46
1V RESULTS AND DISCUSSION
This chapter illustrates the major finding of this research endeavor These findings are
computed in the light of major objectives and hypotheses constructed for this research
The collected primary data was punched into the computer and was estimated
encompassing double bounded dichotomous choice model ordered logit model and
linear regression model in the STATA econometric software This chapter is further
bifurcated into three sections In the first section a descriptive statistics is computed to
elaborate the respondentlsquos traits of the study area that includes socio-economic and
demographic aspects as well Followed by the analysis of major attributes such as
attitudinal behavior perception about pesticides free fruit and householdlsquos consumption
behavior that has attain the specific objectives of this study The empirical results on
willingness to pay are underscored in section two Moreover the three different
questionnaires ie dichotomous choice open ended and payment card are adopted and
their results are discussed and compared with each other in section three
41 Descriptive Analysis
Descriptive analysis is a statistical tool that is used to summarize the collected data in
tabulated form The range of data mean value median standard error and variance
coefficients are highlighted via statistical analysis This helps the researcher and readers
to get understanding about the pattern of data This section consists of the descriptive
part of the analysis Socio-demographic characteristics such as age gender education
and other attributes of the respondents are shown in the tabulated form Moreover
socio-economic portfolio that includes income consumption and certain perception
along their attitudinal trend regarding organic and conventional fruits are given and
discussed
411 Demographic and Socio-economic Characteristics
This section demonstrates the demographic and socio-economic characteristics of the
respondents The information was gathered from 1000 household of the study area
47
Age of the householdrsquos head
Householdslsquo age is an essential demographic characteristic and an important factor that
can influence householdslsquo willingness to pay An average age of the household in
district Peshawar and Mardan is computed and given in Table 41 The computation
depicts that an average age of the respondents in Peshawar is reported around 40 years
while in Mardan an average age is observed as 54 years Result reveals a significant
difference in the mean age of rural and urban location of Peshawar with a probability of
(0001) Whereas no significant difference was found in householdlsquos age in urban and
rural region of district Mardan
Table 41 Age of the householdrsquos head (Years)
District Age of the Respondents
Mean Rural Urban T-test
Peshawar 3997 35382 42333 7217
(0000)
Mardan 5402 53188 55870 1104
(0136)
All 46995 47310 46659
Source Authorrsquos calculation based on Survey Data 2016-17
Educational Level of the Householdrsquos Head
An individual entails modern education about developments in technology science and
an array of other managerial skills that drives consumerlsquos behavior Education can also
play a pivotal role in consumerlsquos awareness while choosing improved quality of food
Therefore education can be considered as an imperative factor influencing consumerlsquos
decision to pay higher price for pesticides free fruit Several research studies carried out
across the globe have corroborated that an educated households with higher
qualification are more conscious while making purchasing decision and prefer to
choose pesticides free fruit
Keeping in view an education as a substantial factor persuading consumer behavior the
householdlsquos head education level was analyzed and is presented in Table 42The
descriptive statistics divulged that the mean educational level was observed as 978 and
1138 years of schooling of the household head in Mardan and Peshawar respectively
Estimates of t-test further depicts a significant difference in educational level in rural
48
and urban region of both districts with a p-value of (0001) and (0000) for Mardan and
Peshawar respectively These findings suggest a higher level of education in urban
households compared to rural households These results are in line with Shah et al
(2016)
Table 42 Educational Level of the Householdrsquos Head (Years)
Districts Educational Level
Mean Rural Urban T-test
Mardan 978 8782 12012 3780
(0001)
Peshawar 1138 7735 13257 8016
(0000)
All 1058 8436 12855
Source Authorrsquos calculation based on Survey Data 2016-17
Households Size in the Study Area
Householdslsquo size is an important demographic characteristic which shape households
purchasing behavior Large householdslsquo size increases the consumption without taking
quality in consideration The probability of choosing an improved version of fruit
quality decreases with an increase a member in a household Small size households are
more concerned about good quality of fruit
An estimation of household size data illustrates that an average household size in
district Peshawar and district Mardan was reported as 06 and 09 members respectively
The results shown in Table 43 have suggested no significant difference in householdslsquo
size in urban and rural areas of both districts The average householdlsquos size was
computed as 715 members These results are consistent with Shah et al (2016) who
depicted similar findings for household size in KP
Table 43 Householdsrsquo size of the Respondents (Member in Number)
District
Mean Rural Urban T-test
Mardan 863 8666 8548 0965
(0400)
Peshawar 567 6029 5484 -2122
(0018)
All 715 7796 6463
Source Authorrsquos calculation based on Survey Data 2016-17
49
Income of the Households
The household income level is one of the driving aspects that manipulate the
consumption and saving behavior of an individual Those societies where individuals
earn high income are usually deemed as food secured societies across the globe
however low income group of the poor societies are generally reported as food
insecure It is worth-mentioning that surge in an income can subsequently leads to
choose high quality food (that includes cereals fruits vegetables pulses and their
byproducts) by individuals Likewise householdlsquos income has considered as an
important determinant of willingness to pay for quality attributes such as pesticides
free
An income status of the households in the study area is outlined in Table 44 The mean
income of the Household was calculated as Rs62130 and 42430 in district Mardan and
Peshawar respectively There was a significant difference in the mean income of
respondents from urban and rural areas of both the districts The T-value of Mardan
region was signified as 6018 and had a probability of (0000) while in Peshawar region
was 950 with P-value of (0000)
Table 44 Householdsrsquo Income in Pakistanrsquos Rupee (PKR)
District
Mean Rural Urban T-test
Mardan 63130 5489855 8145161 6018
(0000)
Peshawar 42430 2923529 4922727 9504
(0000)
All 52780 4642718 5952577
Source Authorrsquos calculation based on Survey Data 2016-17
Householdrsquos Expenditure on Food
Food consumption expenditure is the monetary expense incurred by household to
purchase food items Such food expenditure is the key component of current
expenditure to buy consumable goods The data regarding householdlsquos expenditure on
food is estimated and is shown in Table 45 The mean expenditure incurred on food by
the household in Mardan and Peshawar was determined as Rs 49280 and 34860
respectively A significant difference in rural and urban householdlsquos food expenditure
has been reported The computed t-value observed as 425 and 743 with a p-value
0000 which implies that householdlsquos expenditure in urban region was higher as
compared to rural households
50
Table 45 Households expenditure on food (PKR)
District
Mean Rural Urban T-test
Mardan 49280 4511594 5854839 4256
(0000)
Peshawar 34860 2544118 3971212 7435
(0000)
Total 42070 3862136 4573196
Source Authorrsquos calculation based on Survey Data 2016-17
Note Values in parenthesis is P-Value
Householdrsquos Monthly Expenditure Share on Fresh Fruit
Expenditure share is an amount of income that is incurred by an individual on certain
goods out of total spending Households in the study area have allocated their income
share to make an expense for fresh fruits which is shown in Table 46 It has been
observed that in districts Mardan an average spending for fresh fruit was computed as
4172 (PKR) per month by the household Whereas expenditure share for fresh fruit by
Peshawarlsquos household was 3800 (PKR) which was less as compared to Mardan The
given t-values of the estimates confirm a significant difference in expenditure share
incurred for fresh fruits by rural and urban region households of both the districts This
significant difference implies that householdlsquos expenditure share for fresh fruit in urban
area is higher as compared to rural households
Table 46 Householdrsquos monthly expenditure share on fresh fruits (PKR)
Respondents
Mean Rural Urban T-test
Mardan 4172 3798551 5003226 3055
(0000)
Peshawar 3800 2411765 4515152 5103
(0000)
All 3986 3340777 4671134
Source Authorrsquos calculation based on Survey Data 2016-17
51
412 Householdrsquos Awareness and Perceptions about Pesticides Application on
Fruit
This research endeavor was mainly designed to assess the consumer willingness to pay
for pesticides free fruit Therefore it was pertain to glean data about their awareness
about pesticide use on locally produced fruit in the study area These fruit include
Apple Peach and Mango Due to irrational use of pesticides environmental hazards are
also reported by previous research studies therefore there respondents were asked about
their perception about environmental hazards Major findings about the aforementioned
aspects are underscored in Table 47 which reveals that 61 percent of respondents have
a perception that there is an irrational and intensive use of pesticides on fruit by the
local fruitlsquos farmers Around 88 percent of the respondents perceived environmental
and health concerns over pesticides residues in food Similarly 91 percent of the
respondents believed that farmer should engage in environmental friendly agricultural
production practices which have a minimum adverse impact on health and the
environment
However the overall results indicate that sampled households were not entirely
cognizant about an intensive use of pesticide on local fruits however they were
correctly perceived over the impacts of pesticides on human health and environment
Table 47 Householdrsquos Awareness and Perceptions of Pesticides use on Fruit
Grown
Statements Agreed Disagreed
Local farmers are intensively using pesticides on
Apple Peach and Mango fruits
61 39
I feel the use of pesticides in agriculture has
negative effect on the environment
881
119
I am concerned about pesticide residue in our
food supply
876 124
I believe farmer should engage in environmental
friendly agricultural production practices with
minimum impact on human health
901
99
Source Authorrsquos calculation based on Survey Data 2016-17
52
42 Empirical Results of this Research Endeavour
The empirical analysis of the gleaned data was made to achieve the major objectives
and to address the research questions of this research endeavor Major estimates on
―willingness to pay for pesticide free fruits have been made and conferred in this
section Different elicitation techniques were employed to assess householdlsquos
willingness to pay price premium These estimation techniques encompassed double
bounded dichotomous choice model ordered logit model and linear regression model to
appraise dichotomous choice payment card and open ended question
421 Distribution of responses on householdsrsquo willingness to pay
(WTP)
Householdlsquos preferences to pay higher prices for pesticides free fruit were investigated
and highlighted in Figure 41 which demonstrates the distribution of response about
WTP price premium for pesticide free fruit in the survey area The households were
asked whether and how much they were willing to pay higher prices for pesticide free
fruit than conventional produced fruit The primary data estimates confirm that about
935 percent of respondents are willing to pay a higher price premium for pesticide free
fruit in the sampled districts These results are similar with the previous research study
undertaken by Hayati et al(2017) in Iran by using contingent valuation method
Furthermore an ordered logistic regression model was employed which depicts that out
of 394 respondents who were interviewed 97 percent of respondents were willing to
pay price premium for pesticides free fruits and vegetables These results are supported
by Nandi et al(2017) who conducted a study in India by using contingent valuation
method and applying binomial logistic regression model Data was obtained from 250
respondents and reported that more than 90 percent of the respondents were willing to
pay higher price for better quality fruits and vegetables Decomposing the responses 35
percent of the households are willing to pay 16 to 20 percent higher prices for
pesticides free fruits than the conventional 24 percent willing to pay 6 to 10 percent
higher price and 65 are not willing to pay higher price A plausible reason for higher
WTP for significant portion of the population is due to awareness As most of the
respondents in the study area were aware they may have some knowledge about
adverse effects of chemical pesticides Therefore they were willing to pay higher prices
for pesticide free fruits if available
53
NotWTP
1_5 6_10 11_15 16_20 21_25 26_30 31_35 36_40 Above40
650 4
24
9
35
6 550 150
550 3
Figure 41 Distribution of willingness to pay responses (Rskg)
422 Householdrsquos willingness to pay using ordered logit model
Estimated parameters and coefficients of ordered logit model are presented in table 48
Model is specified on the bases of R2 estimated from restricted and unrestricted
likelihood function The likelihood ratio test is used to test the null hypothesis that the
overall effect of coefficients is zero The p-value is 0000 shows that the model is
statistically significant at 95 level of significance The estimated model with a scaled
R2
about 022 which is in consist with the generally R2 value mostly observed in cross
sectional data In cross sectional data like the one used for this study the value of
Pseudo R2 is typically low The conventionally computed R
2 is of limited value in those
models having qualitative nature In most cases this value is low and use of coefficient
of determination as a summary statistics should be avoided in those cases where the
response variables are qualitative (Gujrati 1995)This pseudo R2 cannot be interpreted
separately or across the dataset but could be used when evaluating multiple models
which predict the same results on the same set of data It has only meaningful when
compared to some other pseudo R2 in the same data on the same type and predicting
the same results In this case pseudo R2 indicates which model better predict the results
(Bruin J 2006)This value pointed out overall ability of the model for the correct
prediction of willingness to pay of the consumer based on explanatory variables The
null hypothesis that the joint influence of explanatory variables was zero on the bases
of chi-squire value null hypothesis was rejected
Predicted probabilities and marginal effects are calculated separately because of the
non-linear behavior of logit model Most of the coefficients are statistically significant
54
The variables like householdlsquos age education level of the respondents awareness
income and health concern variables and household size are significant at five percent
The negative sign showed that as the size of numbers in a family increased the log
odds for willingness to pay decreased The same was reported in a relevant study by
Govindasamy and Italia 1999 carried out a research study in New Jearsy to provide
opinion on organic produce Objective of the study was to evaluate demographic
characteristics caused consumers to pay higher prices to obtained organic food
products Findings of the study showed female respondents consumer with higher
annual income and younger individual were more likely to pay higher premiums for
organic produce Our finding shows variables gender was not significant because most
of the respondents in the study area were male
Positive sign on income showed that consumer with higher income were more likely be
willing to pay higher prices for pesticides free fruit It has been also noted that with
increased in income purchasing power of the respondents increased that changed the
purchasing pattern of the respondents This was also confirmed by Roitner-
Schobesberger et al(2008) They conduct a study on consumerslsquo perception regarding
organic food in Bangkok and found that more than a third of the 848 respondents
reported having purchased organic fruits or vegetables and the main reason for buying
organic food was the expectation of the consumers that the food are healthier and
environmentally friendly The respondents who purchased organic vegetables were
those having more aged higher income and more education
Findings of our study also showed that respondents with friendly attitude regarding
environment would be willing to pay higher price for such fruit These results were in
line with Haghjou et al (2013) carried out a research study on factors effecting
consumerlsquos potential willingness to pay for organic food in Tabriz Iran By adapting an
ordered logistic regression model results showed that factors like income of the
respondent family dimension environmental concern and wholesome diet besides
consumerslsquo awareness were significantly increases consumerslsquo willingness to pay for
organic food Results revealed that consumers with higher care about their health were
more likely to be willing a higher price for such pesticides free fruit
55
Table 48 Factors influencing respondent householdrsquos WTP (Ordered logit
model)
Variables Estimated
Coefficient
Std Error Z-ratio P-value
Age 00698807 00147356 474 0000
Gender -02469171 08432503 -029 0770
Education 00821316 00223365 368 0000
Household size -00975395 00502583 -194 0052
Location
Urban
02783974 02961745 094 0347
Income 00000277 000000502 551 0000
Health concern 2600153 05346547 486 0000
Environment
concern
03993532 0574947 069 0487
Awareness 09595126 02836742 338 0001
Source Authorrsquos calculation based on Survey Data 2016-17
Log likelihood = -29863 Pseudo R-squared = 020 LR chi2 (9) = 15849
Number of observation = 200 Probability gt chi2 = 0000
Note indicate statistical significance at 5
56
423 Predicted probabilities and Marginal effects of ordered logit
model
Predicted probabilities and marginal effects of explanatory variables are underscored in
Table 49 These predicted probabilities indicate a strong likelihood that the average
respondent is willing to pay more prices for pesticides free fruit Producers usually
expect high price for their production so if they sought high premiums than marketing
efforts would be diverted to such fraction of consumer where they would probably
willing to pay high price than the conventional price Alone these predicted
probabilities are not too much informative what is more informative is the impact of a
change in predictors on the predicted probabilities (ie marginal effects)
Due to the non-linear behavior of ordered logit model to measure the impact of a
change in particular independent variable on householdslsquo willingness to pay marginal
effects of explanatory variables are calculated Marginal effects show the change in
predicted probabilities for different class of willingness to pay regarding an average
household concerning the particular variable For qualitative choice model estimated
coefficients affect marginal probabilities These marginal probabilities (probability
derivatives) were calculated from the estimated model They measure the change in the
probabilities of each willingness to pay outcome with respect to change in each
explanatory variable The sum of marginal probability is zero in each row because an
increase of the probability in one category must be set off a decrease in the other
category or categories
For continuous variables the interpretation is simple and straight forward Keeping all
other variables fixed a unit change in explanatory variable will results an increase or
decrease in the predicted probability equal to the degree of marginal effect of the stated
variable However in case of binary variable marginal effects shows change in
predicted probabilities based on whether the respondents falls in that category or not
Our results suggest some meaningful insight into the role of socio-economic and
demographic variables on householdlsquos WTP for pesticides-free fruit
Age has a positive and significant influence on householdlsquos WTP for pesticides free
fruit The results show that with an increase in age WTP also increases This finding is
consistent with other researchers who reported that WTP of organic and healthy food
57
increases with age beyond 30-40 years (Hayati et al 2017 Boccaletti and Nardella
2000 and Zellner and Denger 1989)With increase in age people are more concerned
about their health as they may perceive that they are prompt to low immunity and
higher risk for diseases With realization of aging they are more likely to pay higher
price premium for safer foods Our result suggests that the marginal effects of age is
negative for first three WTP classes (ie Not willing to pay WTP 1-5 percent WTP 6-
10 percent and WTP11-15 percent) while positive for the rest of the four classes in
upper tailsmdashindicating that higher age is associated with higher likelihood of paying
premium on upper tails The highest marginal effect of age 0007 is found for category
16-20 percent higher premium This indicates that an increase in age by one year is
associated with 07 percentage point increase in likelihood of paying 16-20 percent
higher premium for pesticides free fruits over conventional These results are in
contrast with Cranfield and Magnusson (2003) conducted a research study on
consumerlsquos willingness to pay for pesticides free food products in Canada by using
contingent valuation method and reported that younger consumers have the strongest
marginal effects (those consumers had an age less than 35 years younger) followed by
those consumers had an age less than 50 years Results showed younger consumers pay
more for healthy foods as compared to older in case of Canadian consumers However
our results are in consistent with several other studies (Hayati et al 2017 Zellner and
Denger 1989) finding a positive influence of age on consumerlsquos WTP for organic and
healthy foods In another study Boccaletti and Nardella (2000) conducted a study on
consumer willingness to pay for organic produce in Northern Italy By adapting an
ordered logit model the impacts of relevant explanatory variables were reported
Results suggests a positive impact of consumerlsquos age on WTP a price premium
The marginal effects for gender indicate female respondents are less likely to be willing
to pay more prices or likely to pay less amount for pesticides free fruit Female
respondents like to pay a price premium but less as compared to male respondents (no
premium or 1 to 5 percent premium) One can observe that most of the respondents in
the study area were male which support our findings These results are in contrast with
Cranfield and Magnusson (2003) The probability of marginal willingness to pay
decreased by (-0001 percent) for higher amount
58
Another significant variable affecting WTP in our study is the years of education of the
householdlsquos head Our result suggests a positive relationship of education on WTP for
pesticides free fruit Households with more formal education have better understanding
of the adverse effect of consuming fruit contaminated with pesticides So they may
better understand the benefits of pesticides free fruit Marginal effects of education are
positive as WTP progresses for higher classes (categories) beyond 16-20 percent (table
49) Among these the highest effect of education 0020 is shown for WTP category
36-40 percent which implies that an additional year of schooling of the household head
increases likelihood of paying 36-40 percent higher price premium for pesticides free
fruit over conventional by around 2 percentage These results are in line with the
findings of Haghjou et al (2013) who found a positive effect of education on WTP for
organic food products in Iran However these results are in contrast with Boccaletti and
Nardella (2000) who reported an inverse relation of consumer education with WTP a
price premium
We also found a significant effect of the household size and household income on WTP
for pesticides free fruit The effect of household size is negative Marginal effect in
table 49 shows that the highest negative effect of 012 is shown for 16-20 WTP
categories which indicate that an additional household member decreases the likelihood
of paying 16-20 percent higher premium for pesticides free fruits by 12 percent One of
the convincing reasons for this negative effect of household size can be the householdlsquos
budget constraint Budget constraint limits the extent to which consumer pay higher
prices for food products (Cranfield and Magnusson 2003) Our findings are consistent
with previous studies Ariyawardana et al (2009) conduct a study on consumerslsquo
willingness to pay for organic ethnic specialty produce in USA reported that marginal
effect of price premium decreases with an increase in householdslsquo member
In regards to income households with higher income are more willing to pay higher
premiums for pesticides free fruit Income always played a significant role in changing
consumerlsquos behavior to change hisher decision from not willing to pay or less willing
to pay to higher willing to pay for organic products Households in highest income
class showed a strong propensity to pay more prices Marginal effects of income for the
first four classes emerged negative Our results suggest a strong propensity to pay
higher prices as household income increases Our marginal effects of income show a
59
monotonic increase in the income effect as WTP premium level progresses beyond 16-
20 percent It implies that at low level of income households are unwilling to pay more
but with rise in income households are ready to pay higher premium for pesticides free
fruit a significantly higher magnitude is shown for the highest category (010 income
coefficient for more than 40 percent premium) Overall it clearly suggests that
household with higher level of income would pay more prices for pesticides free fruit
These results are in line with Hayati et al (2017) and Cranfield and Magnusson (2003)
who found that an increase in income increases purchasing power of consumer which
results a change in purchasing pattern Boccaletti and Nardella (2000) conducted a
study on consumerslsquo willingness to pay for pesticides free fresh fruits and vegetables in
Italy and found that willingness to pay is significantly and positively related to income
We also included variables indicating health and environmental concern of the
respondent Results indicated that the more the households were concerned about the
impact of pesticides in fruits on health and environment the more the probability of
willingness to pay The marginal effects for health concern is negative for first three
willingness to pay classes (ie not willingness to pay willingness to pay 1_5 wiliness
to pay 6_10 percent) and for environment concern it is negative for first four classes
while for the remaining WTP classes it is positive Strikingly the highest magnitude of
marginal effects up to 041 among all variables is found from the health concern
variable On one hand a significantly positive effect suggests that the health concerned
householdslsquo are more likely to pay higher premium for WTP than those not concerned
A magnitude of higher scale on marginal effect on the other hand strongly supports
the distinct difference in WTP between health concerned and non-concerned
individuals Overall this also highlights the importance of this variable on modeling
WTP for pesticides free fruits For example a 041 marginal effect of health concern
variable on 16-20 premium category of WTP suggest that health concerned individual
are 41 percent more likely to pay 16 to 20 percent higher premium for pesticides free
fruit as compared to non-concerned households The effect of health concern on WTP
is consistent and distinctly higher in magnitude from previous similar studies in other
countries For example Hayati et al (2017) found that health concerned individual were
26 percent more likely to pay 16 to 20 percent in Iran This indicates that health
concern factor is an important motivation to premium price for pesticides free fruits in
Pakistan
60
Finally we found a significant effect of awareness variable Recall that our awareness
variable is represented by dummies Our result suggests that the households in the study
area were aware of the fact that farmers are intensively using pesticides on fruits so
they were willing to pay more price premium for pesticides free fruits Marginal effects
show a negative signs for modest price premiums on WTP categories 1-5 and 6-10
while positive signs for all higher categories 16-20 21-25 26-30 31-35 36-40 and
above 40 This may indicate that households are more aware of the adverse impact of
pesticides on health and environment Probably awareness comes from education as our
results shows that the average years of education is higher in the study area
424 Matrix of Correlation Coefficient
Income is generally related with age and education of the households in the study area
(table 410) This result may indicate that more aged households have higher income
and advanced education Households in high income and more educated class shows
high propensity of willingness to pay for pesticides free fruit As the results indicated
that more aged people do care more about their health and high class income
respondents have more discretionary income to spend on fruit Overall the results show
that explanatory variables are not highly correlated hence no problem of
Multicollinearity was diagnosed in the data
61
Table 49 Predicted probabilities and marginal effects from the estimated ordered logit model
Not WTP
()
WTP 1-5
()
WTP 6-
10 ()
WTP 11-
15 ()
WTP 16-
20 ()
WTP 21-
25 ()
WTP 26-
30 ()
WTP 31-
35 ()
WTP 36-
40 ()
WTP
Above 40
()
Predicted Probabilities
00122 00179 02616 01183 04434 00620 00510 00110 00201 00026
Marginal effects
Age -0000 -0001 -0011 -0002 0007 0003 0003 0006 0001 0001
Gender 00039 00054 00623 0015 -0033 -0019 -0019 -0004 -0008 -0001
Education -0000 -0001 -0013 -0002 0010 0003 0003 0010 0020 0002
Household size 0002 0002 0012 0004 -0012 -0004 -0004 -0001 -0020 -0002
Urban rural -0003 -0004 -0049 -0009 0031 0013 0013 0002 0005 0001
Income -0003 -0004 -0004 -0010 0003 0001 0001 0002 0005 0010
Health concern -0103 -0113 -0372 0030 0410 0100 0100 0014 0030 0003
Environment
concern
-0005 -0007 -0072 -0010 0052 0017 0015 0003 0006 0008
Awareness -0014 -0020 -0120 -0030 0122 0045 0041 0010 0020 0002
Source Authorrsquos calculation based on Survey Data 2016-17
62
Table 410 Matrix of correlation coefficient between explanatory variables
Source Authorrsquos calculation based on Survey Data 2016-17
Variables Age Gender Education Location Households
size
Income Health
Concern
Environment
Concern
Age 10000
Gender -00193 10000
Education 00872 -00147 10000
Location 00725 00689 01047 10000
Households size -00294 00277 -00161 -01704 10000
Income 04123 -00690 02133 - 00405 01583 10000
Health Concern 01604 00224 02229 00660 - 00422 02102 10000
Environment Concern -00786 00944 -00245 00570 -00059 -00350 00118 10000
63
43 Householdrsquos willingness to pay using double bounded dichotomous
choice model
The double bounded dichotomous choice model was used to find out how much
households are willing to pay a price premium for pesticides free fruit The model has
been proved useful for the determination of the contribution of independent variables in
householdslsquo willingness to pay for pesticides free fruit Mainly those factors that
influenced the householdslsquo willingness to pay are age of the householdlsquos head
householdlsquos size gender awareness income head education and their perceptions
The Likelihood Ratio test statistic the Wald Chi2 value is 27228 with a p-value of lt
0001 confirmed that the model with all the explanatory variables has good prediction
power of householdslsquo choice and WTP for pesticides free fruit (table 411) The
estimated coefficients for most of the explanatory variables are statistically significant
and have signs consistent with prior expectations Headslsquo characteristics such as age
education level and awareness of pesticides use on fruits perception of health and
environmental concerns of pesticides are the most import determinants of the
householdlsquos WTP for pesticides free fruit Householdlsquos income and number of
individuals have significant effect on their price premium for fruits free of pesticide
residue
The coefficient for Age is positive and its value is 0294 which reveals that a one year
increase in headlsquos age would increase householdlsquos willingness to pay a price premium
of 0294 rupees for pesticides free fruit at constant level of other variables This
generally implies that household headed by an old individual has strong preferences
and high WTP for pesticides free fruits as compared to others These results are
supported by Vidogbena et al 2015 reported a positive significant effect of consumerslsquo
age WTP in Benin for minimized pesticides residues Results suggest older households
are more concerned about health benefits associated with fresh pesticides free food
This positive correlation of householdslsquo age and Willingness to pay a high price
premium for pesticides freeorganic food is also in agreement with findings of (Anifori
2013 Haghiri et al 2009 Misra et al 1991) However these findings are in contrast
with (Govindasamy and Italia 1999) carried out a research study on consumerslsquo
willingness to pay for organically produced fresh produce in New Jersey to find
64
opinion on organic produce and found that all the three age category younger people
like to pay a high price premium
Headlsquos education level has a positive significant association with householdlsquos
willingness to pay a price premium for pesticides free fruit A likely explanation is that
education increases consumerslsquo awareness regarding the adverse effect of pesticides on
human health and natural environment Consumerslsquo with a high level of education can
better understand the benefits attached to the consumption of food produced without the
use of pesticides These results are also in line with Vidogbena et al (2015) studied
consumerslsquo willingness to pay for cabbage with minimized pesticides residues in
Southern Benin and reported that consumers with high level of education were
positively affected WTP In some other related studies Darby et al (2008)Liu et al
(2009) and Misra et al(1991) also confirmed positive association of consumerlsquos
education and willingness to pay price premium for pesticides free organic fruits
Headlsquos awareness of pesticides use on local fruits production and their health and
environmental concerns over pesticides use are also the most important determinants of
householdlsquos willingness to pay for pesticides free fruits As discussed in the previous
section householdlsquos awareness and perception of pesticides use on fruits and their
education level are connected and have significant influence for creating market for
pesticides free organic fruits
Householdlsquos demand for best quality fruit is expected to rise with increase in their
income level The estimated coefficient for householdlsquos income is positive which
implies direct association with their price premium for pesticides free fruits and is
consistent with general theory and our prior expectations In future with economic
growth increased in per capita income is expected and this increase in per-capita
income will increase the demand for pesticides free fruits
We found a negative significant effect of the householdlsquos size on WTP for pesticides-
free fruit As the number of members increases household become less likely to pay a
price premium for pesticides free fruit More mouths to feed reduces budget for best
quality fruits as noted previously by (Oyawole et al 2016 Ghorbani and Harnraz
2009) In another study Govindasamy et al (2001) findings suggests that each
member in a lager household has less discretionary income to spend compared to a
65
smaller household and may consider paying a premium for integrated pest management
a luxury
Table 411 Factors influencing consumersrsquo WTP (double-bounded dichotomous
choice model)
Variables Coefficient Std Error z-statistic Pgt|z|
Constant -8614601 3640408 -237 0018
Age 0294755 00638171 462 0000
Gender -0133885 - 4628428 003 0977
Education 04521878 01574002 287 0004
Income 00001208 00000284 426 0000
Householdlsquos
Size
-06690743 2499154 -268 0007
Health concern 6165207 1882292 328 0001
Environment
concern
6739389
2053786 328 0001
Awareness 8194937 1693789 484 0000
Urban Rural 02295739 1339268 017 0864
Source Authorrsquos calculation based on Survey Data 2016-17
Log likelihood = -61347 Number of observation = 600
Wald chi2 (9) = 27226 Probabilitygt chi2 = 0000
Note indicate statistical significance at 5
431 Householdsrsquo estimated Mean WTP
The estimated model was used to derive each householdlsquos willingness to pay price
premium for pesticides free fruits Table 412 and figure 42 presents the summary
statistics for the estimated price premium The Table shows that householdlsquos estimated
mean willingness to pay price premium is around 26 rupees with a standard deviation
of 106 and the estimated minimum and maximum price premium are 0 and 445
rupees respectively These statistics reveals that householdslsquo on average are willing to
pay 26 percent more price premium for pesticide-free fruits than the existed market
producing pesticide free fruits
66
2
125 115
38
325
35
-5
0
5
10
15
20
25
30
35
40
45
0 1-10 11-20 21-30 31-40 gt40
Fre
qu
en
cy o
f th
e h
ou
seh
old
s
WTP bins
Table 412 Households mean estimated WTP
Mean Std Dev Min Max
WTP 25798 10601 0 44511
Source Authorrsquos calculation based on Survey Data 2016-17
Figure 42 householdsrsquo estimate WTP bids
432 Households Response to First Bid (Amount)
Table 413 and figure 43 shows households response to first bid of the WTP question
The Table clearly show the sensitivity of a householdlsquos yes - no response to the bid
amount As the bid amount goes up the probability of acceptance is expected to
decrease Results show that higher bids reduced the likelihood of acceptance For
example for a bid amount of Rs10 as price premium for pesticides free fruits 8833
percent of the households are willing to pay while it dropped to 222 percent when the
bid amount is increased to Rs40 which is consistent with the standard theory
67
0
01
02
03
04
05
06
10 20 30 40
Table 413 Householdsrsquo Response to First Bid (Amount)
Households
with YesNo
response
First bid amount (PKR)
10 20 30 40
Households
with No
response
21 (1167) 24 (2581) 141 (5732) 63 (7778)
Households
with Yes
response
159 (8833) 69 (7419) 105 (4268) 18 (2222)
Total
Households
180 93 246 81
Source Authorrsquos calculation based on Survey Data 2016-17
Figure 43 Probability of WTP given bids
44 Post Estimation Diagnostic Test
The model was tested against Multicollinearity by using (variance inflating factor
criteria) and for Heteroskedasticty (Breusch-Pagan test) and the results are presented in
table 414 Rule of thumb for VIF is that if the value is ge 10 than the problem of
Multicollinearity is severe According to our findings the mean value of variance
inflating factor is 114 less than the critical value suggests that there is no
Multicollinearity problem in the model Breusch-Pagan test is used for detecting
Heteroskedasticty problem The (χ2) value is 066 and p- value is 041 This p-value
suggests that the probability of rejecting the presence of Heteroskedasticty is 41percent
68
Table 414 Diagnostic test results
Problems Diagnostic Test Mean value P-value
Multicollinearity VIF 112 _
Heteroskedasticty Breusch-Pagan 066 041
Source Authorrsquos calculation based on Survey Data 2016-17
441 Householdsrsquo willingness to pay by using linear regression model Results of householdlsquos willingness to pay for pesticides-free fruits using linear
regression model is shown in table 415 Variables such as age education awareness
income householdslsquo size and consumer perceptions regarding health and friendly
environment are significantly influencing consumerslsquo WTP for pesticide-free fruits
Age has a positive and significant influence on willingness to pay ie the result shows
that with an increase in age willingness to pay also increases This result is slightly
different from few findings of other researchers who reported a high WTP in young and
middle age consumerslsquo (30-40) years Govindasamy and Italia (1999) But there are
some logical reasons behind our findings As young people are not so much health
conscious but with getting older and older the disease of aging caught their minds and
they keep more care about their health Another reason with an increase in age
education and experience increases as a result an increase in WTP for pesticides free
fruits These results are supported by Muhammad et al (2015) found a positive and
significant association between age and consumer willingness to pay Their results was
supported by the fact that young individual health consciousness is a rare phenomena
but as the people get older and older many diseases related to health induce them to
pay more attention towards safe and healthy food such as pesticides free organic food
Education and monthly income are the other factors positively and significantly
influencing householdslsquo WTP Households with more formal education have more
concern and better understanding of the risk associated with consuming food
contaminated with pesticides So they better understand that fruits produced without the
use of chemicals pesticides could be beneficial for health Results show that a one year
increase in formal education householdslsquo WTP increases by rupees 025 for pesticides
free fruit as compared to those having no education In regards to income respondents
with higher income are willing to pay more price premium A one rupee increase in
income will increase householdlsquos WTP by 0001 Muhammad et al (2015) reported a
69
significant effect of income and education on householdslsquo stated willingness to pay for
organic food in Arab Emirates consumer
Householdslsquo size is usually reported as negative influence on WTP Findings of our
study show a negative significant influence on householdlsquos willingness to pay This is
likely due to larger households requiring additional funds to satisfy households demand
for pesticides free fruit which may induce households to buy conventional fruit Other
reason may be as with limited resources feeding more mouths is increasingly difficult
These results are in contrast with Muhammad et al (2015) conducted a study on
factors affecting consumerlsquos willingness to pay for certified organic food products in
United Arab Emirates and reported a positive relationship of willingness to pay and
householdlsquos size Usually householdslsquo size is large in Arab Emirates and hence more
earning resources compared to small households which support their findings Our
finding shows a decrease of 085 rupees by an addition of one member in a household
Other important variables are householdslsquo concern regarding health and environment
Results show that respondentslsquo are highly concerned about residual effect of pesticides
on human health and environment Our results support these findings by positive WTP
Table 415 shows householdslsquo concerned regarding health and environment Results
suggest that households with more concerned for health and environment are willing to
pay Rs582 and Rs020 respectively higher prices for pesticides free fruit compared to
those not concerned
Finally we found variable awareness positively and significantly influencing
householdslsquo WTP for pesticides free fruit in survey area The result shows that more
aware households are willing to pay more price premium compared to unaware
households Awareness usually increases with education and age as can be evidence
from our findings a positive and significant influence of education and income on
householdlsquos WTP When households education level and age increases their awareness
regarding pesticidelsquos negative impact on health increase and hence an increase in WTP
for pesticides free fruit
70
Table 415 Estimated parameters using liner regression model
Variables Coefficient Std Error t-Statistics P-value
Constant -6174109 - 4353038 142 0158
Age 02348861 00467651 502 0000
Gender -2828394 3096026 - 091 0362
Education 0243413 00772618 315 0002
Income 00001237 00000157 790 0000
Householdlsquos
size
-03936806 01755667 -224 0026
Health concern 5567941 1465789 380 0000
Environment
concern
02999708 2023651 015 0882
Awareness 3567843 1001883 356 0000
Urban rural 0587075 1047051 056 0576
Source Authorrsquos calculation based on Survey Data 2016-17
Note indicate statistical significance at 5
No of observation = 200 F (9) = 2859 Probgt F = 0000 R-squired adjusted = 055
45 Comparison of elicitation questions formats Mean WTP by using double dichotomous payment card and open ended elicitation
format are reported in table 416The willingness to pay evaluated using average values
for the explanatory variables are Rs2576 for double bounded 1632 is for payment
card and 1437 for linear regression Results indicated that householdslsquo evaluated
through double dichotomous choice payment card scenario and open ended format are
willing to pay 26 16 and 14 more price for pesticides free fruits in the study area
These results are in line with Ngo et al (2013) conducted a study on consumerslsquo
willingness to pay for organic vegetables in Vietnam and found 70 more price
premium Rodriguez et al (2008) carried out a research study in Argentina on
consumerslsquo willingness to pay for organic food products and reported that consumers
were willing to pay a higher premium of 87 for leafy vegetables Mean willingness to
pay for double dichotomous model was calculated by maximum likelihood estimation
mentioned in the model while for payment card and open ended format logit regression
of response on bid amount was used All mean WTP values are significantly different
71
from zero and are different across the three questions format The probability (Plt
0000) between double bounded open ended and payment card method shows a
significant difference in estimated mean values of all the three questions elicitation
formats A t-value of 1483 250 and 1222 means that the mean values calculated
through different methods are significantly different from each other
Table 416 Mean willingness to pay comparison from CV question format
CV questions format Open ended
Mean WTP (1437)
Payment card
Means WTP (1632)
Payment card
Mean WTP (1632)
MD (194)
t-value (250)
P-value (0006)
--------
Double bounded
Mean WTP (2576)
MD (1143)
t-value (1483)
P-value (0000)
MD (949)
t-value (1222)
P-value (0000) Source Authorrsquos calculation based on Survey Data 2016-17
1MD = Mean difference 1US$=105 PKR in 2017
451 Response rate for zero WTP
Table 417 shows householdlsquos response rate to different elicitation formats The
response rate of payment card format is more than both DC and OE questions formats
Results show that 87 of the respondents respond to the willingness to pay question for
payment card method For dichotomous choice the response rate is 58 and for open
ended respondentslsquo response rate is 46 Taken together these results suggest that the
payment card format is easy for valuation task faced by respondents and lead to
efficiency in data collection
Table 417 Comparison of response rates by CV question format
Percent Response
to WTP question
Double dichotomous
choice
Payment card
method
Open ended
method
Yes 5850 87 4650
No 4150 13 5350
Source Authorrsquos calculation based on Survey Data 2016-17
72
46 Discussion about Major Findings This study was design to explore householdlsquos preferences and willingness to pay for
pesticides free fruit in Khyber Pakhtunkhwa Pakistan For this study a detailed
questionnaire was designed to obtained information from the households on their socio-
demographic characteristics perception regarding pesticides used on conventional fruit
and their willingness to pay a price premium for pesticides free fruit The overall
objective of the study was to know householdslsquo willingness to pay a price premium for
pesticides free fruit such as Apple Peach and Mango In response to willingness to pay
question 93 percent of the households were willing to pay a price premium while a
negligible portion were unwilling to pay any premium for pesticides free fruit Out of
total WTP 35 percent of the households were willing to pay16-20 percent higher
amount for pesticides free fruit
With regards to gender status of the households findings of the research showed most
of the respondents in the study area were male and a minor portion were female
Variable gender was not significant in this study because of the area structure where
male households are the primary purchaser of householdlsquos food items In this research
we found that majority of the respondents were educated most of them were highly
educated while a negligible portion of the respondents had no formal education The
mean education in Mardan and Peshawar was almost 10 and 12 years of schooling
respectively A significant difference was observed in urban and rural householdslsquo
education level in both the districts
Householdslsquo expenditure on food and fresh fruits were also calculated The mean
expenditure on food in district Mardan was PKR- 49280 and in district Peshawar was
PKR- 34860 Based on t-test a significant difference was observed on the consumption
of fresh fruit in urban and rural areas of the two districts Total expenditure on fresh
fruits in Mardan and Peshawar was 3340 and 4671 respectively Based on findings of
the study it could be concluded that respondents in urban region spent more income on
fresh fruit and consume more fresh fruits compared to rural region
Householdslsquo awareness of pesticides use on locally produced fruit such as Apple
Peach and Mango and their health and environmental concerns over pesticides use
were estimated The results revealed that 61 percent of the respondents were agreed that
local farmers use intensive pesticides on fruit Around 88 percent of the respondents
perceived environmental and health concerns over pesticides residues in food
Similarly 91 percent of the respondents believed that farmer should engage in
73
environmental friendly agricultural production practices which have a minimum
adverse impact on health and the environment These results induced households to pay
higher prices for such pesticides free fruit if available in the market The overall results
indicated that sampled households were not fully aware of the intensive pesticides use
on local fruit however they were correctly perceived over the impacts of pesticides on
human health and environment
The empirical findings of the study revealed socio-demographic characteristics had a
significant influence on householdslsquo willingness to pay a price premium for pesticides
free fruit Results showed more aged householdslsquo head were willing to pay more price
premium This is supported by the fact that older people are more health concern
compared to young individual Householdslsquo head education level also played a positive
and significant role with high education consumers seems slightly more willing to pay
These results are in line with Haghjou et al (2013) Householdlsquos size was negatively
influencing householdlsquos WTP and accord with the expectation Due to income
constraint with increase a member in a household will decrease WTP for pesticides-
free fruit because feeding more mouths with limited resources would be difficult These
results are in line with Oyawole et al 2016 Many Conflicting results are also reported
regarding household size Some studies indicated the presence of more children
positively influencing WTP for organic food while some results reported an inverse
relationship between WTP and householdslsquo size Findings of our research revealed a
negative significant influence on householdslsquo willingness to pay for pesticides free
fruits These results were also according to our expectation With an increase in family
size the households do not care much about quality but mostly quantity
Income of the householdslsquo head was taken as continuous variable in this research study
In most cases especially in willingness to pay research studies a positive association of
income and households WTP was observed Any increase in householdslsquo income leads
to rise in their willingness to pay for safer healthier and pesticides free fruit Despite
high prices for pesticides free food products householdslsquo with high income showed
likelihood to pay a price premium Our findings also showed a positive effect of
income on householdslsquo WTP for pesticides free fruit An increase in income changes
householdslsquo purchasing behavior and choose better quality of food So with an increase
in income households were willing to pay more price premium Same results were
reported by Cranfield and Magnusson 2003
74
Variable awareness played a significant role while consuming better quality of food
Findings of our study also showed a positive and significant influence of variable
awareness on householdslsquo WTP for pesticides free fruit More than half of the
respondents were aware of the intensive use of pesticides on fruit Majority of the
households knew about the risk attached with fruits produced with agrochemicals The
more aware households were willing to pay more price premium for pesticides free
fruit compared to unaware households These results are also supported by Oyawole et
al2016
Moreover results of this study are also consistent with previous studies that health and
environmental concern are the important factors in householdlsquos preferences for
pesticides free food and reduced input food products We also found a positive
significant influence of health concern and environment concern on WTP These results
suggest that respondents in the study area are more conscious about health and
environment They are willing to pay more prices for such fruit free from pesticides
residues Based on above results most of socio-demographic characteristics have
positive influence on householdlsquos willingness to pay for pesticides-free fruit in the
study area On the basis of these findings we reject the null hypothesis and accept the
alternative hypothesis by concluding that socio-demographic characteristics have
influencing behavior on householdslsquo WTP
Willingness to pay across urban and rural regions shows no significant difference The
P-value of 0864 showed that WTP of households in urban regions were not statistically
different from those in rural regions Although we had expected a positive and
significant difference among urban and rural households willingness to pay for
pesticides free fruit and the difference in householdslsquo income education and
expenditure across urban and rural households support our expectation One of the
reasons for no significant difference is the selection of rural union councils which are
nearby urban union councils If the study is spread to more rural union councils than an
expected difference in urban and rural households may be observed Based on these
results the null hypothesis of no significant difference between urban and rural
households is accepted and can be concluded that no significant difference was found
in willingness to pay amount across rural and urban households
75
A Payment Card Approach
In this approach respondents are asked to select their WTP from a payment card given
in absolute value or in percentage of prices (Boccaletti amp Nardella 2000 Lacaze
Rodriguez and Lupin 2009) Payment card requires smaller sample sizes for the
efficient estimation of parameters than the double bounded model A recent research
found that payment card is to be free of range and centering biases when the
willingness to pay values on the payment card is sufficiently large and the respondents
are not constrained (Rowe et al 1996) However choosing an amount from payment
card may be more cognitively burdensome on the respondents and difficult than simply
yes or no response
B Open Ended Approach
In open ended question respondents are asked to state their WTP for a certain attribute
without suggesting them any value This technique does not require an interviewer and
does not result in any starting bias This approach is easy for the respondents to answer
Due to non provision of any value respondents find it difficult to answer and results
large non- response rate
C Double Bounded Approach
The dichotomous choice contingent valuation method is an important method in
contingent valuation surveys Due to simplicity this method is popular and widely used
for data collection Two questions formats are used in this method single bound and
double bounded questions are asked from the respondents For single bound question
format the respondentlsquos only reply in yes or no while in double bounded approach
second question contingent on the first response is asked
Hanemann et al (1991) recommended double bounded dichotomous choice model for
eliciting householdslsquo WTP In the double bounded formate each respondent is
presented with two bids The level of the second bid is contingent upon the response to
the first bid If an individual responds in ― yes to the first bid Bi the second bid (Bu) is
some amount greater than the first bid (Bi lt Bu) is askedIf the respondent responds
―no to the first bid the second bid (Bl) is some amount smaller than the first bid (B
llt
Bi) is asked
76
Henemann et al (1991) and Leon (1995) confirmed that double bounded model is more
effcient than single bound model For the correction of poor choice of the initial vector
double bounded model was suggested Researchers also found that double bounded
method produce more precise point estimates of parameters Double bounded model
requires more sample size due to the statistical inefficiency imposed by the data
compared to payment card and open ended model If sample size is large enough
double bounded model estimates accurate results
Due to its potttential inconsistency with response to the first binary question and larger
scope for biased results double bounded model is contravartial Bateman et al (2001)
concluded that the respondents feel fury and guilt when the second question is asked
making the response of the double bounded internally inconsistence One of the main
disadvantage of double bounded model is that response of the respondents may be
influenced by the first offered amount which is generally called starting point bias
(Flachaire and Hollard 2005)
There are few notable patterens while studying consumerlsquos willingness to pay by using
different elicitation formats Estimated willingess to pay based on double bounded
format and payment card format tend to be large compared to open ended questins
format Furthermore estimated willingness to pay from double bounded model would
be larger than payment card format
Not surprisingly as shown in table 416 the estimated mean willingness to pay for
pesticides free fruit based on the models were significantly different across the three
elicitation format Estimated WTP for double bounded format payment card format
and open ended was 25 percent 16 percent and 14 percent respectively The estimated
mean WTP for double dichotomous model is higher than twice the estimated mean
willingness to pay based on payment card and open ended data
When comparing response rate of households to the willingness to pay questions
format was different across the three elicitation methods In double bounded method
the question was whether the households were willing to pay a specific amount in
payment card method households were asked to select the amount from a specified
values provided on a card whereas in open ended question households were asked to
say how much extra they were willing to pay for pesticides free fruits The difference in
questions leads us to expect that more individual would respond positively to
willingness to pay question in payment card method because in this elicitation format
consumers had to select from payment level The response rate of payment card format
77
is more than both DC and OE questions formats Results show that 87 of the
respondents respond to the willingness to pay question for payment card method For
dichotomous choice the response rate is 58 and for open ended respondentslsquo response
rate is 46 Taken together these results suggest that the payment card format is easy
for valuation task faced by respondents and lead to efficiency in data collection
It has been remained an unresolved issue that which CV questions format is best to use
While the NOAA panel (Federal Register 1993) recommended using double bounded
dichotomous choice model due to its easy use and resemblances in day to day decision
making In this study we found that the response rate in double dichotomous choice
model is lower than payment card format and higher mean willingness to pay than both
open ended and payment card format In contrast payment card format has desirable
response properties
One elicitation format is not clearly better than the others on priority ground The
appropriateness of any elicitation format depends upon the circumstances of the study
For example payment card elicitation format better suits if the sample size is small If
the sample size is large enough double bounded elicitation format is preferred
78
V SUMMARY CONCLUSION AND RECOMMENDATION
This chapter presents findings of the research study as well as policy recommendations
This chapter also outlined limitation in this research and suggestion for further research
in future
51 Summary
Conventional agriculture has gained the power of providing food to majority of the
world population but at the cost of damaging the environment and human health While
pesticides free farming on the other side is environmental and human health friendly
farming that avoids the use of such hazardous chemicals which are harmful for human
plants and animal planet Pesticides free farming system is increasingly becoming
popular in producers as well as in consumer The term pesticides free denote production
of fruit without the use of pesticides and play a vital rule in future agriculture
commodities production It has been observed that fruit produced without the use of
chemicals pesticides are generally higher in prices than the conventional fruit
production in most part of the world However pesticides free farming and pesticides
free food is a relatively new phenomenon and very few people especially in developing
countries are aware about the beneficial impacts of such food on health and
environment Willingness to pay for pesticides free fruit is different from fruits
produced through the use of chemicals pesticides because pesticides free fruits are
relatively expansive
The main theme of this study was to investigate householdslsquo awareness and willingness
to pay for pesticides free fruit and to determine socio-economic and socio-demographic
characteristics in relation to their impact on willingness to pay a price premium This
study was carried out in two districts of Khyber Pakhtunkhwa (Pakistan) namely
Peshawar and Mardan The household level data employed in this study were obtained
from 1000 households through face to face interview by employing pretested
questionnaires Householdslsquo perception and attitude about pesticides free fruit were
also analyzed Three questionnaire elicitation formats ie dichotomous choice payment
card and open ended were used in this study For the estimation of dichotomous choice
data double bounded dichotomous choice model was used An ordered logit model was
used for the estimation of payment card type data and for the estimation of open ended
79
questionnaires linear regression model was used to estimate householdslsquo willingness to
pay price premium for pesticides free fruits
52 Conclusions
Adoption of technological advancement in agriculture has attracted considerable
attention in many developing countries because majority of population in less
developed countries derives its likelihood from agricultural production New
technologies provide farmers an opportunity to increase production and enhance
economic growth (Carvalho 2006) Although the green revolution spread across
developing countries in Asia and resultant in increased food production by adopting
technological inputs like fertilizer and pesticides However the high usage of these
chemicals to bring this spectacular growth in agriculture production is not without its
problems In most countries it has been observed that using commercial agricultural
practices causes many problems like environmental degradation and human health
effects (Wilson 2000) Coordinated efforts are needed to increase food production
with a view to enhance food safety and quality Although chemicals free agriculture is
gaining more and more support for safer food but still not providing enough food to
support need of the population in developing countries
Demand and markets for pesticides free fruit has gained a significant and valuable
interest of research scientist in all over the world Several research studies have been
identified price premium that consumers are willing to pay for pesticides free fruit and
also showed some socio-demographic factors influencing their decision to pay more
price premiums Different approaches are adopted in these studies depending on their
objectives These research studies mainly focused on attitudes and perception towards
these foods and not their actual purchase According to our knowledge studies on
householdlsquos willingness to pay and the most relevant factors influencing their decision
to pay more price premium are limited in developing countries such as Pakistan
The general objective of this survey was to study the socio-demographic and socio-
economic characteristics of the householdslsquo and to investigate factors influencing their
willingness to pay for pesticides free fruit A variety of factors including respondentlsquos
age gender householdlsquos size respondentlsquos income householdlsquos head education
awareness and certain attitudinal questions like health concern and environment
concern appear to influence householdlsquos willingness to pay a price premium Findings
80
of the study suggest health concern and environment concern has significant influence
on householdslsquo willingness to pay Hence it can be concluded that households in the
study area are more concern about their health and surrounding environment Results of
the study also indicated no significant difference in willingness to pay across rural and
urban regions of the study area
Study concluded that the most relevant explanatory variables positively influencing
householdslsquo willingness to pay for pesticides free fruit are age of the householdlsquo head
income of the household headlsquos education householdslsquo awareness health concern and
environmental concern while householdlsquos size is negatively significant which usually
reported that householdslsquo with more members do not care much about quality but more
quantity because feeding more people with limited resources are difficult Majority of
the households are willing to pay price premium for pesticides free fruit especially
those with high level of income household leads to high degree of willingness to pay
Education level also became an important factor in willingness to pay higher price for
pesticides free fruit More aged people have always been concern about their health As
the people get aged more and more the diseases of aging caught their minds so they
like to pay more for safer food While when it become to pay more price variable
gender shows insignificant affect due to the limited availability of female respondents
in the sample data
Results of the households awareness regarding pesticides used on conventional fruit
and its impact on health and natural environment are positive Most of the households
are highly concern about health and environment Results suggest that more than half of
the households are aware of the adverse impact of pesticides on health and
environment Survey suggested that more than half of the households are strongly
agreed that farmers should produce such an agricultural food product which has
minimum adverse impact on human health and natural environment Results of the
study are consistent with other findings conducted on consumerslsquo willingness to pay for
organic food and pesticides free food and reported that health and environmental
concern were the most important factors
Health and environmental concern is an important factor constituted a significant
influence which inclined households towards willingness to pay for pesticides free fruit
Krisoff (1998) reported that consumers perceived pesticides free food as healthier safer
and environmental friendly as compare to food produced by conventional method
81
From this study it is observed that households perceived pesticides free food as
healthier they are willing to pay more price premium
Results obtained from this study concluded that 93 percent of the households are
willing to pay more prices for pesticides free fruit Out of this proportion 35 percent of
households are willing to pay 16 to 20 percent more price above the regular price while
24 percent are willing to pay 6 to 10 percent higher price for pesticides free fruit
Households are willing to pay above than 20 percent comprised of 215 percent of the
sample data Results show that out of total willingness to pay 4 percent of the
households are willing to pay 1 to 5 percent price premium and 9 percent are willing to
pay 11 to 15 percent more price premium Results also show that only a minor portion
65 percent of the sampled respondents is unwilling to pay any more
Householdslsquo willingness to pay was also assessed The study revealed that on average
the respondents are willing to pay 26 percent higher price for pesticides free fruit than
the regular price which concluded that households in the study area are responsive
towards safer food and they like to pay higher premium for such fruit
53 Recommendations
This study is one of the first analytical attempts to measure householdslsquo willingness to
pay for pesticides free fruit in Pakistan Since not much research work is done on
pesticides free fruit in Pakistan so this study would contribute a little for future
researchers Findings of the survey suggest some recommendations for consumers and
producers Researchers may consider this study as basis for further research
An important task is to provide more information to consumers regarding
pesticides free fruit and the perceived benefits by consuming these fruit This
research study also provides information to consumers that how pesticides free
fruit is differ from fruit produced conventionally The sampled studied shows
that there is a potential for market growth of pesticides free fruit To identify
these potential consumers knowledge about their socio-demographic and socio-
economic characteristics is important
With potential demand and high price premium pesticides free fruit production
could be one of the lucrative strategies for producers to earn higher net margin
from their production so like other new technologies management practices
and production system pesticides free fruit production also needs government
82
assistance such as advertisement consumers awareness campaigns financial
aids as well as green subsides and loans to the producers to develop well
established market and efficient supply chain in Pakistan
By adopting new agricultural practices and comply with standards of World
Trade Organization (WTO) this will not only abridge the supply demand gap
for pesticide free fruit sat domestic level but also will boost the economy of the
country due to increase in fruit and vegetables exports
Contribution in the field of pesticides free fruit production from academics
research workers extension graduates scientist and other professionals are
necessary to brief producers as well as consumers about the negative impact of
pesticides due to incorrectly use of these hazardous chemicals on human and
animals health as well as effect on natural environment
Based on the findings from this research government non-government
organization and other stakeholders should formulate policies and would
promote and encourage the production of pesticides free fruit in Pakistan
Demonstration centers should be established within the agriculturist community
for the awareness of farmers regarding the production of pesticides free food
As the results identified householdlsquos willingness to pay is effected by
explanatory variables so more independent variables should be included in the
model to further explain willingness to pay for pesticides free fruit
In addition the area of sampling could be more spread and not be limited to only
two districts of Khyber Pakhtunkhwa If data are collected from different
provinces and districts all over Pakistan the results obtained might be a better
representation of the whole population
As this research study conducted only at few fruit such as Apple Peach and
Mango future research should focus on more fruit as well as on vegetables
54 Limitation and Suggestion for Future Envisage
A couple of limitations were encountered during this research study
This research study has investigated willingness to pay for fruit only due to
time and budget constraint In future a large scale research study should be
carried out both on fruit and vegetable
83
Second since only two districts of Khyber Pakhtunkhwa were examined in
the future such studies should be replicated to other districts and provinces of
Pakistan to determine householdslsquo willingness to pay for pesticides free fruit
Third some variables employed in this study were not statistically significant
presumably due to small sample size To overcome this problem in future
study large sample size should be taken into consideration in order to enhance
the degree of freedom
56 Suggestions
The future of pesticides free agriculture production is very bright To lead a healthy life
human being needs pure food and pollution free environment It has been proved that
pesticides free agriculture is the only solution to provide safe and healthy food to the
world population Chemicals free agricultural system is a natural phenomena and
human being can feel its importance By adopting pesticides free farming soil fertility
can also be maintained Farmers can provide healthy and safer environment by
strengthening the sustainable and pesticides free agriculture Now a daylsquos demand for
pesticides free food is increasing very fast and in the future it would be necessary to get
rid of food produced by using chemical fertilizer and pesticides
To inform consumers long term investment in promotion and education campaigns
would help to develop individual concern regarding the risk associated with pesticides
on food products This concern will translate individual willingness to pay towards a
positive price premium
84
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Conference of the Agricultural Economics Society Royal Dublin Society in
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Anwar TI Ahmad and S Tahir 2011 Determination of pesticide residues in fruits of
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Akgungor S B Miran and C Abay2010Consumer willingness to pay for organic
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Ashari N R T M Miranda and D Wawan 2010 Consumer attitude and intention to
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Abhilash P C and NaditaS 2009 Pesticide use and application an Indian scenario J
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Aryal K P PChaudhary S Pandit and G Sharma2009 Consumerslsquo willingness to
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Ariyawardana A R Govindasamy and V Puduri2009Consumerslsquo willingness to pay
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85
Proceedings of the International Conference on Applied Economics (ICOAE)
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Arrow K RSolow PR Portney EELeamer R Radner and
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Aldridge J H and F Nelson1984Linear probability logit and probit
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Bhavsar H k Baryeh and F Tegegne 2016Willingness to pay more for 0rganic
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Bektas Z BMiran O KUysal and CGunden 2011 Consumer awareness for food
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Bruin J 2006 Command to compute new test UCLAAcademic technology
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Breidert C M Hahsler and T Reutterer 2006 A review of methods for
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Bateman I J Carson R T Day B Hanemann M Hanley N Hett T ampSugden
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Champ A P and R C Bishop 2006 Is willingness to pay for a public good sensitive
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Carson R T and Hanemann W M2005 Contingent valuation Handbook of
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Cranfield JA L and E Magnusson 2003 Canadian consumerslsquo willingness to pay
for pesticide-free food products An ordered Probit analysis International Food
amp Agribusiness Management Review 6 13ndash30
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Calia P and Strazzera E 2000 Bias and efficiency of single versus double bound
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Darby K M T Batte S Ernest and B Roe 2008Decomposing local a conjoint
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Flachaire E ampHollard G 2006 Controlling starting-point bias in double-bounded
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Food and AgricltureOrganization 2006Fertilizer use by Crop Fertilizer and Plant
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Fox J A1995 Determinants of consumer acceptability of bovine
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Gumber G and J Rana 2017 Factors Influencing Willingness to Pay Price Premium
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GhorbaniM and S Hamraz 2009A survey on consumerlsquos potential willingness to pay
for organic products in Iran Trends in Agricultural Economics2(1)10-16
Griffith R and L Nesheim 2008 Consumer willingness to pay for organic products
CEPR Discussion Paper No DP6905 Available at
SSRN httpsssrncomabstract=1240215
GraciaA and TDMagistris 2007 Pesticide free good product purchase behavior
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89
Gil J M A Gracia M Sanchez 2000 Market segmentation and willingness to pay
for organic products in SpainThe International Food and Agribusiness
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Govindasamy R and J Italia 1999Predicting willingness to pay a premium for
organically grown fresh produce Journal of Food Distribution
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HayatiB M Haghjou and E Peshbahar 2017Effecting factors on consumerslsquo
willingness to pay a premium for pesticide-free fruit and vegetables in Iran
MOJFoodProcessingampTechnology4(5)00105Availablehttpmedcraveonline
comMOJFPTMOJFPT-04-php
HUICL C W MAY and W K LI 2013 Research on householdlsquoslsquo willingness to
pay for pesticide free productsUniversity Tunku Abdul RahmanFaculty of
Accountancy and Management Department of Economics
Hai M N M Moritaka and S Fukuda 2013 Willingness to pay for organic
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Haghjou M B Hayati E Pishbahar RMohammadrezaei GDashti2013 Factors
affecting consumerslsquo potential willingness to pay for organic food products in
Iran Case study of Tabriz Journal of Agricultural Science and Technology
15(2) 191-202
Haghiri M J E Hobbs and M LMcnamara 2009 Assessing consumer preferences
for organically grown fresh fruits and vegetables in Eastern New Brunswick
International Food and Agribusiness Management Review Volume 12( 4)81
HeoSW and H Kim 2004 Green marketing strategies and willingness to pay for
environment-friendly agricultural products in the metropolitan area Korean
Journal of Organic Agriculture
90
HossainF B Onyango B Schilling W Hallman and AAdelaja2003 Product
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foods International Journal of Consumer Studies 27(5) 353-365
Hanemann M J Loomis and B Kanninen 1991Statistical efficiency of double-
bounded dichotomous choice contingent valuationAmerican Agricultural
Economics 73(4)1255-1263
HanemannWM 1984Welfare evaluations in contingent valuation experiments with
discrete responses Am J Agric Econ 66(3) 332ndash341
Jakobsson K M and A K Dragun 1996 Contingent valuation and endangered
species methodological issues and applications Edward Elgar Publishing
Khan J M M S Zia and M Qasim 2010 Use of pesticides and their rule in
environmental pollution International Journal of Environmental and Ecological
Engineering4 12-25
KalogerasN S Valchovska G Baourakis and P Kalaitzis2009Dutch householdlsquos
willingness to pay for pesticide free olive oilJournal of International Food amp
Agribusiness Marketing 21(4) 286-311
Kimenju S C and HD Groote 2008 Householdlsquos willingness to pay for genetically
modified food in Kenya Agricultural economics 38(1) 35-46
Krystallis A and G Chryssoidis 2005 Consumers willingness to pay for organic
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91
Lusk JL and Hudson D 2004 Willingness-to-pay estimates and their relevance to
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Liu Y Y Zeng and X Yu 2009Consumer willingness to pay for food safety in
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Loureiro M L and W J Umberger 2005 Assessing consumer preferences for
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Loureiro M L and W JUmberger 2003 Estimating consumer willingness to pay for
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Loomis J P Kent L Strange K Fausch and A Covich 2000 Measuring the total
economic value of restoring ecosystem services in an impaired river basin
results from a contingent valuation survey Ecological Economics 33(1) 103ndash
117
MuhammadS E Fathelrahman and RUT Ullah 2015 Factors affecting
householdlsquoslsquo willingness to pay for certified pesticide free food products in
United Arab Emirates Journal of Food Distribution Research 46(1)37-45
MagnussonE and J A L Cranfield 2005 Householdlsquos demand for pesticide free food
products in Canada A Probit Analysis Canadian Journal of Agricultural
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MagnussonK MA Arvola UKKHursti L Aringberg PO Sjoumldeacuten 2003 Choice
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environmentallyfriendly behavior Appetite40 (2)109ndash117
92
Millock K H and L G Hansen 2002 Willingness to pay for pesticide-freefoods A
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Nandi R W Bokelmann N VGowdruand G Dias2017 Factors influencing
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NouhoheflinT O Coulibaly A J Cherry R A Hassan and PYAdegbola2004
Consumerslsquo perception and willingness to pay for pesticide free vegetable in
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OwusuV and A M Owusu 2010Measuring market potential for fresh pesticide free
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RodriacuteguezE V Lacaze and B Lupiacuten 2008Contingent valuation of householdslsquo
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Roitner-Schobesberger B I Darnhofer SSomsook and C R Vogl2008Consumer
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Salmet A S A k Nakayasu and H Bai 2016The determinants of organic vegetables
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SangkumchaliangP and W C Huang 2012 Consumerslsquo perceptions and attitudes of
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Chemical Industries KalashahKaku Pakistan Environmental Earth Science
62(6)1311ndash1321
Smith A T C L Hung and B H Lin 2009 Does Price or Income Affect Organic
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Willingness to Pay for Cabbage with minimized pesticide residues in Southern
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Tanzania (SAT)
95
Veeman M and W Adamowicz 2000Consumerlsquos perceptions of environmental risks
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Wang Q and J Sun 2003 Consumer preference and demand for organic food
Evidence from a Vermont survey Paper prepared for American Agricultural
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Zia M S M J Khan M QasimandARehman 2009Pesticide residue in the food
chain and human body inside Pakistan J Chem Soc Pak 31(2) 284ndash291
Zhongmin X U J Loomis Z Zhiqiang and K Hamamura 2006Evaluating the
performance of different willingness to pay question formats for valuing
environmental restoration in rural ChinaEnvironment and Development
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Zellner JA and RL Degner1989Consumer willingness to pay for food safety Paper
presented at the Southern Agricultural Economics Meeting Nashville TN
96
Appendix- 1 Questionnaire
Q1Socio-economic characteristics
1 Location
o Rural
o Urban
2 Name ____________________
3 Age ____________________(years)
4 Gender
o Male
o Female
5 Educational status ______________ Years
6 Household Size_________________ No
7 Monthly income _______________________________Rs
8 Monthly consumption expenditure _________________Rs
9 How much you spend on Fresh Fruits Rs __________month
10 How much you consume the following fruits
Fruits Quantity
Apple
Mango
Peaches
11 Local farmers are intensively using pesticides on Apple Peach and Mango fruits
o Aware
o Not aware
97
12 Attitudinal question responses
Householdrsquos Awareness Perceptions of Pesticides use
Questions Agreed Disagreed
Local farmers are intensively using pesticides on
Apple Peach and Mango fruits
I feel the use of pesticides in agriculture has negative
effect on the environment
I am concerned about pesticide residue in our food
supply
I believe farmer should engage in environmental
friendly agricultural production practices with
minimum impact on human health
The effect of pesticides residues on human health
The use of pesticides can badly affect the agro-ecological system as well as human
health Human health related problems may vary with the composition of chemicals
The most common problems are skin flue and headache while severe health hazards
include paralysis cancer etc Studies show that globally around 30 lakh people are
poisoned annually from consumption of pesticides contaminated food and 2 lakh of
them die from different heath problems caused by pesticides residues Most of the
pesticides used on agricultural crops are banned by the WHO
13 Householdrsquos willingness to pay for pesticide free fruit
Wording for Dichotomous choice question
Suppose your favorite fruit such as apple mango and peach regularly cost on average
Rs 100kg Assuming no difference in taste and nutritional content would you pay Rs
X more to consume pesticide free version of the same fruits
Yes No
Wording for open ended question
Suppose your favorite fruit such as apple mango and peach regularly cost on average
Rs 100kg Assuming no difference in taste and nutritional content how much would
you pay for pesticides-free version of the same fruits
Rs _________
98
Wording for payment card question
Suppose your favorite fruit such as apple mango and peaches regularly costs on
average Rs 100kg you purchase Assuming no difference in taste and nutritional
content would you pay slightly more for a pesticides free version of the same fruits
Yes No
If yes how much would you pay to consume pesticide free version of the same fruit
Select from the given payment card
1 WTP= 0
2 WTP= 1-5
3 WTP= 6-10
4 WTP= 11-15
5 WTP= 16-20
6 WTP= 21-25
7 WTP= 26-30
8 WTP= 31-35
9 WTP= 36-40
10 WTP= Above than 40
If no what are the reasons for not paying price premium for pesticide free
commodities (PFC) Please select the most relevant one
o I canlsquot afford to pay price premium on PFC
o The pesticide have no harmful effect on health
o We do not use fresh fruits
o Other reasons ___________________________
99
PLAGIRIASM UNDERTAKING
It is certified that the research work presented in the Ph D dissertation of Mr Jahangir
Khan C No 45 University Registration No2006-Agr-U-13234 Session 2014-2017
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar under the titled ―HOUSEHOLD
PREFRENCES AND WILLINGNESS TO PAY FOR PESTICIDES FREE FRUIT IN
KHYBER PAKHTUNKHAWA (KP) PAKISTAN was conducted under the
supervision of Dr Abbas Ullah Jan
I understand the zero-tolerance policy of HEC and the University of Agriculture
Peshawar towards plagiarism Therefore I as an author of the above titled research
thesis declared that no portion of my thesis has been plagiarized and the material used
for references is properly cited
I undertake that I found guilty at any time and any statement is found to be incorrect or
plagiarized in the above mentioned titled thesis even after my graduation the
University has the right to withdraw my Ph D degree and the HEC has the right to
publish my name on the HECUniversity website on the list of persons who submitted
plagiarized thesis of guilty under plagiarism policy
Jahangir Khan
100
AUTHORrsquoS DECLARATION
I Mr Jahangir Khan C No 45 Session 2014-2017 hereby stated that my Ph D
dissertation titled ―Household Preferences and Willingness to Pay for Pesticides free
Fruit in Khyber Pakhtunkhwa (KP) Pakistan is my own work and not been submitted
previously by me or anyone else for taking degree from The university of Agriculture
Peshawar or any other University in the country world At any time if any statement
found to be incorrect even after my graduation the university has the right to withdraw
my Ph D Degree
Jahangir khan
Date
101
CERTIFICATE OF APPROVAL
It is certified that the research work presented in the Ph D dissertation of Mr Jahangir
Khan C No 45 University Registration No 2006 -Agr-U-13234 Session 2014-2017
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar under the titled ―HOUSEHOLD
PREFRENCES AND WILLINGNESS TO PAY FOR PESTICIDES FREE FRUIT IN
KHYBER PAKHTUNKHAWA (KP) PAKISTAN was conducted under the
supervision of Dr Abbas Ullah Jan
No part of this dissertation has been submitted anywhere else for any degree The
dissertation is submitted for the award of degree of Doctor of Philosophy in the
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar
Ph D Scholar Jahangir Khan
APPROVED BY
1 External Examiner _________________ Lal K Almas Ph D
Associate Dean and Regents
Professor Agricultural Business amp
Economics University of West Texas
AampM USA
2 External Examiner ___________________ Prof Dr Harun Ucak
Alanya Alaadin Keykubat
University Turkey
Major Supervisor ___________________ Dr Abbas Ullah Jan
Head of Department ________________
Dr Ghaffar Ali
iv
results of householdlsquos head awareness on WTP are according to the prior expectations
that awareness of householdlsquos head has significant contribution in willingness to pay
for pesticides free fruit While householdlsquos size has a significant but inverse effect on
willingness to pay for pesticides free fruit Furthermore householdlsquos perception
regarding health and environment concern has a propensity to positively influence the
willingness to pay for pesticides free fruit It is also depicted by the results that mean
WTP by using double dichotomous payment card and open ended elicitation format
validates consumer demand for pesticide free fruit in the study area Three separate
mean WTP were computed for each double dichotomous choice payment card and
open ended format which were figured as Rs2576 1632 and 1437 respectively
These results reveal market potential for pesticides free fruit in the study area This
research study is expected to contribute in the three different aspects Firstly this study
has figured out the potential for pesticides free markets in Pakistan This study has also
abridged the research gap regarding consumerlsquos preferences and willingness to pay for
pesticides free fruit which can be generalized and replicated to other areas In addition
results have provided insight to fruit producers helping them to strategize production
system decisions Based on the findings from this research government non-
government organization and other stakeholders should formulate policies and would
promote and encourage the production of pesticides free fruit in Pakistan
1
I INTRODUCTION
Pesticides are agrochemical formulated to cope with the severe problems diseases
caused by insects fungi virus and self-grown weeds The term pesticide can be defined
as any chemical or natural substance applied with the objective to repel destroy or
control pests and regulate plant growth (FAO 2002) In modern agriculture arena
pesticides are intensively used on crops before and after harvest The application of
pesticides surged with the passage of time due to an increase in the demand for
agricultural commodities by the burgeoning population of the world The overall
pesticidelsquos consumption across the globe is observed as about 2 million tons per year
While this massive pesticides consumption demonstrates that about 69 percent is used
by European countries and the remaining 31 percent is utilized by the rest of the world
as mentioned by Abhilash and Singh (2009) The more alarming situation is that the
aforementioned magnitude of pesticides consumption is increasing with the every
passing year as reported by FAO (2002)
The green revolution as well as a huge increase in the application of pesticides in the
agriculture realm had enhanced food and non-food crop production Resultantly the
significant surge in the economic growth of several agricultural based economies was
reported over the last few decades as demonstrated by Carvalho (2006) Despite the
substantial contribution of pesticides to diminish the food insecurity societies around
the world are cognizant and concerned about the food sanitation safety and
environmental externalities owing to irrational use of pesticides and other croplsquos input
(Wilson 2000) More categorically the food safety realization in developed countries
has been led to organic agriculture Whereas in many developing countries which
include but not limited to Pakistan the pesticides-free and organic food markets
remained underdeveloped due to several reasons One of the obvious reasons is the
uncertainty among consumerlsquos preference that led to their concern if an organic market
can be self-sustained Similarly a dearth of proper market structures and institutional
support failed to provide environment-friendly agriculture practices in developing
countries (Rehber and Turhan 2002) The current scenario of agriculture sector in
developing countries has raised several considerable questions to acquire the
anticipated implications for this sector However the most relevant query drifted that
2
―Is there sufficient consumerlsquos willingness to pay (WTP) available in a developing
country for grass-roots development of pesticide-free agriculture
11 Background of the Research Endeavor
Agriculture sector is the mainstay of Pakistanlsquos economy which significantly
contributes as 192 percent to overall Gross Domestic Product (GDP) of its economy
(GOP 2016-17) Despite many efforts and policy reforms still this sector is entangled
with insignificant growth momentum
Since the inception of this country in 1947 there wasnlsquot any notable crop and plant
protection policy adopted by concerned policy makers over a long span of time It is
evident from past timeline that ―Grow More slogan was initiated by the government of
Pakistan back in 1970s to address the escalating foodlsquos demand of rapidly increasing
population of Pakistan Subsequently Grow More policy resulted in ever increasing
pest problem which couldnlsquot be controlled with conventional crop management
practices Therefore the government started to provide the direct subsidy to Pesticides
Industry to provide panacea to croplsquos pest problem But unfortunately the colossal
surge in pesticides utilization had not only destroyed the pests but was also found lethal
for the environment benign organisms that include predators birds etc This irrational
use of pesticides and other crop inputs has caused huge economic loses and health
issues among the farming community
Pakistanlsquos agriculture is endowed with 11 (Eleven) different agro-ecological zones
providing the country an incredible exciting arena for experimentation and state of the
art for agriculture as reported by Altaf (2010) This diversified nature of ecological
zones can be utilized in a lucrative way to attain an optimal output The driving forces
of this sector are striving hard to curtail the gaps by ensuring the adequate production
and supplying the food to meet the demand of rapid growing population of the country
However the emerging challenges such as irrational use of croplsquos input and complying
with world trade organization (WTO) obligations are insisting the concerned policy
makers to focus on paradigm shift for significant contribution of agriculture towards
livelihood welfare and prosperity
3
These different agro ecological conditions provide the encouraging and conducive
environment for the production of cereal crops fruits vegetables and even for non-food
crops Fruits and vegetables grown in Pakistan have a wide domestic demand and have
also attracted the international consumer by exporting these edibles in the international
market Pakistan exports mango apple dates oranges guava and dry fruits like pine
nuts to different countries which include but not limited to Afghanistan UAE Saudi
Arabia and Europe (GOP 2014-15)
The relative importance of agricultural sector can be gauged with high growth rate of
exports of fruits and vegetables from Pakistan to different countries mainly South East
and the Middle East (Khalid Mustafa 2003) where low Sanitary and Phytosanitary
(SPS) standards are comply with Yet several more fruit grown in Pakistan have
enormous potential to be exported in the international market Specifically insect pest
infestation during pre- and post- harvest of fruit and vegetables is a significant problem
To protect from those many kinds of pesticides and agro-chemicals are widely used in
Pakistan These include different types of agro-chemicals which consist more than 100
types of insecticides almost 30 types of fungicides and approximately 39 different
types of herbicides (Zia et al 2009Anwar et al 2011) In 1960 the consumption of
chemical pesticides in Pakistan was 7000 tons per year which has risen to 78 232 tons
per year in 2003 (Syed and Malik 2011)With the development of pest resistance to
those chemicals over years each year new chemical compounds in large amount are
used to protect crops Overuse of these agro-chemicals has caused many adverse health
and environmental effects
However significant variation in consumer behavior in the developed countries has
excelled the demand of high quality food which had encouraged the organic
agriculture Thatlsquos why developing countries who have still adopted obsolete strategies
for pest control are out of race for agriculture export and are at venture to be considered
as ―dirty producer in an international market Similarly in Pakistan massive increase
in the pesticidelsquos use has escorted to two major harms to Pakistanlsquos economy Firstly
Pakistan imports a large quantity of pesticides incurring billions of costs on it and
second overuse of pesticides on agricultural commodities has created many health and
environmental hazards in the farming community of Pakistan Several research
endeavors such as Ahmad et al (2004) Rizwan et al (2005) Parveen and Masud
4
(2001) had divulged that individuals working in field under pesticides exposed
environment specifically women who worked long time in the cotton croplsquos field
sustained more health hazards These health hazard underscored skin irritation
headache nausea and gastroenteritis It is also evident that the hazardous chemical
residues of organo-chlorines organophosphate and synthetic pyrethroids pesticides
were found in 85 percent of the blood samples drawn from 75 sampled individuals
(male and female) in Pakistan
12 Pesticides free Food and Products
Pesticides free fruit and vegetable are those edibles that are grown without the use of
pesticides and can be deemed as major component of an organic farming Due to
awareness among people about advantages of Pesticides free fruit and vegetable which
upshot in food safety and benefit environment as well the production and consumption
of such food products is being highly valued With the consumption of food produced
without the use of pesticides can be helpful in the prevention of some of the health
hazards related with the consumption of conventional food (Nouhoheflin et al 2004)
The term ―Pesticides free was introduced for the first time in a book ―Look to the
Land in 1939 by Lord Northbourne The author narrates pesticides free farm as an
organization that making use of environment balance technique by adopting zero
pesticides In early 20th
century pesticides free food ideology was brought forward
while correspondingly there was an immense use of chemical in food products as well
Householdslsquo were having great concern about their health as well as soil condition and
they began to grow such food which was free from chemical residuals In the era of
70s a noteworthy change was reported in escalating the demand of pesticides free food
and pesticides free farming Therefore in year 1972 ―International Federation of
Pesticide free Agriculture Movement was formed In the same era the producers who
were producing pesticides free food individually commenced the certification process
The obvious aim of the process was to develop rules and to underpin the standards of
pesticides free production
In this modern era where food consumers are highly concerned about their health safety
and environment benign practices they prefer to buy pesticides free food products
This is because of their knowledge about the relationships between the production
practices and quality of food produced Consumers are becoming more conscious as
5
they are aware of the harmful effects of food produced with irrational pesticides use on
their health Many research endeavors have corroborated that fresh fruit and vegetables
confers health related benefits and provide protection against the risk associated with
different types of diseases like diabetes stroke and cancer(Van and Pivonka 2000 Stan
Kar Stoner Singh 2008) Likewise the world health organization (WHO) has
revealed in their research carried out in 2002 that the fruits and vegetables
contaminated with pesticides can cause about 31 percent of diseases related to heart and
11 percent stroke in all over the world However if best quality of fruit and vegetable
consumption is adequately increased it is projected that about 27 million of lives can
be protected each year Pesticides free food contains higher level of antioxidants which
fight against various diseases and provide different essential vitamins More
importantly pesticides free food products also aimed to prevent from some allergies
and diseases common in human being It is corroborated by other research studies that
chemical fertilizer free food are beneficial for human health as well as for the animals
wildlife and for the ecosystem To encourage such agricultural management techniques
in developing countries in general and Pakistan in particular still there is long way to
go but such research studies can provide the paved way to open new avenues for the
concerned policy makers and stakeholder in the realm of Agriculture
In addition locally grown pesticide free produce tends to fetch higher prices due to
sanitation concerns of the consumer and improved quality of the product Subsequently
such produce are preferred by the household and they are agree to pay a price premium
for such food produced free from pesticides compared to prevailing regular market
price of conventional food products Thus it is important to measure householdlsquos
willingness to pay for locally produced pesticide free fruit To acquire a good or
service consumerslsquo wants to sacrifice an extra amount of money which show their
willingness to pay Willingness to pay can also be defined more categorically as the
extra amount of money that an individual wants to pay for best quality of food (Lusk
and Hudson 2004) The commonly used model for eliciting householdlsquos willingness to
pay information is Contingent Valuation Method (CVM) Contingent valuation (CV) is
a survey-based method which is used to elicit householdlsquos willingness to pay for
environmental and natural resources
6
12 Justification of the Study
With the every passing year the demand for agriculture products is hiking due to rapid
increase in the worldlsquos population Pakistan being an agrarian country is striving hard
to fulfill the domestic and international demand for agricultural food To overcome the
escalating demand for agricultural product farmers mainly depend on chemical
technologies to manage pests and to provide enough food Besides their benefits now it
is clear that pesticides are negatively influencing human health and also the natural
environment The food that we are eating has gained more discussion in all over the
world including developing countries like Pakistan that whether this food is safer for
human health and for natural environment Consumers are facing with problemslsquo which
food is safe to eat and which is not safe Which food processing is beneficial for human
and environment and which is worse (Bold et al 2015 Chiew Shi Wee et al 2014
Sirieix 2011 and Butt et al 2015) Most of people are turning towards the production
and consumption of pesticides free food to resolve these issues
In developed countries consumers are highly concerned about the excessive use of
chemicals on food and its negative impact on health and natural environment thatlsquos
why the production of food produced without the use of pesticides Large numbers of
studies are conducted on consumerslsquo perception regarding pesticides- free food in
developed countries like Europe Australia United State and New Zealand but in
developing countries very little is known about consumerslsquo perception regarding
pesticides-free food
Despite the fact that food production without pesticides and other chemicals are safe for
health and environment its production and consumption is very low In Pakistan only
few farmers are using chemicals free technology for food production It has only 28
farms producing pesticides-free food which they just growing for their own
consumption not for commercial purpose In Pakistan there is high gape of information
about consumerlsquos perception and awareness regarding pesticides-free food and
consumerslsquo willingness to pay for pesticides-free food (Panhwar 2004)
Keeping in view the human health hazards and environmental vulnerability owing to
irrational use of pesticides alternative farming systems such as pesticides free farming
integrated pest management (IPM) and organic farming is becoming progressively
7
more popular in the global context However in the country like Pakistan where costly
input and lower output agriculture was a historic focus Following the Green
Revolution in 1960s adoption of certified organic production is expected to be fairly
low Nevertheless aforementioned agriculture practices could be an alternative system
in convincing farmers towards safe and sustainable agriculture and to comply with the
strict regulations and mandates of certified organic system and WTO Moreover due to
conducive and diversified weather and climatic condition of the country and relatively
cheaper labor force availability production of such safer food seems feasible
Pesticides free food is supposed to be having high prices however it is important to
examine whether households are willing to pay a higher price for these pesticides free
fruit According to the research study conducted in different countries of the world on
pesticides free food this study also focus to investigate a price premium that
households are willing to pay for pesticides-free fruit and factors influencing their
decision For this purpose Khyber Pakhtunkhwa (KP) is selected as a research area
Khyber Pakhtunkhwa (KP) is blessed with fertile soil and plenty of water for irrigation
and is famous for production of delicious fruit such as peach apple guava plum
mango Pear apricot date and citrus Fruit farming has been an important business of
Khyber Pakhtunkhwa and the total fruit production during 2015-16 was 411448 tons
from 44737 hectare (GOKP 2015-16) Given that the region is one of the important
fruit growing regions with relatively readily available agricultural labor growers has
the potential to produce pesticides free fruit in this region In this direction more
research work is required to estimate a price premium householdslsquo willing to pay for
fruit free of chemicals and pesticides Thatlsquos why this study is designed to measure
what price premium households would be willing to pay for pesticides free fruit and
improvement in apple peach and mango quality produced by farmers
14 Purpose and objectives of the Study
The irrational and overuse of pesticides in agricultural food production causes severe
damages to human as well as animal health and to the environment too Thus a new
production and new system is needed to overcome these problems and to limiting the
use of these hazardous chemicals during production process The risk of harmful effects
on health and environment are generally reduced with pesticides free farming compared
8
to conventional farming methods Hence pesticides-free farming has the potential to
provide a healthy and safer environment The purpose of conducting this study is to
understand the factors that influence householdlsquos behavior in purchasing pesticide free
food and their willingness to pay for such food The main theme to carry out this study
is to discuss on the variables which determines householdlsquos behavior in the buying
pattern of pesticide free food Besides this research also aims to increase the
understanding on householdlsquos awareness attitude and perceptions towards pesticide
free products
The general objective of this study was to investigate what price premium householdslsquo
are willing to pay for pesticides free fruit produced locally
The specific objectives of this research study are mentioned as below
To study socio-economic characteristics of household and their expenditure on
fruit
To investigate householdlsquos perception towards the use of pesticides on fruit
production
To identify factors influencing householdlsquos willingness to pay (WTP) for
pesticides free fruit
To compare householdlsquos willingness to pay across urban and rural regions of
the study area
To examine the effect of different contingent valuation elicitation format on
householdlsquos WTP
15 Research Questions
1 Do householdlsquos willingness to pay a price premium for pesticide free fruit
produced locally is affected by their socio-economic characteristics
2 Do householdslsquo willingness to pay price premium for pesticide free fruit
produced locally are different in rural and urban regions
3 Do householdslsquo willingness to pay price premium for pesticide free fruit
produced locally are affected by WTP question format
9
16 Hypotheses
Hypothesis is a proper statement that shows the expected association between an
exogenous and endogenous variable (Creswell 1994) Hypothesis is mainly of two
types the null (Ho) and the alternative (H1) hypothesis The null hypothesis is a
statement about the relationship between the dependent and independent variables
while the alternative hypothesis is tested for the acceptance or for the rejection of null
hypothesis through using different test-statistics and usually opposite to the null
hypothesis
161 Hypotheses to be tested
Hypothesis 1
H1 Socioeconomic characteristics have significant effect on householdlsquos WTP
for pesticides free fruit produced locally
Hypothesis 2
H1 Rural and urban locations have significant effect on householdlsquos WTP for
pesticides free fruit produced locally
Hypothesis 3
H1 WTP question format have significant effect on householdlsquos WTP for
pesticides free fruit produced locally
17 Contribution of the Study
The major findings of this research endeavor could be lucrative to pesticides-free food
industry players in designing and implementing programs relating to the production
marketing and consumer behavior regarding fruit and vegetable The study is providing
information regarding householdlsquos willingness to pay an extra amount for pesticides
free fruit at market place The identification of factors influencing purchase of
pesticides free food provides valuable information in formulating short and long term
marketing programs Also the outcomes of the study provide benefits to Government
in their policy making towards pesticides-free farming and pesticides free products
Pesticides free fruit could contribute significantly to wealth formation poverty
lessening and can assess to export market Pesticides free fruit provide healthy food and
natural environment to the society
10
18 Organization of thesis
This study is organized into five chapters In the first chapter background of the study
research questions study hypothesis research justification and contribution of this
study is discussed Chapter two is consist of review of literature related to consumerslsquo
perception market potential and market prospects empirical research studies on
consumerlsquos willingness to pay and consumer knowledge about pesticides free food
socio-demographic variables and their effects on willingness to pay price premium are
discussed Chapter three discuss in detail the study area conceptual and empirical
framework on consumerslsquo willingness to pay and contingent valuation methods are
discussed Chapter four presents descriptive analysis and results obtained from
empirical findings and Chapter five provide summary conclusion and recommendation
and future suggestions on the basis of research findings
11
II LITERATURE REVIEW
Literature review is a synthesis of previous study in the content of a thesis In this
chapter different past investigation are reviewed Mostly this chapter concern on the
methods adopted by different researchers while measuring willingness to pay It also
figure-out various explanatory variables which have been found influencing
householdslsquo willingness to pay an extra amount of money for pesticides-free food
Previous researches on perception questions are also discussed
21 Illustration of Contingent Valuation Method (CVM)
A number of research studies are undertaken across globe to investigate about
consumerslsquo WTP for safer foods such as organically produced pesticides free or
naturally grown Most of the WTP studies use contingent valuation methods where
hypothetical market scenario is developed and subjects are asked to name their WTP
price as compared to existing market price Different techniquesquestionnaires are
used in contingent valuation method where respondents are directly asked to state their
maximum amount of money they are willing to pay for specified improvements in
environmental or health quality The methods used in CVM includes personnel
interview mail and survey that elicit consumerlsquos WTP for those goods yet not available
in the market Survey questions include single bounded double bounded dichotomous
choice and open ended or closed ended (Lusk and Hudson 2004)
Misra et al (1991) studied consumer preferences and their willingness to pay for
pesticides free fresh produce by applying contingent valuation method An ordered
probit model was adopted to know householdlsquos stated willingness to pay for products
free from pesticides residual The study also aimed to know the factors affecting the
probability of householdslsquo WTP for a number of alternative price premiums The
results indicated that householdlsquos willingness to pay was different across different
factors The study concluded that testing and certification was the recommendation of
the households Results also showed that consumers in the study area opposed higher
prices for certified-FPR fresh produce
In another study Gil et al (2000) adopted contingent valuation method and studied
consumerslsquo willingness to pay for pesticides free fruit in Spanish regions Results
showed that consumerslsquo concern over health and environment was increased Results
12
also suggested that due to the adverse impact of conventional food on health and
environment demand for pesticides-free food has raised Results of the study also
showed that consumerslsquo were willing to pay more prices for fruits vegetables and
meats which were free of pesticides
Boccaletti and Nardella (2000) used contingent valuation method to assess householdlsquos
willingness to pay for pesticides free fresh fruit and vegetables To know the impacts of
explanatory variables on the probability of householdslsquo willingness to pay different
price premium an ordered logit model was used and results were reported A
significant and positive effect of income on householdlsquos willingness to pay was
observed Results of the study also suggest that householdlsquos education and associated
risk concern has an inverse relation with households WTP
In another study Millock et al (2002) conducted a research study by using contingent
valuation technique to estimate willingness to pay for pesticides free products through
panel data The information collected was based on weekly report of householdslsquo
purchases of 2000 Danish families Questionnaires were sent to households and asked
them to differentiate different food attributes The food product attributes were included
environmental issues animal welfare and food safety The result showed that
household had given high value to food free from pesticideslsquo residues
Similarly in a relevant study Cranfield and Magnussan (2003) studied willingness to
pay of the Canadian householdlsquos for those products which were free from pesticides
residuals by applying an Ordered Probit Analysis model A contingent valuation (CV)
study was attempted to know that if Canadian households would pay a price premium
for pesticides free food products About sixty five (65) percent of the householdlsquos were
willing to pay a 1 to 10 percent extra amount of compared to those products
contaminated with pesticides residuals About five percent of the total respondents were
willing to pay more than 20 percent price premium The main determinants that switch
over the households to pay higher premiums for pesticides free products were
householdslsquo health concern and environmental concern
In a relevant study John and Eric (2004) developed a survey based research to find out
householdlsquos choice of paying an extra amount for fresh and pesticides free products by
using a contingent valuation technique According to their research 65 percent of
13
households were willing to pay one to ten percent extra prices for pesticides-free
products as compare to conventionally produce one five percent respondents willing
to pay more than twenty percent Health and natural environmental issues youth and
grocery stores were the important factors influencing consumers to pay higher prices
Masias et al (2012) carried out a research study in Spain to analyze the level of
knowledge consumption and consumerlsquos willingness to pay for organic vegetables
such as organic tomatoes By using contingent valuation method three distinct
consumerslsquo groups were identified The results showed consumerlsquos lack of knowledge
regarding organic vegetable Result of the study revealed a clear relationship between
level of knowledge and organic food consumption and consumerslsquo potential willingness
to pay
Boys et al (2014) conduct a research study in Dominica to assess willingness of the
consumerslsquo and their opinion for organic or locally grown produce By adopting
contingent valuation method (CVM) maximum likelihood estimation (MLE) procedure
was applied Findings from the study reported that respondents in Dominica were
willing to pay 175 percent for organic and 12 percent price premium for locally
produced food Results of the study showed that consumer response towards
willingness to pay was different across socio-demographic characteristics family health
status and experience regarding adoption of organic food products
22 Crux of the Double bounded dichotomous choice model
Many recent research studies deployed double bounded dichotomous choice model to
study consumerslsquo willingness to pay for pesticides free organic and related food
Owusu (2010) studied and analyzed market possibility for new pesticides free lettuce
and water melon by using a double bounded dichotomous choice contingent valuation
technique in the city of Kumasi in Ghana The information of the respondents was
collected By applying a Tobit model householdslsquo willingness to pay was assessed
More than 50 percent price premium were paid by 71 percent of the respondents for
natural vegetables and 82 were willing to pay 1 to 50 percent higher premiums for
natural fruits Results showed that human capital food qualities and householdlsquos
recognition impact householdlsquos willingness to pay for pesticide free commodities The
14
evaluated market possibility for pesticide free fruits were (GHcent32117113 US$
26453433) for every annum and for naturally produced vegetable was GHcent1991224
(US$1640083) per year suggested an immense market possibility for naturally
produced fruits in Ghana
sum
(
)
(
)
Where
are binary valued (0 or 1) indicators and the formulas
for the corresponding response probabilities are given above The model was estimated
through maximum likelihood estimation method and the results were used to find out
the mean and individual WTP (s) for pesticides free fruits
Where ƒ(WTP) is a function X is a set of socio-economic characteristics are
coefficients and is error term
In another study Cerda et al (2012) investigated different markets regarding
respondentlsquos preferences and willingness pay a price premium for products free from
pesticide in Chile Conjoint analysis was also used to estimate the marginal willingness
to pay of the consumer for pesticide-free apple A total of 400 individuals were
interviewed to know householdlsquos willingness to pay and to determine different
attributes that consumer search when purchasing apple by using a logistic probability
function and single-bound dichotomous elicitation format The output showed sweet
apple lowest price and pesticides free production attributes were preferred by
households Results of the study revealed that consumers in the study area were willing
to pay about 130 Chilean pesos kilogram for pesticide free apple
By using double bounded dichotomous choice approach Minh et al (2013) conducted
a research study on consumption and willingness to pay a price premium for pesticides
free vegetables in Vietnam Under contingent valuation method 185 respondents were
surveyed and analyzed Results showed that about 15 percent of the consumers had
already used pesticides free vegetables and 88 percent sought to try and purchase such
products if available in the market Result revealed that consumerslsquo were willing to pay
15
on average 70 percent more amount for pesticides free vegetable than the convention
price Findings also showed that respondents with more concerned about pesticides free
food and high purchasing power were more likely to pay extra amount of money
Findings of the study showed most of the consumers were still worrying about safe
food because of chemical residues in vegetables Results suggest that control of
pesticides level was difficult for state agencies because of insufficient capabilities
Some recommendations were suggested based on findings of the study such as the
consumers should be informed regarding organic vegetables and information should be
publicized to consumers and to expand organic market share in the future new shops
should be open
Hai et al (2013) conducted a research study on consumption of organic vegetables and
consumer WTP for vegetables produced without the use of pesticides in Vietnam They
reported in their study that most of the consumers were still worrying about safe food
because of chemical residues in vegetables Control of pesticides level was difficult for
state agencies because of insufficient capabilities By using double bounded
dichotomous choice approach under contingent valuation method 185 respondents
were surveyed and analyzed The results showed that about 15 percent of the
consumers had already used pesticides-free vegetables and 88 percent of the total
respondents desired to try and purchase if such pesticides free products were available
in the market On average consumers were willing to pay 70 percent more price than
the convention price Findings of the study also showed that respondents with high
income and more concerned about pesticides-free food were more likely to pay price
premium
23 Overview of the Ordered Logit Model
Regarding discrete nature and ordinal ranking of the WTP variables in payment card
method an ordered logistic regression was applied in many research studies Ordered
logistic regression is the most appropriate choice in studying these issues (Green
2007) Under latent variable framework the willingness to pay model can be written as
follows
16
Where is an unobserved latent variable reflecting the WTP for pesticides-free fruits
for household i expressed in terms of utility to switch from the traditionally grown
fruits consumption to pesticide free fruits is a parameterlsquos vector reflecting the
relationship between WTP captures a set of socioeconomic and demographic
variables influencing WTP and is the unobserved disturbance term reflecting
stochastic differences between households not controlled for The relationship between
the unobserved and the observed outcome for household ( =0 1 2hellipj) can
be summarized as follows
It is presumed that ɛ is normally distributed across observation
With regards to ordered logistic model Valchovska S (2004) investigated Dutch
householdlsquos attitudes and behavioral intentions to purchase pesticides-free olive oil By
applying CVM to assess consumer willingness to pay a price premium for pesticides
free olive oil on the Dutch consumer an ordered logit regression model was used
Results suggested that willingness to pay did not depend on socio-demographic factors
but rather on consumers awareness and experience with the product Results also
showed that experience regarding the product was significantly related to purchase
intention and willingness to pay Most of the consumers considered pesticide-free olive
oil to be too expensive Results suggested high prices appeared the biggest constraint
on consumption Results clearly verified that consumerslsquo familiarity with pesticide-free
olive oil in the Netherlands was low at present This situation may however be
changed by a possible increased availability of the product in the supermarkets
17
Rodriguez et al (2008) carried out a research study to measure consumers WTP for the
available pesticides free products in Argentina domestic market The data was collected
through a survey from the consumers of Buenos Aires city For the analysis of data a
binomial multiple logistic regression model was applied Five different organic
products such as regular milk leafy vegetables whole wheat flour and fresh chicken
and aromatic herbs were selected for the research The method of contingent valuation
(CVM) was adopted to estimate consumerslsquo stated willingness to pay The result
revealed that pesticide free agriculture has undergone momentous expansion and
consumers in the study area were willing to pay a higher amount of money for such
organic products Research results suggest that along with price that play a significant
rule while consuming organic products non availability of stores for organic products
and a reliable regulatory system limits the consumption of pesticides free organic
products in the study area
According to Kalogeras et al (2009) carried out a research study that concentrates on
the identification of Dutch householdslsquo willingness to pay (WTP) for natural olive oil
The study was carried out in 5 biggest Dutch cities in Netherland To evaluate the
impact of explanatory variables on householdslsquo willingness to pay a price premium for
natural produced olive oil an ordered logit regression model was constructed Results
suggest that experience awareness and consumerslsquo personnel satisfaction were the
variables influencing consumerslsquo WTP for natural olive oil
Travis et al (2009) conduct a research on consumer purchasing behavior for pesticides
free fruits and vegetables To identify the impact of socio-economic and socio-
demographic characteristics on the probability of consumers belonging to certain
groups like devoted casual or nonuser an ordered logistic model was used Results
showed that factors like price and income were influencing householdlsquos willingness to
purchase pesticides-free fruits and vegetables to some extent The results also showed
that respondents with a college degree children aged more than six years and aged
above than fifty years were willing to purchase pesticides-free fruits and vegetables
Zeki and Zia (2009) carried out a research study to investigate consumerslsquo stated WTP
for tomatoes produced free from pesticides residues The study also aimed to measure
the impacts of socio-demographic and hazard variables on WTP Ordered Probit model
18
was used to figure out the likelihood of WTP for pesticide free tomatoes The
information was acquired from 666 respondents by survey method in Ankara and Tokat
regions at same occasion The study results revealed that 3423 percent of Turkish
households were not willing to pay 7702 percent willing to pay a 30 percent higher
amount of money and 22 97 percent would be willing to pay more than 30 percent
premium According to the results Turkish households were paying a little price
premium for tomatoes produced free from pesticides Furthermore the important
factors significantly influencing willingness to pay for pesticides free tomatoes were
gender education statue of mother recognizes for ecologic agriculture solid
sustenance and risk
Oyawole et al (2016) conducted a study in Nigeria to asseslsquo consumer awareness
benefits and willingness to pay for organic vegetables Descriptive statistics and logit
model was used for the analysis of data According to the research findings about 70
percent of consumers were aware of the benefits of organic agriculture and hence they
were willing to pay price premium Results showed that factors influencing willingness
to pay positively were higher education and consumer awareness regarding organic
food while age income and gender had no significant influence on consumer
willingness to pay
Hayati et al (2017) conducted a research study in Marand city to identify factors
effecting consumerslsquo WTP for pesticides-free fruits and vegetables To assess
respondentlsquos willingness to pay an ordered logistic regression model was applied By
using Contingent valuation method data was collected from 394 respondents The
results revealed that 33 of the respondents were willing to pay 20 more price
premium 64 showed 5 to 20 more price premium while only a small portion 3
of the total sample of the consumers were not willing to pay more price for pesticides
free fruits and vegetables Findings of the study also revealed that factors such as
income of the respondent environmental and health concern and consumerlsquos
knowledge regarding pesticides free fruits and vegetables were significantly affecting
respondentslsquo willingness to pay for vegetables and fruits free from pesticides residues
19
24 Factors influencing Householdsrsquo Willingness to Pay
Based on the literature review factors influencing households WTP a price premium
are discussed below
WTPj = β0 +β1Agej + β2Genj + β3Eduj+ β4Hsizej + β5Incj + β6Locj + β7Healthconj+
β8Envirconcernj +
Where
WTP = Willingness to pay for pesticides free fruit = Householdslsquo head age in years
= Gender status of the householdslsquo head = Education level of householdslsquo head in
years = Householdslsquo size = Income of the household = Householdslsquo
location = Health concerned = Environment concerned micro=Error term
Govindasamy and Italia (1991) investigated households in different grocery retail
markets in New Jersy to know their different opinion regarding pesticides free
products The main theme of the research study was to know demographic
characteristics that caused the household to pay a price premium for products free from
pesticides residues than the price prevailing in the market The result showed the
influencing factors that caused the individual to pay more price premium for pesticides
free products were demographics characteristics such as females those having higher
income and young individuals The result also showed that number of member in
households had an inverse relation with willingness to pay More individual in a house
were not willing to pay higher prices for pesticides free products
Piyasiri and Ariyawardana (2002) conduct a research study to identify market potential
and consumerslsquo expectations for pesticides free food in Kandy Sri Lanka The study
also aimed to identify factors influencing consumerslsquo willingness to pay price premium
for pesticides-free food Results revealed that most of consumers in the study area were
aware of the use of pesticides free food and this awareness influenced their
consumption of organic food and willingness to pay more for organic food Results
showed that socio-demographic characteristics like income education of the
respondents beside environment knowledge were the important factors influencing
consumerslsquo WTP for pesticides-free food Study suggested that market for organic food
could be enhanced by availability of organic food in easily accessible shops and market
20
should also direct awareness in consumer regarding demand and consumption of
organic food
Qingbin and Junjie (2003) conduct a study to identify market potential for pesticides
free apple and milk by adopting a conjoint analysis technique in Vermont State of
USA Results found that there was a significant niche market for pesticides free apple
and milk The results also suggested that especially those consumers who were
regularly purchased pesticides free products were willing to pay price premium for
apple and milk produced without the use of chemicals and certified by NOFA
Heo and Kim (2004) investigated green marketing strategies and willingness to pay for
environment-friendly agricultural products in the Metropolitan area The results
revealed consumerlsquos WTP for grain vegetables fruit and processed foodstuffs were
206 percent 202 percent 193 percent and 172 percent respectively higher than
agricultural products produced by conventional farming method
Gracia and Magistris (2007) conduct a research study to know consumerslsquo purchasing
behavior regarding pesticide-free food and also factors influencing food purchasing in
Iran A multivariate limited dependent variable model was used Results showed that
households purchasing pattern was more for pesticides free products and they
purchased such safer products in large quantity Findings of the study showed that
purchase of pesticide free products depends on householdlsquos behavior and information
regarding the product Moreover householdlsquos behavior regarding health concern and
environment concerns given by pesticides-free products were the factors that explained
both intension and final decision to purchase pesticide free products Income and
information about pesticide free products had a significant positive influence on the
decision of the consumer to purchase pesticides free products
Kamal et al (2009) studied householdlsquos willingness to pay a higher price for
pesticides-free products in Kathmandu valley About 180 respondents were interviewed
by using well designed questionnaires to find out their perception for pesticide-free
food commodities and asses their willingness to pay The study revealed that almost all
the respondents were willing to pay a higher price for such food but the level of
acceptability varied Up to 58 of the respondents were willing to pay 6- 20 more
price while 13 were willing to pay half premium The average price premium was
21
noted about 30 Over 39 of the respondents suggest the extra price is reasonable for
pesticide-free food while 27 suggest it a really higher price However results showed
that the consumption of pesticide free food had increased
Morteza et al (2009) conducted a study to examine consumerslsquo willingness to pay for
pesticides free fruits and vegetables The results showed that variables such as socio-
demographic characteristics and perception of the respondents regarding environment
and health concern were influencing consumerslsquo WTP for pesticides free food
Environment concern was the important factor of consumer willingness to pay but
results from this study showed that respondents in New Brunswick gave more priority
to health as compare to environment Results also indicated a positive influence of
income and health concern on consumer willingness to pay for organic food
Ghorbani and Harnraz (2009) carried out a research study on factors influencing
consumer WTP for pesticides free products in Iran By applying Tobit model the
results showed that physical look and information of consumerslsquo were the influencing
factors affecting willingness to pay higher price Consumerlsquos concern of chemicals
residues in diets were also positively affecting willingness to pay In demographic
characteristics such as education of the respondents had negative effect on WTP The
study suggested that farmers and consumers should be encouraged to produce and
consume pesticides-free food Study also suggests that marketing strategies should be
encouraged for the marketing of such organic food products
Akgungor et al (2010) carried out a research study to estimate consumerslsquo perception
regarding safe food and the trade-off that urban Turkish consumer made between good
quality and chemicallsquos free fresh fruits and vegetables The date was gathered from a
representative sample of urban consumers The results suggested higher income and
more educated respondents were highly interested and they had more knowledge
regarding organic products Results showed suggested reason for choosing organic
products was consumerslsquo perception regarding organic products of low health risk and
higher nutritional value Results showed 36 percent higher price premium consumers
were willing to pay for organic food that suggests urban Turkish consumerslsquo demand
for organic products
22
Oraman and Unakitan (2010) analyzed factors influencing Turkish consumerslsquo
purchasing decisions for fruits and vegetables The survey conducted in Istanbul by
applying logistic model Results of the survey showed that health and safety concern
were the important factors influencing consumerslsquo preferences regarding organic food
Findings of the study would help organic food producer in targeting factors that were
influencing consumerslsquo decisions to purchase organic food products
Bektas et al (2011) conducted a research study to determine level of consumerslsquo
awareness regarding food safety in Izmir Turkey by applying Probit model Results
revealed that consumerslsquo with high income and more education were more aware
regarding safer food Outcome of the study also identified aged respondents had more
probability for healthy and safe food products Results suggested that awareness for
safer food should be passed through informative campaign targeting especially low and
middle income groups as well as low education level population
Coulibaly et al (2011) studied the health risk caused by using large quantity of
chemicals and pesticides on vegetables By using a hedonic pricing model they
identified the determinants of the householdlsquos WTP for pesticide free products
Information was collected through a well designed questionnaire on householdlsquos
perception awareness and consumerslsquo willingness to pay for pesticide free vegetables
The perception of householdlsquos for good quality vegetables included color freshness no
external damage and firmness The most important factor effecting householdlsquos choice
to pay more for pesticide-free vegetables were awareness about the health hazards
caused by those chemical Households were willing to pay more than fifty percent for
those products free of such pesticides and chemicals
Joyce et al (2011) conduct a survey to examine consumerslsquo perceptions and to assess
their willingness to pay for pesticides-free product They surveyed 100 households in
Morogoro municipal The results presented showed that 78 of the respondents were
willing to pay a higher price for pesticides-free food The results revealed that
environment and health concern were the most important factors effecting householdlsquos
willingness to pay for organic food Results from the survey suggested that
consumption of pesticides free food were increasing but need certification labeling
processing and packaging to boost up the demand
23
Sangkumchaliang and Huang (2012) conducted a survey on consumerslsquo perception and
attitude towards organic food products Results showed that consumers were
purchasing organic food products because of the expectations that organic food is
healthier and safer to the environment Results also revealed that respondents with old
aged and more educated were more willing to purchase organic food products The
study suggested that consumerlsquos information needed to purchases organic food
Owusua and Anifori (2013) analyzed the willingness of householdlsquos to pay an extra
amount of money to watermelon and lettuce produced naturally or free from pesticides
by applying a (CV) contingent valuation information starting with urban Kumasi in
Ghana The impacts of the determinants of the householdlsquos willingness to pay a higher
price were examined with a Bivariate Tobit model Results showed socioeconomic
characteristics as well as freshness and cleanness of products had a great influence on
householdlsquos choice to pay a higher price than they pay for conventional products
While householdslsquo size has a negative impact on consumerslsquo willingness on paying
premium to natural lettuce The estimated mean householdlsquos willingness to pay for
pesticide free watermelon was Ghcent05554 (US$ 0 4575) and for natural lettuce was
GHcent12579 (US$1 0361)
Haghjou (2013) investigated that the demand for those products that was grown without
the use of pesticides has increased amazingly in the recent years The study was carried
out to assess the factors effecting householdlsquos willingness to pay a higher price for
organic products accessible in the Argentinean provincial market The output of the
study reveals that 95 of the respondents were willing to pay a higher price while 10
of the householdlsquos were like to pay about 35 percent higher price than the market
existed price for naturally grown products The results suggested that householdslsquo
income family size ecological problems including respondentslsquo knowledge has
enhanced their desire to pay higher price for pesticide-free products than the
conventional one The result also showed that female as well as house wives were
agreed to pay more price premium
HUI et al (2013) conduct a survey on householdslsquo WTP a price premium for
pesticides-free products in Klang valley The study was based on householdlsquos
purchases by 2012 on their demographic and social-economic characteristics To study
the householdlsquos perception and WTP for pesticide free products 500 households were
24
interviewed by using well designed questionnaires The data collected were analyzed to
find what determined the presence of pesticide-free products The main theme of the
research study was to know the determinants that playing rule in willingness to pay for
products free from pesticides residues The result revealed that majority of the
households were agreed to pay a higher price premium for pesticide free products
Different factors like environment psychology food free from pesticide residuals and
health conscious were related to explain household willingness to pay for organic
products However the result also showed that social demographic and level of
knowledge did not explain the WTP for products free from pesticide
Syed et al (2014) studied different level of pesticides in different vegetables and fruits
in Pakistan The results obtained showed that more than half of the collected samples
were contaminated with organophosphate pyrethroids and more organochlorines
pesticides Numerous research studies found that tomato apple melon mango grapes
and plum among fruits and vegetables has crossed the maximum residual levels of
FAO and World Health Organization (WHO) The comparison with other areas showed
that in 50 of the sample the residual level was above than the stated level but was in
agreement with neighboring countries like china and Bangladesh Higher hazard risk
index (HRI) values were calculated for dieldrin methamidophos op-DDT diazinon
and pp-DDT in apple mango banana melon potato and onion
Vidogbena et al (2015) carried out a research study in major cities in Benin to asseslsquo
consumer perceptions about cabbage produced by a physical barriers method to protect
cabbage from pesticides Results showed that consumers were aware of the impacts of
pesticides on health and environment but they were not able to differentiate between
cabbage produced conventionally and through this net method Results of the study
revealed that consumer were willing to pay higher price for cabbage produced with
minimum application of pesticides as compared to one produced with pesticides
application Consumers were willing to pay 38 more price than the existed market
price Results indicated that females more educated and aged respondents were willing
to pay more prices for better quality cabbage
Safdar et al (2015) studied pesticide free food consumption and consumerslsquo WTP in
the United Arab Emirates To recognize major determinants of respondentlsquos willing to
pay more price for products free from pesticides residues a regression model was used
25
Around 300 hundred respondents were interviewed and information was collected The
results showed that the consumption of such food was increased in the study area This
increment was due to high per person price premium more knowledge about nourished
food products and different household population Consumers were paid price premium
for the food free from pesticides residuals Results showed that majority of the
respondents respond when inquired as to whether they were willing to pay more for
pesticide-free products Age nationality instruction family size and salary were main
factors influencing consumerslsquo to pay higher price for the pesticides-free food products
Hiren et al (2016) carried out a survey in Tennessee State USA The data were
collected on a random sample from grocery shoppers to assess consumer general
knowledge about pesticides-free food and to know their willingness to pay For this
study binary logistic regression model was used The survey showed that most of the
consumer had a fair knowledge about pesticides free food Results indicated that
number of those respondents who had never been used organic food was higher than
those who usually used The results showed that income and environmental concern
were the factors that effectively determine to pay more for pesticides-free food
Aguiar et al (2016) studied factors influencing consumerslsquo purchasing behavior
regarding organic food in Brazil by using structural equation modeling (SEM)
approach Results revealed that most of the consumerslsquo were willing to buy organic
food Respondents were willing to pay 25 percent price premium for organic food as
compared to food produced conventionally Results suggest the main determinants of
consumerslsquo willingness to pay were their beliefs of positive effects of organic food on
health and environment
Mangan et al (2016) studied level of awareness and willingness to pay for organic
vegetables in Sindh province of Pakistan Result of the study reported that majority of
the respondents had knowledge about the beneficial effect of organic vegetables while
less than half of the respondents had never heard about organic vegetables Results also
showed that most of the respondents (82) were not aware of the benefits of organic
vegetables to the environment Majority of the respondents were willing to pay price
for organic vegetables
26
Nandi et al (2016) studied consumer willingness to pay for organic fruits and
vegetables and also factors influencing consumerslsquo WTP in India For the estimation of
respondentlsquos willingness to pay contingent valuation method (CVM) was used For the
data analysis 250 respondents were selected A binomial regression model was used to
know respondents willingness to pay and the factors influencing on WTP Results
revealed that most of the respondents were confronted with environment problem
health related issues and safe environment and food The respondents were increasingly
desired to have more healthier and environmental friendly food To acquire better
quality of fruits and vegetables about 90 percent of consumers were willing to pay a
price premium ranging from 5 percent to 100 percent Factors like income of
respondents householdlsquos size gender and other opinion variables such as pesticides
residues in food taste and environmental concern were significantly influencing
consumer willingness to pay a price premium
Slamet et al (2016) conducted a research study to identify factors influencing
consumerslsquo willingness to purchase pesticides free vegetables in Jabodetabek region
(Jakarta) Data was obtained through a householdlsquos survey Three methods binary logit
model descriptive analysis and factor analysis were used for analysis of data The
results showed that respondents with more income minimum householdlsquos size and
price tolerant were more likely to purchase pesticides-free vegetables The study also
indicated other factors determining consumerlsquos willingness to purchase for pesticides-
free vegetables were positive attitude health concern environment concern as well as
positive belief in pesticides-free vegetables
Gumber and Joyti (2017) conduct a research study in national capital region of India to
find out price premium and factors effecting consumerslsquo WTP for pesticides free food
Results of the study showed that consumerlsquo demographic characteristics like education
income of the respondents environmental concern and health related issues were the
important factors influencing consumers to pay higher price for organic food Besides
other variables like taste physical look certification packaging and promotion were
found to have no influence on consumer willingness to pay for pesticides-free food
Results suggested organic food producer to design communication strategies and
suitable pricing strategies in the study area
27
25 Essence of the Literature Reviewed
The above literature reported that several studies have been conducted on
consumerhouseholds willingness to pay for pesticides-free fruits with contingent
valuation method (Govindasamy and Italia 1999 Krystallis and Chryssohoidis 2005
Quagrainie 2006 Kimenju and De Groote 2008) In this type of models a
hypothetical market scenario is developed in which consumer are asked about their
stated WTP a price premium Misra et al (1991) and Boccaletti and Nardella (2000)
used contingent valuation method and analyzed household willingness to pay for
organic products in Italy and USA Gil et al (2000) also used the contingent valuation
model in Spain and reported that respondents in that study area were willing to pay a
price premium for pesticide-free fruits
Regarding the socio-demographic profile of pesticides-free products the above
underline research study showed that mostly female respondents were willing to pay
price premium more frequently than male respondents Age factors also played an
important role with older consumers observed more WTP due to their health concern
On the other hand income played a vital role while buying safer food Literature also
supported that more educated respondents are willing to pay more price premium for
healthier and environmental friendly food products
The preceding review presents valuable information on contingent valuation method
and consumer willingness to pay price premium for organic foods and environment
resources Since most of the work had done on consumer willingness to pay for
pesticide-free fruits in developed countries but not a few studied paid much attention to
conduct research on householdslsquo willingness to pay for pesticides-free fruits in
developing countries like Pakistan
A few facts emerge the literature review One the coverage of consumerslsquo WTP for
organic and pesticide-free food is rather thin in the literature The lack of this
information could inhibit governmental and developmental agencieslsquo decision Second
the consumer WTP is a factor demographics and consumerslsquo perception This study
uses CVM to explore Pakistani consumer WTP for pesticide-free fruit We found socio-
demographic factors such as age education income householdlsquos size householdlsquos
head education and perception significantly influencing householdslsquo WTP Findings of
28
WTP
Environmental
concern
Socio-demoghr
aphic characte
risitcs
consumer knowledge of PFF
Health
concern
this study almost showed 26 percent price premium that suggest a strong indication of
consumerslsquo demand for pesticide-free fruit This is a convincing message for
agriculture policymakers to encourage and educate farmers for production of pesticide-
free fruits Thus this study is timely relevant and provided additional information on
understanding consumerlsquos attitudinal behavior choice and factors effecting willingness
to pay for pesticide free fruits in Khyber Pakhtunkhwa (Pakistan)
Review of literature highlighted different influencing factors that affect the consumers
willingness to pay for pesticides-free food are shown in figure 1 It shows that
perception of consumers regarding human health and environment and socio-economic
and socio-demographic characteristics have an influential affect on consumer
willingness to pay
Figure 1 Factors effecting consumerrsquos WTP for pesticides free fruits
29
III MATERIALS AND METHODS
This chapter consists of two sections The first section describes the study area while
the second section presents the conceptual frame of the study The second section
provides a detailed discussion about the methodology being employed for the research
In the beginning of this section a brief debates provided on Contingent Valuation
Method (CVM) used to analyze householdslsquo willingness to pay (WTP) and later on
elaborate specification of the empirical models used for capturing the factors
influencing householdlsquos willingness to pay for pesticides-free fruit and vegetables is
given followed by a discussion on how the data was collected in the study area
31 Khyber Pakhtunkhwa
Khyber Pakhtunkhwa (KP) occupies a north-west position in Pakistan with a total area
of about 74521 square km Gilgit-Baltistan is situated on its northeast Punjab on the
southeast and Azad Kashmir on the east A long and narrow piece of land belongs to
the Federally Administered Tribal Areas (FATA) borders situated to its south and
Baluchistan directly below it On its west Federally Administered Tribal Areas are
situated and Afghanistan is situated on its northwest According to census report 1998
the total population of KP was 177 million According to the 2011 Census Bureau of
Pakistan house listing operation the population of KP was estimated to be more
than 268 million There are a total of 26 districts in KP Naturally KP has been
endowed with abundant cultural and tourism friendly environment It has the capability
to become a charming area for the tourist in the world Due to its beautiful and
attractive scenery geographical location climate and God gifted natural resources KP
is exceptionally abundant in terms of multitudes of tourist attraction The core of this
charm is clear from the striking natural picturesque consisting of beautiful rivers
attractive and splendid waterfalls spiral lakes mostly in the hilly areas and ever green
valleylsquos in most parts of the province TCKP (Tourism Corporation Khyber
Pakhtunkhwa(2015)Districts of KP is shown in figure31
30
Figure 31 District Peshawar and Mardan of Khyber Pakhtunkhwa
31
32 Sampling Technique
Three stage stratified sampling technique was used for the collection of data
from study area
321 Stage 1 _Selection of district Peshawar and Mardan
In the first stage as KP is comprised of 26 districts Peshawar and Mardan was
purposively selected The purpose behind this selection was huge population in these
two districts
322 Stage 2 _ Selection of Union Councils (UCs)
In the second stage from each selected district one urban and one rural union
council were randomly selected Thus a total of 4 union councils were taken as a
sample location from both districts
323 Stage 3 _Selection of households from each Union Council
In the third and final stage a list of households was obtained from local union
councillsquos health department (BHU) The following Yamanelsquos (1967) formula was
used to decide sample size of households
Where
- r is the sample size for households
- N is the total households in selected UCs and
- e is the minimum probability of error
The value of ―e was selected at e = 003 with the intension to keep the error at lowest
possible level and select a best representative sample from the given population of
10020 households
The Yamanelsquos formula suggests a sample size of 1000 households from two districts
After deciding sample size households was taken from selected union councils (UCs)
using proportional allocation sampling technique The allocation is said to be
32
proportional when the total sample size n is distributed among the different union
councils in proportion to the size of strata
=
____________________ (2)
Where
- = no of sampled respondents in each stratum
- Ni =population size of ith UCs
- N = the total number of households in selected UCs
- n = total number of households
The number of sampled households selected through proportional allocation method is
given in table 31
Table 31 Total population and sampled households from selected UCrsquos
District Union councils Total households Sampled
households
Mardan Urban 3090 309
Rural 1910 191
Peshawar Urban 3000 300
Rural 2020 202
Total 4UClsquos 10020 1000
Source Local Basic Health Unit (BHU) Peshawar and Mardan
33 Allocation of Sample Size for Different Models
A total of 1000 sampled respondents were selected for this research study from urban
and rural areas of the two districts namely Peshawar and Mardan of Khyber
Pakhtunkhwa Pakistan A sample of 600 respondents was reserved for double
bounded dichotomous choice model For the best estimation of parameters double
bounded model requires large sample size compared to open ended and payment card
model (Calia and Strazzera 2000) Out of total respondents a sample of 400
households were allocated for linear regression model and ordered logit model 200
for each model
33
34Contingent Valuation Survey Designing
CVM produces values contingent upon the description of the resource and the method
of payment The accurate measurement of any resource requires a detailed description
of the resource (Loomis et al 2000) The survey designed for this study started with the
description of the conventional food commodities and uses of different varieties of
chemical pesticides on fruit and vegetables before and after harvest After the
description of pesticides its harmful effects on human being as well as on environment
then pesticide free fruits were discussed with the households After describing the
benefits of pesticides free fruit respondents were asked to rank the relative importance
of each benefit The main reason for asking this question was to reveal householdlsquos
preferences their non-monetary value for use and nonuse benefits and to compare
them with their stated WTP response
Results in CVM are sensitive to the valuation question format and payment mechanism
(Carson and Hanemann 2005) The National Oceanic and Atmospheric Administration
(NOAA) Blue Ribbon Panel recommended the use of single bounded dichotomous
choice CV questions with mandatory payment vehicles (Arrow et al 1993) However
recent studies show that the single bounded dichotomous choice method provides
limited information about householdlsquos WTP and produces higher WTP compared to
open-ended question and payment card method (Zhongmin et al 2006) The single
question dichotomous choice method requires a large number of respondents to obtain
an accurate estimate of WTP (Carson and Hanemann 2005) People in the study area
were not familiar with CV Survey The use of an open-ended question format may
generate high zero WTP responses Consequently this study used the entire three
payment format to elicit householdlsquos WTP for pesticides-free products
35 Householdsrsquo Survey
This research mainly based on primary data The primary data was amassed through
interview schedule On the basis of objectives of the study a well-defined questionnaire
was prepared and was pre-tested in the field A small Pre-test was conducted before the
final data collection About 1000 households from Peshawar and Mardan were face to
face interviewed In contingent valuation studies face to face interview is more reliable
(Carson 2000) Socio-demographic characteristics attitudinal and behavioral
34
information of the households were collected Through this survey the data was
gathered both from rural and urban areas of the selected districts District Peshawar and
urban areas were taken equal to one and district Mardan and rural areas were taken
equal to zero Before asking the respondents for their willingness to pay a price
premium they were briefed about the differences among the conventional and
pesticides free fruit The attitudes of the consumers and knowledge about the minimum
use of pesticides on fruit were also gathered to better know how the respondents relate
different aspects of pesticides free fruit These attitudinal behavior questions were
posed using a modified Likert scale response (where a one equals agree and zero equals
disagree) Different values were assigned to each response according to a well-defined
method in the literature (Cranfield and Magnusson 2003)
36 Conceptual Framework
This section is devoted to the conceptual framework of the study Households utility
and willingness to pay willingness to pay and contingent valuation method and the
estimation of mean WTP are discussed The empirical discussion on the factors
influencing householdlsquos willingness to pay a price premium is also discussed
361 Householdrsquos Utility and Willingness to Pay
Willingness to pay could be analyzed as a householdlsquos choice problem Following
Canfield et al 2003 the study assumes that a household who buys and consumes a
conventionally produced food products encounters the same food products but in
pesticide free form on the market The household who decides to purchase pesticide-
free fruits instead of the conventional one does so because it is assumed that hisher
utility is higher for the pesticide-free food (Magnusson et al 2005) If the utility does
not change then a rational household will not be willing to pay as an increase in the
price results in a lower level of utility compared to the base level of utility Also if the
utility increases then the household may be willing to pay more for pesticides-free
food on the basis that the price increase does not lower the utility beyond the base level
(Cranfield et al 2003) The householdlsquos willingness to pay is therefore a function of
the change in utility arising from the consumption of pesticides-free food Thus
35
Where ∆U is the change in utility
Since the choice of one product over another is a discrete one it is convenient to look at
householdlsquos choice problem in a random utility setting Random utility models have
been used extensively in the valuation literature in the analysis of householdlsquos food
safety valuation and assessment of householdlsquos response to new (or different) products
(Eom 1994 Veeman and Adamowicz 2000 Kuperis et al 1999 Quagrainie et al
1998) Following the random utility framework proposed by Cranfield et al (2003) it
is assumed that a household faces a choice between buying either the conventional or
pesticides-free food variety of the same product The utility derived from consuming a
given product by a household is given as
Where
Where is the utility arising from choosing the ith alternative is the deterministic
component of the utility function is a vector of observable alternative specific
factors that influence utility is a vector of parameters and is the stochastic
component The households choose alternative if and only if for all (or
that without loss of generality
The utility of the household is however not observable What is observed is whether or
not the household chooses to pay a premium for the pesticide free product
362 WTP and CVM
On the basis of stated preferences consumer willingness to pay can be measured by
several methods To extensively elicit consumer preferences for food labels on different
attributes economist and market researchers have used contingent valuation (CV)
choice experiment (CE) and experimental auction (EA) or combination of all the three
methods (Fox et al 1994 Fox 1995 Huffman et al 1996 Hossain et al 2003
Loureiro and Umberger2003 2005) To estimate willingness to pay (WTP) economist
must turn to hypothetical due to unavailability of markets for the good or service
Historically Contingent Valuation Method (CVM) has been used for the evaluation of
consumerlsquos preferences for those goods not available in the market
36
Contingent Valuation Method is a survey based method where respondents are
presented with a hypothetical payment scenario for pesticide free products in this study
pesticides-free fruits Methods used in contingent valuation include face to face
interview surveys and mail to elicit consumerlsquos willingness to pay for organic and
pesticide-free food Contingent valuation method based on a survey approach was
presented by SVCiariacy-Wantrup (1947) however contingent valuation method was
first time empirically used by Davis (1963) Due to its proficiency most of the
researchers and policy makers used this technique to elicit consumerlsquos valuation for
those goods which are not available in the market such as research concerns to
environment health and recreation (Jakobsson ampDragun 1996)
The classification of framework to measure WTP based on the data collection methods
are as presented in Figure 32 We employed contingent valuation method (CVM) to
measure householdslsquo willingness to pay for pesticides-free fruits among the different
available alternative methods in the literature CVM was the most widely used
approach (Hanemann 1984)
Figure 32 Classification framework of methods to measure willingness-to-pay
Source (Breidert Hahsler ampReutterer 2006)
37 Elicitation Techniques
According to Portney(1994)to draw out the value of good and service different
elicitation techniques are used to design CV question scenario It is the important part
37
of any CVM study The elicitation used in contingent valuation methods are of various
types The most popular ones are bidding game approach open ended payment card
and dichotomous choice approach
371 Bidding Game Approach
In this approach a bid is randomly assigned to each respondent from a list of
predetermined bids The assigned bid may be a lower bid or higher bid Respondents
are to answer the bid and the process is continuous until the highest positive response is
recorded (Randall et al 1974 as cited in Venkatachalam 2004) Since this approach
provides market like situation and the respondents can research their preferences so the
results obtained through this approach are quite better
372 Open-ended Elicitation Method
In open ended questions format respondents are asked to identify a single amount
without suggesting them any value Respondents are asked to give their opinion on
―How much they willing to pay for a certain attribute Mitchell and Carson (1989)
found certain drawbacks in using this question format They reported that this method
provides maximum no response no answer and outliers In this method respondents do
not know what value heshe has to select
373 Payment Card Approach
Another technique in contingent valuation method is the payment card approach In this
question format respondents are asked to select an amount in willingness to pay from a
checklist given in absolute value or in percentage of prices (Boccaletti ampNardella
2000 Lacaze Rodriguez and Lupin 2009)This approach is used for small sample
size However it has been noted that the respondents could easily be confused if the
survey is not carefully designed (Wang and Whittington 2005)
374 Dichotomous Choice Model
In this format two choices are provided to respondents ―Yes or ―No This format
resembles the market choice behavior It included single bounded double bounded and
multiple bounded questions format
38
A Single Bounded Method
The single bounded format was first used by (Bishop and Heberlein 1979) The
consumers are asked whether they would be willing to pay a single amount for a certain
goods having an extra quality attribute The answer expected might be ―yes or ―no to
the given amount This format is easy to use but it provides limited information for
willingness to pay amount and the bidding game stop after a single information
provided
Most of the research work done on willingness to pay has suggested that respondents in
contingent valuation methods do not have a single value of price but they might have a
range of economic values in their mind (Cameron ampQiggim 1994 Dobourg Jones-lee
and Loomes 1994)
B Double Bounded Method
In double-bounded questions format respondents are presented with follow-up
questions after asking the first question For example if respondentlsquos answered to the
first question is ―yes willingness to pay a $X the next question might be whether
respondents willing to pay $Y (typically $Y gt $X) On the other hand if respondents
say ―No the first question than heshe might ask whether the respondents willing to
pay $Z (typically $Z lt $X) This questionlsquos approach is also called doubled-bounded
referendum approach (Cameron ampQiggim 1994) In comparison with single bounded
model more statistical efficiency can be seen by estimating doubled-bounded
willingness to pay data with the help of interval based econometric model (Heinemann
et al 1991) Figure 33 shows double bounded choice format
This study used all the three question scenarios to elicit WTP for pesticide free fruits
39
WTP
Yes
wtp
1st bid
yes
wtp 2nd
higher bid
yes No
No
wtp 2nd lower bid
yes No
No
Figure 33 Double Bounded Choice formats
38 Empirical Estimation of WTP by Payment Card using Ordered Logit Model
Regarding discrete nature and ordinal ranking of the WTP variables in payment card
method an ordered logistic regression was applied as the most appropriate choice in
studying these issues (Green 2007) The WTP model can be written under latent
variable framework as follows
Where is an unobserved latent variable reflecting the WTP for pesticides-free fruits
for household i expressed in terms of utility to switch from the traditionally grown
fruits consumption to pesticide free fruits is a vector of parameters reflecting the
relationship between WTP captures a set of socioeconomic and
demographicvariables influencing WTP and is the unobserved disturbance term
reflecting stochastic differences between households not controlled for The
40
relationship between the unobserved and the observedoutcome for household
( =0 12hellipj) can be summarized as follows
It is presumed that ɛ is normally distributed across observation By normalizing the
mean and variance of ɛ to zero and one the following probabilities can be calculated
Where F () indicates distribution function and microlsquos are unknown parameters to be
estimated with β
A natural question arises that when a variable influencing outcome changes than how
this variable influences the probabilities of different outcome For example if age is a
factor which influence consumer willingness to pay different choices then how would a
personlsquos probability of being WTP different choices be effected if heshe was a year
older Aldrich and Nelson stated that the estimated coefficients only determine the
direction of the effect but not the magnitude The magnitude of ordered logit cannot be
simply interpreted but signs and statistical significance agree with linear regression
(Wooldridge 2001) To answer the above question and take the idea marginal effects
can be calculated The marginal effects show that how a change in explanatory
variables affects the probability of willingness to pay that consumers are willing to pay
for different WTP classes In this model the coefficients are not equal to the marginal
41
effects of explanatory variables on probabilities Since the marginal effects can be
calculated by the following equation
There are two broad Cumulative density function (CDF) choices Logistic density
function and standard normal density function The model is said to be ordered logit if
the distribution is cumulative standard logistic (F) and the model is said to be ordered
Probit if the distribution is cumulative standard normal (Φ) Results obtained from
both of these models are same only the difference is in the tail The logistic distribution
has heavier tail than the standard normal distribution As Green (2000) reported ―It is
difficult to justify choice of one distribution over other on theoretical grounds in most
applications it seems not much difference The results obtained from both models
may be quite similar because of the similar distribution However an ordered logit
model is applied in this study
Empirically we estimated ordered logit model where WTPj is an ordered dependent
variable with ten WTP price premium categories
Table 32 Payment card format
Price premium classes (PKR)
WTP
= 0
WTP
1-5
WTP
6-10
WTP
11-15
WTP
16-20
WTP
21-25
WTP
26-30
WTP
31-35
WTP
36-40
Above
40
Source Pre- tested field survey (2017)
42
39 Empirical Estimation of WTP using Double Bounded Dichotomous Choice
Model
For Dichotomous choice question Following Chen et al (2002) and Kimenju et al
(2005) a double bounded dichotomous choice model was used in this study to assess
householdslsquo willingness to pay and the influence of explanatory variables on
householdlsquos WTP a price premium for pesticides-free fruits This model was used
because the dependent variable was double dichotomous whether the respondents
would be willing to pay or not so they provide answer with ―yes or ―no Many
researchers used double-bounded dichotomous choice method in their research such as
(Ara 2002 Rodriguez et al 2007 Abdullah and Jeanty 2011 and Claudy et al
2011)
The double-bounded method confronts each respondent with two dichotomous choice
WTP questions (bids) The 2nd
bid value is contingent on the respondentlsquos reply to 1st
bid If the respondent responds in ―yes to the first bid (B) than the second bid (Bu) is
some amount higher than the first bid (Bu
gt B) If the respondent says ―no to the first
bid the second bid (Bd) is then some lower amount (B
d lt B) Thus there are the
following four possible outcomes for the double-bounded WTP question ―yes-yes
―yes-no ―no-yes and ―no-no
According to Hanemann et al (1991) the probability of answering ―yes-yes (Pryy) is
= )
Where Pryy is the probability of answering ―yes-yes WTP is the respondentlsquos
willingness to pay for the product and F is the cumulative distribution function with
parameter vector Similarly the probability for each of the other three outcome
responses is
]
43
Where and are the probabilities for saying ―yes-no ―no-yes and ―no-
no to the double-bounded question respectively Thus the log-likelihood function for
the ith
respondent can be written as
sum
(
)
(
)
Where
are binary valued (0 or 1) indicators and the formulas
for the corresponding response probabilities are given above The model was estimated
through maximum likelihood estimation method and the results were used to find out
the mean and individual WTP (s) for pesticides free fruits
Where ƒ(WTP) is a function X is a set of socio-economic characteristics are
coefficients and is error term The models were estimated using maximum
likelihood estimation method
391 Factors which could Influence WTP
As Kimenju et al (2005) has indicated WTP is influenced by householdlsquos knowledge
and perception in addition to price and socio-economic factors Moreover
householdlsquos WTP may be influenced by individuals tastes and preferences income
and perceptions on the products in addition to household and socio-economic
characteristics (Cranfield and Magnusson 2003)
A number of different explanatory variables were included in the WTP model These
include demographic variables regional variables and perceptional variables The
variables that are included may depend on the manner by which the data is gathered
(ie contingent valuation surveys experimental methods etc) Factors which
influence householdlsquos willingness to pay for pesticides-free fruits are formally specified
as
44
392 Bids Design
In this study hypothetical prices (bids) for double-bounded dichotomous choice model
were designed based on the prices available for conventional fruit in the market On
average (Rs100kg) To minimize starting bids bias bidding system was used in table
31 Respondents were asked different bid
Table33 Bid system for Pesticides free fruits
First bid High bid Low bid
10 20 5
20 30 10
30 40 20
40 Above 30
Source Field Survey (2017)
310Empirical Estimation of WTP using Linear Regression Model
For open ended questions data a linear WTP model was used to estimate WTP and
identified its determinants
sum
Where
= is the WTP of the jth household for Pesticides-free fruits
= Set of socioeconomic characteristics of the jth household
Factors effecting consumerslsquo willingness to pay for pesticides free fruits can be written
as
Willingness to pay is actually represents the demand of the household The difference
in both is only the consumer surplus If we suppose zero consumerslsquo surplus than the
two identities are the same Therefore willingness to pay in the above model showed
percentage of expenditure on pesticides free fruit of the total food expenditure The
explanatory variables included were age gender education householdlsquos size income
45
location health concern environment concern and awareness Since the dependant
variable in the model is continuous so the appropriate method of estimation was
ordinary least square (OLS)
311Description of Variables
Table 34 presents a list of explanatory variables used in estimation of willingness to
pay a price premium for pesticides-free fruits
Table34 Description of explanatory variables
Respondents willingness to pay
WTP ( Price Premium)
0= Not willing to pay
1= Willingness to pay 1-5
2= Willingness to pay 6-10
3= willingness to pay 11-15
4= willingness to pay 16-20
5= willingness to pay 21-25
6= willingness to pay 26-30
7= willingness to pay 31-35
8= willingness to pay 36-40
9= willingness to pay above
Age of the householdlsquos head
Age Age of the householdlsquos head measured in years
Gender of respondents (Dummy variable)
Gender 0= Female
1= Male
Householdlsquos head education
Education Education of the householdlsquos head in years
Member in each household
Householdslsquo Size In number including all family members
Households location 0 = Rural households
1= Urban households
Awareness Household knowledge regarding pesticides uses on fruits
where 1 shows aware respondents and 0 shows unaware
respondents
Income Income of the households in Pakistani rupees
Consumer attitude towards impact of pesticides on health
Health concern 1 if respondents concern to health 0 if not concerned
Consumer attitude towards impact of pesticides on environment
Environment concern 1 if respondents concern to environment 0 if not
concerned
46
1V RESULTS AND DISCUSSION
This chapter illustrates the major finding of this research endeavor These findings are
computed in the light of major objectives and hypotheses constructed for this research
The collected primary data was punched into the computer and was estimated
encompassing double bounded dichotomous choice model ordered logit model and
linear regression model in the STATA econometric software This chapter is further
bifurcated into three sections In the first section a descriptive statistics is computed to
elaborate the respondentlsquos traits of the study area that includes socio-economic and
demographic aspects as well Followed by the analysis of major attributes such as
attitudinal behavior perception about pesticides free fruit and householdlsquos consumption
behavior that has attain the specific objectives of this study The empirical results on
willingness to pay are underscored in section two Moreover the three different
questionnaires ie dichotomous choice open ended and payment card are adopted and
their results are discussed and compared with each other in section three
41 Descriptive Analysis
Descriptive analysis is a statistical tool that is used to summarize the collected data in
tabulated form The range of data mean value median standard error and variance
coefficients are highlighted via statistical analysis This helps the researcher and readers
to get understanding about the pattern of data This section consists of the descriptive
part of the analysis Socio-demographic characteristics such as age gender education
and other attributes of the respondents are shown in the tabulated form Moreover
socio-economic portfolio that includes income consumption and certain perception
along their attitudinal trend regarding organic and conventional fruits are given and
discussed
411 Demographic and Socio-economic Characteristics
This section demonstrates the demographic and socio-economic characteristics of the
respondents The information was gathered from 1000 household of the study area
47
Age of the householdrsquos head
Householdslsquo age is an essential demographic characteristic and an important factor that
can influence householdslsquo willingness to pay An average age of the household in
district Peshawar and Mardan is computed and given in Table 41 The computation
depicts that an average age of the respondents in Peshawar is reported around 40 years
while in Mardan an average age is observed as 54 years Result reveals a significant
difference in the mean age of rural and urban location of Peshawar with a probability of
(0001) Whereas no significant difference was found in householdlsquos age in urban and
rural region of district Mardan
Table 41 Age of the householdrsquos head (Years)
District Age of the Respondents
Mean Rural Urban T-test
Peshawar 3997 35382 42333 7217
(0000)
Mardan 5402 53188 55870 1104
(0136)
All 46995 47310 46659
Source Authorrsquos calculation based on Survey Data 2016-17
Educational Level of the Householdrsquos Head
An individual entails modern education about developments in technology science and
an array of other managerial skills that drives consumerlsquos behavior Education can also
play a pivotal role in consumerlsquos awareness while choosing improved quality of food
Therefore education can be considered as an imperative factor influencing consumerlsquos
decision to pay higher price for pesticides free fruit Several research studies carried out
across the globe have corroborated that an educated households with higher
qualification are more conscious while making purchasing decision and prefer to
choose pesticides free fruit
Keeping in view an education as a substantial factor persuading consumer behavior the
householdlsquos head education level was analyzed and is presented in Table 42The
descriptive statistics divulged that the mean educational level was observed as 978 and
1138 years of schooling of the household head in Mardan and Peshawar respectively
Estimates of t-test further depicts a significant difference in educational level in rural
48
and urban region of both districts with a p-value of (0001) and (0000) for Mardan and
Peshawar respectively These findings suggest a higher level of education in urban
households compared to rural households These results are in line with Shah et al
(2016)
Table 42 Educational Level of the Householdrsquos Head (Years)
Districts Educational Level
Mean Rural Urban T-test
Mardan 978 8782 12012 3780
(0001)
Peshawar 1138 7735 13257 8016
(0000)
All 1058 8436 12855
Source Authorrsquos calculation based on Survey Data 2016-17
Households Size in the Study Area
Householdslsquo size is an important demographic characteristic which shape households
purchasing behavior Large householdslsquo size increases the consumption without taking
quality in consideration The probability of choosing an improved version of fruit
quality decreases with an increase a member in a household Small size households are
more concerned about good quality of fruit
An estimation of household size data illustrates that an average household size in
district Peshawar and district Mardan was reported as 06 and 09 members respectively
The results shown in Table 43 have suggested no significant difference in householdslsquo
size in urban and rural areas of both districts The average householdlsquos size was
computed as 715 members These results are consistent with Shah et al (2016) who
depicted similar findings for household size in KP
Table 43 Householdsrsquo size of the Respondents (Member in Number)
District
Mean Rural Urban T-test
Mardan 863 8666 8548 0965
(0400)
Peshawar 567 6029 5484 -2122
(0018)
All 715 7796 6463
Source Authorrsquos calculation based on Survey Data 2016-17
49
Income of the Households
The household income level is one of the driving aspects that manipulate the
consumption and saving behavior of an individual Those societies where individuals
earn high income are usually deemed as food secured societies across the globe
however low income group of the poor societies are generally reported as food
insecure It is worth-mentioning that surge in an income can subsequently leads to
choose high quality food (that includes cereals fruits vegetables pulses and their
byproducts) by individuals Likewise householdlsquos income has considered as an
important determinant of willingness to pay for quality attributes such as pesticides
free
An income status of the households in the study area is outlined in Table 44 The mean
income of the Household was calculated as Rs62130 and 42430 in district Mardan and
Peshawar respectively There was a significant difference in the mean income of
respondents from urban and rural areas of both the districts The T-value of Mardan
region was signified as 6018 and had a probability of (0000) while in Peshawar region
was 950 with P-value of (0000)
Table 44 Householdsrsquo Income in Pakistanrsquos Rupee (PKR)
District
Mean Rural Urban T-test
Mardan 63130 5489855 8145161 6018
(0000)
Peshawar 42430 2923529 4922727 9504
(0000)
All 52780 4642718 5952577
Source Authorrsquos calculation based on Survey Data 2016-17
Householdrsquos Expenditure on Food
Food consumption expenditure is the monetary expense incurred by household to
purchase food items Such food expenditure is the key component of current
expenditure to buy consumable goods The data regarding householdlsquos expenditure on
food is estimated and is shown in Table 45 The mean expenditure incurred on food by
the household in Mardan and Peshawar was determined as Rs 49280 and 34860
respectively A significant difference in rural and urban householdlsquos food expenditure
has been reported The computed t-value observed as 425 and 743 with a p-value
0000 which implies that householdlsquos expenditure in urban region was higher as
compared to rural households
50
Table 45 Households expenditure on food (PKR)
District
Mean Rural Urban T-test
Mardan 49280 4511594 5854839 4256
(0000)
Peshawar 34860 2544118 3971212 7435
(0000)
Total 42070 3862136 4573196
Source Authorrsquos calculation based on Survey Data 2016-17
Note Values in parenthesis is P-Value
Householdrsquos Monthly Expenditure Share on Fresh Fruit
Expenditure share is an amount of income that is incurred by an individual on certain
goods out of total spending Households in the study area have allocated their income
share to make an expense for fresh fruits which is shown in Table 46 It has been
observed that in districts Mardan an average spending for fresh fruit was computed as
4172 (PKR) per month by the household Whereas expenditure share for fresh fruit by
Peshawarlsquos household was 3800 (PKR) which was less as compared to Mardan The
given t-values of the estimates confirm a significant difference in expenditure share
incurred for fresh fruits by rural and urban region households of both the districts This
significant difference implies that householdlsquos expenditure share for fresh fruit in urban
area is higher as compared to rural households
Table 46 Householdrsquos monthly expenditure share on fresh fruits (PKR)
Respondents
Mean Rural Urban T-test
Mardan 4172 3798551 5003226 3055
(0000)
Peshawar 3800 2411765 4515152 5103
(0000)
All 3986 3340777 4671134
Source Authorrsquos calculation based on Survey Data 2016-17
51
412 Householdrsquos Awareness and Perceptions about Pesticides Application on
Fruit
This research endeavor was mainly designed to assess the consumer willingness to pay
for pesticides free fruit Therefore it was pertain to glean data about their awareness
about pesticide use on locally produced fruit in the study area These fruit include
Apple Peach and Mango Due to irrational use of pesticides environmental hazards are
also reported by previous research studies therefore there respondents were asked about
their perception about environmental hazards Major findings about the aforementioned
aspects are underscored in Table 47 which reveals that 61 percent of respondents have
a perception that there is an irrational and intensive use of pesticides on fruit by the
local fruitlsquos farmers Around 88 percent of the respondents perceived environmental
and health concerns over pesticides residues in food Similarly 91 percent of the
respondents believed that farmer should engage in environmental friendly agricultural
production practices which have a minimum adverse impact on health and the
environment
However the overall results indicate that sampled households were not entirely
cognizant about an intensive use of pesticide on local fruits however they were
correctly perceived over the impacts of pesticides on human health and environment
Table 47 Householdrsquos Awareness and Perceptions of Pesticides use on Fruit
Grown
Statements Agreed Disagreed
Local farmers are intensively using pesticides on
Apple Peach and Mango fruits
61 39
I feel the use of pesticides in agriculture has
negative effect on the environment
881
119
I am concerned about pesticide residue in our
food supply
876 124
I believe farmer should engage in environmental
friendly agricultural production practices with
minimum impact on human health
901
99
Source Authorrsquos calculation based on Survey Data 2016-17
52
42 Empirical Results of this Research Endeavour
The empirical analysis of the gleaned data was made to achieve the major objectives
and to address the research questions of this research endeavor Major estimates on
―willingness to pay for pesticide free fruits have been made and conferred in this
section Different elicitation techniques were employed to assess householdlsquos
willingness to pay price premium These estimation techniques encompassed double
bounded dichotomous choice model ordered logit model and linear regression model to
appraise dichotomous choice payment card and open ended question
421 Distribution of responses on householdsrsquo willingness to pay
(WTP)
Householdlsquos preferences to pay higher prices for pesticides free fruit were investigated
and highlighted in Figure 41 which demonstrates the distribution of response about
WTP price premium for pesticide free fruit in the survey area The households were
asked whether and how much they were willing to pay higher prices for pesticide free
fruit than conventional produced fruit The primary data estimates confirm that about
935 percent of respondents are willing to pay a higher price premium for pesticide free
fruit in the sampled districts These results are similar with the previous research study
undertaken by Hayati et al(2017) in Iran by using contingent valuation method
Furthermore an ordered logistic regression model was employed which depicts that out
of 394 respondents who were interviewed 97 percent of respondents were willing to
pay price premium for pesticides free fruits and vegetables These results are supported
by Nandi et al(2017) who conducted a study in India by using contingent valuation
method and applying binomial logistic regression model Data was obtained from 250
respondents and reported that more than 90 percent of the respondents were willing to
pay higher price for better quality fruits and vegetables Decomposing the responses 35
percent of the households are willing to pay 16 to 20 percent higher prices for
pesticides free fruits than the conventional 24 percent willing to pay 6 to 10 percent
higher price and 65 are not willing to pay higher price A plausible reason for higher
WTP for significant portion of the population is due to awareness As most of the
respondents in the study area were aware they may have some knowledge about
adverse effects of chemical pesticides Therefore they were willing to pay higher prices
for pesticide free fruits if available
53
NotWTP
1_5 6_10 11_15 16_20 21_25 26_30 31_35 36_40 Above40
650 4
24
9
35
6 550 150
550 3
Figure 41 Distribution of willingness to pay responses (Rskg)
422 Householdrsquos willingness to pay using ordered logit model
Estimated parameters and coefficients of ordered logit model are presented in table 48
Model is specified on the bases of R2 estimated from restricted and unrestricted
likelihood function The likelihood ratio test is used to test the null hypothesis that the
overall effect of coefficients is zero The p-value is 0000 shows that the model is
statistically significant at 95 level of significance The estimated model with a scaled
R2
about 022 which is in consist with the generally R2 value mostly observed in cross
sectional data In cross sectional data like the one used for this study the value of
Pseudo R2 is typically low The conventionally computed R
2 is of limited value in those
models having qualitative nature In most cases this value is low and use of coefficient
of determination as a summary statistics should be avoided in those cases where the
response variables are qualitative (Gujrati 1995)This pseudo R2 cannot be interpreted
separately or across the dataset but could be used when evaluating multiple models
which predict the same results on the same set of data It has only meaningful when
compared to some other pseudo R2 in the same data on the same type and predicting
the same results In this case pseudo R2 indicates which model better predict the results
(Bruin J 2006)This value pointed out overall ability of the model for the correct
prediction of willingness to pay of the consumer based on explanatory variables The
null hypothesis that the joint influence of explanatory variables was zero on the bases
of chi-squire value null hypothesis was rejected
Predicted probabilities and marginal effects are calculated separately because of the
non-linear behavior of logit model Most of the coefficients are statistically significant
54
The variables like householdlsquos age education level of the respondents awareness
income and health concern variables and household size are significant at five percent
The negative sign showed that as the size of numbers in a family increased the log
odds for willingness to pay decreased The same was reported in a relevant study by
Govindasamy and Italia 1999 carried out a research study in New Jearsy to provide
opinion on organic produce Objective of the study was to evaluate demographic
characteristics caused consumers to pay higher prices to obtained organic food
products Findings of the study showed female respondents consumer with higher
annual income and younger individual were more likely to pay higher premiums for
organic produce Our finding shows variables gender was not significant because most
of the respondents in the study area were male
Positive sign on income showed that consumer with higher income were more likely be
willing to pay higher prices for pesticides free fruit It has been also noted that with
increased in income purchasing power of the respondents increased that changed the
purchasing pattern of the respondents This was also confirmed by Roitner-
Schobesberger et al(2008) They conduct a study on consumerslsquo perception regarding
organic food in Bangkok and found that more than a third of the 848 respondents
reported having purchased organic fruits or vegetables and the main reason for buying
organic food was the expectation of the consumers that the food are healthier and
environmentally friendly The respondents who purchased organic vegetables were
those having more aged higher income and more education
Findings of our study also showed that respondents with friendly attitude regarding
environment would be willing to pay higher price for such fruit These results were in
line with Haghjou et al (2013) carried out a research study on factors effecting
consumerlsquos potential willingness to pay for organic food in Tabriz Iran By adapting an
ordered logistic regression model results showed that factors like income of the
respondent family dimension environmental concern and wholesome diet besides
consumerslsquo awareness were significantly increases consumerslsquo willingness to pay for
organic food Results revealed that consumers with higher care about their health were
more likely to be willing a higher price for such pesticides free fruit
55
Table 48 Factors influencing respondent householdrsquos WTP (Ordered logit
model)
Variables Estimated
Coefficient
Std Error Z-ratio P-value
Age 00698807 00147356 474 0000
Gender -02469171 08432503 -029 0770
Education 00821316 00223365 368 0000
Household size -00975395 00502583 -194 0052
Location
Urban
02783974 02961745 094 0347
Income 00000277 000000502 551 0000
Health concern 2600153 05346547 486 0000
Environment
concern
03993532 0574947 069 0487
Awareness 09595126 02836742 338 0001
Source Authorrsquos calculation based on Survey Data 2016-17
Log likelihood = -29863 Pseudo R-squared = 020 LR chi2 (9) = 15849
Number of observation = 200 Probability gt chi2 = 0000
Note indicate statistical significance at 5
56
423 Predicted probabilities and Marginal effects of ordered logit
model
Predicted probabilities and marginal effects of explanatory variables are underscored in
Table 49 These predicted probabilities indicate a strong likelihood that the average
respondent is willing to pay more prices for pesticides free fruit Producers usually
expect high price for their production so if they sought high premiums than marketing
efforts would be diverted to such fraction of consumer where they would probably
willing to pay high price than the conventional price Alone these predicted
probabilities are not too much informative what is more informative is the impact of a
change in predictors on the predicted probabilities (ie marginal effects)
Due to the non-linear behavior of ordered logit model to measure the impact of a
change in particular independent variable on householdslsquo willingness to pay marginal
effects of explanatory variables are calculated Marginal effects show the change in
predicted probabilities for different class of willingness to pay regarding an average
household concerning the particular variable For qualitative choice model estimated
coefficients affect marginal probabilities These marginal probabilities (probability
derivatives) were calculated from the estimated model They measure the change in the
probabilities of each willingness to pay outcome with respect to change in each
explanatory variable The sum of marginal probability is zero in each row because an
increase of the probability in one category must be set off a decrease in the other
category or categories
For continuous variables the interpretation is simple and straight forward Keeping all
other variables fixed a unit change in explanatory variable will results an increase or
decrease in the predicted probability equal to the degree of marginal effect of the stated
variable However in case of binary variable marginal effects shows change in
predicted probabilities based on whether the respondents falls in that category or not
Our results suggest some meaningful insight into the role of socio-economic and
demographic variables on householdlsquos WTP for pesticides-free fruit
Age has a positive and significant influence on householdlsquos WTP for pesticides free
fruit The results show that with an increase in age WTP also increases This finding is
consistent with other researchers who reported that WTP of organic and healthy food
57
increases with age beyond 30-40 years (Hayati et al 2017 Boccaletti and Nardella
2000 and Zellner and Denger 1989)With increase in age people are more concerned
about their health as they may perceive that they are prompt to low immunity and
higher risk for diseases With realization of aging they are more likely to pay higher
price premium for safer foods Our result suggests that the marginal effects of age is
negative for first three WTP classes (ie Not willing to pay WTP 1-5 percent WTP 6-
10 percent and WTP11-15 percent) while positive for the rest of the four classes in
upper tailsmdashindicating that higher age is associated with higher likelihood of paying
premium on upper tails The highest marginal effect of age 0007 is found for category
16-20 percent higher premium This indicates that an increase in age by one year is
associated with 07 percentage point increase in likelihood of paying 16-20 percent
higher premium for pesticides free fruits over conventional These results are in
contrast with Cranfield and Magnusson (2003) conducted a research study on
consumerlsquos willingness to pay for pesticides free food products in Canada by using
contingent valuation method and reported that younger consumers have the strongest
marginal effects (those consumers had an age less than 35 years younger) followed by
those consumers had an age less than 50 years Results showed younger consumers pay
more for healthy foods as compared to older in case of Canadian consumers However
our results are in consistent with several other studies (Hayati et al 2017 Zellner and
Denger 1989) finding a positive influence of age on consumerlsquos WTP for organic and
healthy foods In another study Boccaletti and Nardella (2000) conducted a study on
consumer willingness to pay for organic produce in Northern Italy By adapting an
ordered logit model the impacts of relevant explanatory variables were reported
Results suggests a positive impact of consumerlsquos age on WTP a price premium
The marginal effects for gender indicate female respondents are less likely to be willing
to pay more prices or likely to pay less amount for pesticides free fruit Female
respondents like to pay a price premium but less as compared to male respondents (no
premium or 1 to 5 percent premium) One can observe that most of the respondents in
the study area were male which support our findings These results are in contrast with
Cranfield and Magnusson (2003) The probability of marginal willingness to pay
decreased by (-0001 percent) for higher amount
58
Another significant variable affecting WTP in our study is the years of education of the
householdlsquos head Our result suggests a positive relationship of education on WTP for
pesticides free fruit Households with more formal education have better understanding
of the adverse effect of consuming fruit contaminated with pesticides So they may
better understand the benefits of pesticides free fruit Marginal effects of education are
positive as WTP progresses for higher classes (categories) beyond 16-20 percent (table
49) Among these the highest effect of education 0020 is shown for WTP category
36-40 percent which implies that an additional year of schooling of the household head
increases likelihood of paying 36-40 percent higher price premium for pesticides free
fruit over conventional by around 2 percentage These results are in line with the
findings of Haghjou et al (2013) who found a positive effect of education on WTP for
organic food products in Iran However these results are in contrast with Boccaletti and
Nardella (2000) who reported an inverse relation of consumer education with WTP a
price premium
We also found a significant effect of the household size and household income on WTP
for pesticides free fruit The effect of household size is negative Marginal effect in
table 49 shows that the highest negative effect of 012 is shown for 16-20 WTP
categories which indicate that an additional household member decreases the likelihood
of paying 16-20 percent higher premium for pesticides free fruits by 12 percent One of
the convincing reasons for this negative effect of household size can be the householdlsquos
budget constraint Budget constraint limits the extent to which consumer pay higher
prices for food products (Cranfield and Magnusson 2003) Our findings are consistent
with previous studies Ariyawardana et al (2009) conduct a study on consumerslsquo
willingness to pay for organic ethnic specialty produce in USA reported that marginal
effect of price premium decreases with an increase in householdslsquo member
In regards to income households with higher income are more willing to pay higher
premiums for pesticides free fruit Income always played a significant role in changing
consumerlsquos behavior to change hisher decision from not willing to pay or less willing
to pay to higher willing to pay for organic products Households in highest income
class showed a strong propensity to pay more prices Marginal effects of income for the
first four classes emerged negative Our results suggest a strong propensity to pay
higher prices as household income increases Our marginal effects of income show a
59
monotonic increase in the income effect as WTP premium level progresses beyond 16-
20 percent It implies that at low level of income households are unwilling to pay more
but with rise in income households are ready to pay higher premium for pesticides free
fruit a significantly higher magnitude is shown for the highest category (010 income
coefficient for more than 40 percent premium) Overall it clearly suggests that
household with higher level of income would pay more prices for pesticides free fruit
These results are in line with Hayati et al (2017) and Cranfield and Magnusson (2003)
who found that an increase in income increases purchasing power of consumer which
results a change in purchasing pattern Boccaletti and Nardella (2000) conducted a
study on consumerslsquo willingness to pay for pesticides free fresh fruits and vegetables in
Italy and found that willingness to pay is significantly and positively related to income
We also included variables indicating health and environmental concern of the
respondent Results indicated that the more the households were concerned about the
impact of pesticides in fruits on health and environment the more the probability of
willingness to pay The marginal effects for health concern is negative for first three
willingness to pay classes (ie not willingness to pay willingness to pay 1_5 wiliness
to pay 6_10 percent) and for environment concern it is negative for first four classes
while for the remaining WTP classes it is positive Strikingly the highest magnitude of
marginal effects up to 041 among all variables is found from the health concern
variable On one hand a significantly positive effect suggests that the health concerned
householdslsquo are more likely to pay higher premium for WTP than those not concerned
A magnitude of higher scale on marginal effect on the other hand strongly supports
the distinct difference in WTP between health concerned and non-concerned
individuals Overall this also highlights the importance of this variable on modeling
WTP for pesticides free fruits For example a 041 marginal effect of health concern
variable on 16-20 premium category of WTP suggest that health concerned individual
are 41 percent more likely to pay 16 to 20 percent higher premium for pesticides free
fruit as compared to non-concerned households The effect of health concern on WTP
is consistent and distinctly higher in magnitude from previous similar studies in other
countries For example Hayati et al (2017) found that health concerned individual were
26 percent more likely to pay 16 to 20 percent in Iran This indicates that health
concern factor is an important motivation to premium price for pesticides free fruits in
Pakistan
60
Finally we found a significant effect of awareness variable Recall that our awareness
variable is represented by dummies Our result suggests that the households in the study
area were aware of the fact that farmers are intensively using pesticides on fruits so
they were willing to pay more price premium for pesticides free fruits Marginal effects
show a negative signs for modest price premiums on WTP categories 1-5 and 6-10
while positive signs for all higher categories 16-20 21-25 26-30 31-35 36-40 and
above 40 This may indicate that households are more aware of the adverse impact of
pesticides on health and environment Probably awareness comes from education as our
results shows that the average years of education is higher in the study area
424 Matrix of Correlation Coefficient
Income is generally related with age and education of the households in the study area
(table 410) This result may indicate that more aged households have higher income
and advanced education Households in high income and more educated class shows
high propensity of willingness to pay for pesticides free fruit As the results indicated
that more aged people do care more about their health and high class income
respondents have more discretionary income to spend on fruit Overall the results show
that explanatory variables are not highly correlated hence no problem of
Multicollinearity was diagnosed in the data
61
Table 49 Predicted probabilities and marginal effects from the estimated ordered logit model
Not WTP
()
WTP 1-5
()
WTP 6-
10 ()
WTP 11-
15 ()
WTP 16-
20 ()
WTP 21-
25 ()
WTP 26-
30 ()
WTP 31-
35 ()
WTP 36-
40 ()
WTP
Above 40
()
Predicted Probabilities
00122 00179 02616 01183 04434 00620 00510 00110 00201 00026
Marginal effects
Age -0000 -0001 -0011 -0002 0007 0003 0003 0006 0001 0001
Gender 00039 00054 00623 0015 -0033 -0019 -0019 -0004 -0008 -0001
Education -0000 -0001 -0013 -0002 0010 0003 0003 0010 0020 0002
Household size 0002 0002 0012 0004 -0012 -0004 -0004 -0001 -0020 -0002
Urban rural -0003 -0004 -0049 -0009 0031 0013 0013 0002 0005 0001
Income -0003 -0004 -0004 -0010 0003 0001 0001 0002 0005 0010
Health concern -0103 -0113 -0372 0030 0410 0100 0100 0014 0030 0003
Environment
concern
-0005 -0007 -0072 -0010 0052 0017 0015 0003 0006 0008
Awareness -0014 -0020 -0120 -0030 0122 0045 0041 0010 0020 0002
Source Authorrsquos calculation based on Survey Data 2016-17
62
Table 410 Matrix of correlation coefficient between explanatory variables
Source Authorrsquos calculation based on Survey Data 2016-17
Variables Age Gender Education Location Households
size
Income Health
Concern
Environment
Concern
Age 10000
Gender -00193 10000
Education 00872 -00147 10000
Location 00725 00689 01047 10000
Households size -00294 00277 -00161 -01704 10000
Income 04123 -00690 02133 - 00405 01583 10000
Health Concern 01604 00224 02229 00660 - 00422 02102 10000
Environment Concern -00786 00944 -00245 00570 -00059 -00350 00118 10000
63
43 Householdrsquos willingness to pay using double bounded dichotomous
choice model
The double bounded dichotomous choice model was used to find out how much
households are willing to pay a price premium for pesticides free fruit The model has
been proved useful for the determination of the contribution of independent variables in
householdslsquo willingness to pay for pesticides free fruit Mainly those factors that
influenced the householdslsquo willingness to pay are age of the householdlsquos head
householdlsquos size gender awareness income head education and their perceptions
The Likelihood Ratio test statistic the Wald Chi2 value is 27228 with a p-value of lt
0001 confirmed that the model with all the explanatory variables has good prediction
power of householdslsquo choice and WTP for pesticides free fruit (table 411) The
estimated coefficients for most of the explanatory variables are statistically significant
and have signs consistent with prior expectations Headslsquo characteristics such as age
education level and awareness of pesticides use on fruits perception of health and
environmental concerns of pesticides are the most import determinants of the
householdlsquos WTP for pesticides free fruit Householdlsquos income and number of
individuals have significant effect on their price premium for fruits free of pesticide
residue
The coefficient for Age is positive and its value is 0294 which reveals that a one year
increase in headlsquos age would increase householdlsquos willingness to pay a price premium
of 0294 rupees for pesticides free fruit at constant level of other variables This
generally implies that household headed by an old individual has strong preferences
and high WTP for pesticides free fruits as compared to others These results are
supported by Vidogbena et al 2015 reported a positive significant effect of consumerslsquo
age WTP in Benin for minimized pesticides residues Results suggest older households
are more concerned about health benefits associated with fresh pesticides free food
This positive correlation of householdslsquo age and Willingness to pay a high price
premium for pesticides freeorganic food is also in agreement with findings of (Anifori
2013 Haghiri et al 2009 Misra et al 1991) However these findings are in contrast
with (Govindasamy and Italia 1999) carried out a research study on consumerslsquo
willingness to pay for organically produced fresh produce in New Jersey to find
64
opinion on organic produce and found that all the three age category younger people
like to pay a high price premium
Headlsquos education level has a positive significant association with householdlsquos
willingness to pay a price premium for pesticides free fruit A likely explanation is that
education increases consumerslsquo awareness regarding the adverse effect of pesticides on
human health and natural environment Consumerslsquo with a high level of education can
better understand the benefits attached to the consumption of food produced without the
use of pesticides These results are also in line with Vidogbena et al (2015) studied
consumerslsquo willingness to pay for cabbage with minimized pesticides residues in
Southern Benin and reported that consumers with high level of education were
positively affected WTP In some other related studies Darby et al (2008)Liu et al
(2009) and Misra et al(1991) also confirmed positive association of consumerlsquos
education and willingness to pay price premium for pesticides free organic fruits
Headlsquos awareness of pesticides use on local fruits production and their health and
environmental concerns over pesticides use are also the most important determinants of
householdlsquos willingness to pay for pesticides free fruits As discussed in the previous
section householdlsquos awareness and perception of pesticides use on fruits and their
education level are connected and have significant influence for creating market for
pesticides free organic fruits
Householdlsquos demand for best quality fruit is expected to rise with increase in their
income level The estimated coefficient for householdlsquos income is positive which
implies direct association with their price premium for pesticides free fruits and is
consistent with general theory and our prior expectations In future with economic
growth increased in per capita income is expected and this increase in per-capita
income will increase the demand for pesticides free fruits
We found a negative significant effect of the householdlsquos size on WTP for pesticides-
free fruit As the number of members increases household become less likely to pay a
price premium for pesticides free fruit More mouths to feed reduces budget for best
quality fruits as noted previously by (Oyawole et al 2016 Ghorbani and Harnraz
2009) In another study Govindasamy et al (2001) findings suggests that each
member in a lager household has less discretionary income to spend compared to a
65
smaller household and may consider paying a premium for integrated pest management
a luxury
Table 411 Factors influencing consumersrsquo WTP (double-bounded dichotomous
choice model)
Variables Coefficient Std Error z-statistic Pgt|z|
Constant -8614601 3640408 -237 0018
Age 0294755 00638171 462 0000
Gender -0133885 - 4628428 003 0977
Education 04521878 01574002 287 0004
Income 00001208 00000284 426 0000
Householdlsquos
Size
-06690743 2499154 -268 0007
Health concern 6165207 1882292 328 0001
Environment
concern
6739389
2053786 328 0001
Awareness 8194937 1693789 484 0000
Urban Rural 02295739 1339268 017 0864
Source Authorrsquos calculation based on Survey Data 2016-17
Log likelihood = -61347 Number of observation = 600
Wald chi2 (9) = 27226 Probabilitygt chi2 = 0000
Note indicate statistical significance at 5
431 Householdsrsquo estimated Mean WTP
The estimated model was used to derive each householdlsquos willingness to pay price
premium for pesticides free fruits Table 412 and figure 42 presents the summary
statistics for the estimated price premium The Table shows that householdlsquos estimated
mean willingness to pay price premium is around 26 rupees with a standard deviation
of 106 and the estimated minimum and maximum price premium are 0 and 445
rupees respectively These statistics reveals that householdslsquo on average are willing to
pay 26 percent more price premium for pesticide-free fruits than the existed market
producing pesticide free fruits
66
2
125 115
38
325
35
-5
0
5
10
15
20
25
30
35
40
45
0 1-10 11-20 21-30 31-40 gt40
Fre
qu
en
cy o
f th
e h
ou
seh
old
s
WTP bins
Table 412 Households mean estimated WTP
Mean Std Dev Min Max
WTP 25798 10601 0 44511
Source Authorrsquos calculation based on Survey Data 2016-17
Figure 42 householdsrsquo estimate WTP bids
432 Households Response to First Bid (Amount)
Table 413 and figure 43 shows households response to first bid of the WTP question
The Table clearly show the sensitivity of a householdlsquos yes - no response to the bid
amount As the bid amount goes up the probability of acceptance is expected to
decrease Results show that higher bids reduced the likelihood of acceptance For
example for a bid amount of Rs10 as price premium for pesticides free fruits 8833
percent of the households are willing to pay while it dropped to 222 percent when the
bid amount is increased to Rs40 which is consistent with the standard theory
67
0
01
02
03
04
05
06
10 20 30 40
Table 413 Householdsrsquo Response to First Bid (Amount)
Households
with YesNo
response
First bid amount (PKR)
10 20 30 40
Households
with No
response
21 (1167) 24 (2581) 141 (5732) 63 (7778)
Households
with Yes
response
159 (8833) 69 (7419) 105 (4268) 18 (2222)
Total
Households
180 93 246 81
Source Authorrsquos calculation based on Survey Data 2016-17
Figure 43 Probability of WTP given bids
44 Post Estimation Diagnostic Test
The model was tested against Multicollinearity by using (variance inflating factor
criteria) and for Heteroskedasticty (Breusch-Pagan test) and the results are presented in
table 414 Rule of thumb for VIF is that if the value is ge 10 than the problem of
Multicollinearity is severe According to our findings the mean value of variance
inflating factor is 114 less than the critical value suggests that there is no
Multicollinearity problem in the model Breusch-Pagan test is used for detecting
Heteroskedasticty problem The (χ2) value is 066 and p- value is 041 This p-value
suggests that the probability of rejecting the presence of Heteroskedasticty is 41percent
68
Table 414 Diagnostic test results
Problems Diagnostic Test Mean value P-value
Multicollinearity VIF 112 _
Heteroskedasticty Breusch-Pagan 066 041
Source Authorrsquos calculation based on Survey Data 2016-17
441 Householdsrsquo willingness to pay by using linear regression model Results of householdlsquos willingness to pay for pesticides-free fruits using linear
regression model is shown in table 415 Variables such as age education awareness
income householdslsquo size and consumer perceptions regarding health and friendly
environment are significantly influencing consumerslsquo WTP for pesticide-free fruits
Age has a positive and significant influence on willingness to pay ie the result shows
that with an increase in age willingness to pay also increases This result is slightly
different from few findings of other researchers who reported a high WTP in young and
middle age consumerslsquo (30-40) years Govindasamy and Italia (1999) But there are
some logical reasons behind our findings As young people are not so much health
conscious but with getting older and older the disease of aging caught their minds and
they keep more care about their health Another reason with an increase in age
education and experience increases as a result an increase in WTP for pesticides free
fruits These results are supported by Muhammad et al (2015) found a positive and
significant association between age and consumer willingness to pay Their results was
supported by the fact that young individual health consciousness is a rare phenomena
but as the people get older and older many diseases related to health induce them to
pay more attention towards safe and healthy food such as pesticides free organic food
Education and monthly income are the other factors positively and significantly
influencing householdslsquo WTP Households with more formal education have more
concern and better understanding of the risk associated with consuming food
contaminated with pesticides So they better understand that fruits produced without the
use of chemicals pesticides could be beneficial for health Results show that a one year
increase in formal education householdslsquo WTP increases by rupees 025 for pesticides
free fruit as compared to those having no education In regards to income respondents
with higher income are willing to pay more price premium A one rupee increase in
income will increase householdlsquos WTP by 0001 Muhammad et al (2015) reported a
69
significant effect of income and education on householdslsquo stated willingness to pay for
organic food in Arab Emirates consumer
Householdslsquo size is usually reported as negative influence on WTP Findings of our
study show a negative significant influence on householdlsquos willingness to pay This is
likely due to larger households requiring additional funds to satisfy households demand
for pesticides free fruit which may induce households to buy conventional fruit Other
reason may be as with limited resources feeding more mouths is increasingly difficult
These results are in contrast with Muhammad et al (2015) conducted a study on
factors affecting consumerlsquos willingness to pay for certified organic food products in
United Arab Emirates and reported a positive relationship of willingness to pay and
householdlsquos size Usually householdslsquo size is large in Arab Emirates and hence more
earning resources compared to small households which support their findings Our
finding shows a decrease of 085 rupees by an addition of one member in a household
Other important variables are householdslsquo concern regarding health and environment
Results show that respondentslsquo are highly concerned about residual effect of pesticides
on human health and environment Our results support these findings by positive WTP
Table 415 shows householdslsquo concerned regarding health and environment Results
suggest that households with more concerned for health and environment are willing to
pay Rs582 and Rs020 respectively higher prices for pesticides free fruit compared to
those not concerned
Finally we found variable awareness positively and significantly influencing
householdslsquo WTP for pesticides free fruit in survey area The result shows that more
aware households are willing to pay more price premium compared to unaware
households Awareness usually increases with education and age as can be evidence
from our findings a positive and significant influence of education and income on
householdlsquos WTP When households education level and age increases their awareness
regarding pesticidelsquos negative impact on health increase and hence an increase in WTP
for pesticides free fruit
70
Table 415 Estimated parameters using liner regression model
Variables Coefficient Std Error t-Statistics P-value
Constant -6174109 - 4353038 142 0158
Age 02348861 00467651 502 0000
Gender -2828394 3096026 - 091 0362
Education 0243413 00772618 315 0002
Income 00001237 00000157 790 0000
Householdlsquos
size
-03936806 01755667 -224 0026
Health concern 5567941 1465789 380 0000
Environment
concern
02999708 2023651 015 0882
Awareness 3567843 1001883 356 0000
Urban rural 0587075 1047051 056 0576
Source Authorrsquos calculation based on Survey Data 2016-17
Note indicate statistical significance at 5
No of observation = 200 F (9) = 2859 Probgt F = 0000 R-squired adjusted = 055
45 Comparison of elicitation questions formats Mean WTP by using double dichotomous payment card and open ended elicitation
format are reported in table 416The willingness to pay evaluated using average values
for the explanatory variables are Rs2576 for double bounded 1632 is for payment
card and 1437 for linear regression Results indicated that householdslsquo evaluated
through double dichotomous choice payment card scenario and open ended format are
willing to pay 26 16 and 14 more price for pesticides free fruits in the study area
These results are in line with Ngo et al (2013) conducted a study on consumerslsquo
willingness to pay for organic vegetables in Vietnam and found 70 more price
premium Rodriguez et al (2008) carried out a research study in Argentina on
consumerslsquo willingness to pay for organic food products and reported that consumers
were willing to pay a higher premium of 87 for leafy vegetables Mean willingness to
pay for double dichotomous model was calculated by maximum likelihood estimation
mentioned in the model while for payment card and open ended format logit regression
of response on bid amount was used All mean WTP values are significantly different
71
from zero and are different across the three questions format The probability (Plt
0000) between double bounded open ended and payment card method shows a
significant difference in estimated mean values of all the three questions elicitation
formats A t-value of 1483 250 and 1222 means that the mean values calculated
through different methods are significantly different from each other
Table 416 Mean willingness to pay comparison from CV question format
CV questions format Open ended
Mean WTP (1437)
Payment card
Means WTP (1632)
Payment card
Mean WTP (1632)
MD (194)
t-value (250)
P-value (0006)
--------
Double bounded
Mean WTP (2576)
MD (1143)
t-value (1483)
P-value (0000)
MD (949)
t-value (1222)
P-value (0000) Source Authorrsquos calculation based on Survey Data 2016-17
1MD = Mean difference 1US$=105 PKR in 2017
451 Response rate for zero WTP
Table 417 shows householdlsquos response rate to different elicitation formats The
response rate of payment card format is more than both DC and OE questions formats
Results show that 87 of the respondents respond to the willingness to pay question for
payment card method For dichotomous choice the response rate is 58 and for open
ended respondentslsquo response rate is 46 Taken together these results suggest that the
payment card format is easy for valuation task faced by respondents and lead to
efficiency in data collection
Table 417 Comparison of response rates by CV question format
Percent Response
to WTP question
Double dichotomous
choice
Payment card
method
Open ended
method
Yes 5850 87 4650
No 4150 13 5350
Source Authorrsquos calculation based on Survey Data 2016-17
72
46 Discussion about Major Findings This study was design to explore householdlsquos preferences and willingness to pay for
pesticides free fruit in Khyber Pakhtunkhwa Pakistan For this study a detailed
questionnaire was designed to obtained information from the households on their socio-
demographic characteristics perception regarding pesticides used on conventional fruit
and their willingness to pay a price premium for pesticides free fruit The overall
objective of the study was to know householdslsquo willingness to pay a price premium for
pesticides free fruit such as Apple Peach and Mango In response to willingness to pay
question 93 percent of the households were willing to pay a price premium while a
negligible portion were unwilling to pay any premium for pesticides free fruit Out of
total WTP 35 percent of the households were willing to pay16-20 percent higher
amount for pesticides free fruit
With regards to gender status of the households findings of the research showed most
of the respondents in the study area were male and a minor portion were female
Variable gender was not significant in this study because of the area structure where
male households are the primary purchaser of householdlsquos food items In this research
we found that majority of the respondents were educated most of them were highly
educated while a negligible portion of the respondents had no formal education The
mean education in Mardan and Peshawar was almost 10 and 12 years of schooling
respectively A significant difference was observed in urban and rural householdslsquo
education level in both the districts
Householdslsquo expenditure on food and fresh fruits were also calculated The mean
expenditure on food in district Mardan was PKR- 49280 and in district Peshawar was
PKR- 34860 Based on t-test a significant difference was observed on the consumption
of fresh fruit in urban and rural areas of the two districts Total expenditure on fresh
fruits in Mardan and Peshawar was 3340 and 4671 respectively Based on findings of
the study it could be concluded that respondents in urban region spent more income on
fresh fruit and consume more fresh fruits compared to rural region
Householdslsquo awareness of pesticides use on locally produced fruit such as Apple
Peach and Mango and their health and environmental concerns over pesticides use
were estimated The results revealed that 61 percent of the respondents were agreed that
local farmers use intensive pesticides on fruit Around 88 percent of the respondents
perceived environmental and health concerns over pesticides residues in food
Similarly 91 percent of the respondents believed that farmer should engage in
73
environmental friendly agricultural production practices which have a minimum
adverse impact on health and the environment These results induced households to pay
higher prices for such pesticides free fruit if available in the market The overall results
indicated that sampled households were not fully aware of the intensive pesticides use
on local fruit however they were correctly perceived over the impacts of pesticides on
human health and environment
The empirical findings of the study revealed socio-demographic characteristics had a
significant influence on householdslsquo willingness to pay a price premium for pesticides
free fruit Results showed more aged householdslsquo head were willing to pay more price
premium This is supported by the fact that older people are more health concern
compared to young individual Householdslsquo head education level also played a positive
and significant role with high education consumers seems slightly more willing to pay
These results are in line with Haghjou et al (2013) Householdlsquos size was negatively
influencing householdlsquos WTP and accord with the expectation Due to income
constraint with increase a member in a household will decrease WTP for pesticides-
free fruit because feeding more mouths with limited resources would be difficult These
results are in line with Oyawole et al 2016 Many Conflicting results are also reported
regarding household size Some studies indicated the presence of more children
positively influencing WTP for organic food while some results reported an inverse
relationship between WTP and householdslsquo size Findings of our research revealed a
negative significant influence on householdslsquo willingness to pay for pesticides free
fruits These results were also according to our expectation With an increase in family
size the households do not care much about quality but mostly quantity
Income of the householdslsquo head was taken as continuous variable in this research study
In most cases especially in willingness to pay research studies a positive association of
income and households WTP was observed Any increase in householdslsquo income leads
to rise in their willingness to pay for safer healthier and pesticides free fruit Despite
high prices for pesticides free food products householdslsquo with high income showed
likelihood to pay a price premium Our findings also showed a positive effect of
income on householdslsquo WTP for pesticides free fruit An increase in income changes
householdslsquo purchasing behavior and choose better quality of food So with an increase
in income households were willing to pay more price premium Same results were
reported by Cranfield and Magnusson 2003
74
Variable awareness played a significant role while consuming better quality of food
Findings of our study also showed a positive and significant influence of variable
awareness on householdslsquo WTP for pesticides free fruit More than half of the
respondents were aware of the intensive use of pesticides on fruit Majority of the
households knew about the risk attached with fruits produced with agrochemicals The
more aware households were willing to pay more price premium for pesticides free
fruit compared to unaware households These results are also supported by Oyawole et
al2016
Moreover results of this study are also consistent with previous studies that health and
environmental concern are the important factors in householdlsquos preferences for
pesticides free food and reduced input food products We also found a positive
significant influence of health concern and environment concern on WTP These results
suggest that respondents in the study area are more conscious about health and
environment They are willing to pay more prices for such fruit free from pesticides
residues Based on above results most of socio-demographic characteristics have
positive influence on householdlsquos willingness to pay for pesticides-free fruit in the
study area On the basis of these findings we reject the null hypothesis and accept the
alternative hypothesis by concluding that socio-demographic characteristics have
influencing behavior on householdslsquo WTP
Willingness to pay across urban and rural regions shows no significant difference The
P-value of 0864 showed that WTP of households in urban regions were not statistically
different from those in rural regions Although we had expected a positive and
significant difference among urban and rural households willingness to pay for
pesticides free fruit and the difference in householdslsquo income education and
expenditure across urban and rural households support our expectation One of the
reasons for no significant difference is the selection of rural union councils which are
nearby urban union councils If the study is spread to more rural union councils than an
expected difference in urban and rural households may be observed Based on these
results the null hypothesis of no significant difference between urban and rural
households is accepted and can be concluded that no significant difference was found
in willingness to pay amount across rural and urban households
75
A Payment Card Approach
In this approach respondents are asked to select their WTP from a payment card given
in absolute value or in percentage of prices (Boccaletti amp Nardella 2000 Lacaze
Rodriguez and Lupin 2009) Payment card requires smaller sample sizes for the
efficient estimation of parameters than the double bounded model A recent research
found that payment card is to be free of range and centering biases when the
willingness to pay values on the payment card is sufficiently large and the respondents
are not constrained (Rowe et al 1996) However choosing an amount from payment
card may be more cognitively burdensome on the respondents and difficult than simply
yes or no response
B Open Ended Approach
In open ended question respondents are asked to state their WTP for a certain attribute
without suggesting them any value This technique does not require an interviewer and
does not result in any starting bias This approach is easy for the respondents to answer
Due to non provision of any value respondents find it difficult to answer and results
large non- response rate
C Double Bounded Approach
The dichotomous choice contingent valuation method is an important method in
contingent valuation surveys Due to simplicity this method is popular and widely used
for data collection Two questions formats are used in this method single bound and
double bounded questions are asked from the respondents For single bound question
format the respondentlsquos only reply in yes or no while in double bounded approach
second question contingent on the first response is asked
Hanemann et al (1991) recommended double bounded dichotomous choice model for
eliciting householdslsquo WTP In the double bounded formate each respondent is
presented with two bids The level of the second bid is contingent upon the response to
the first bid If an individual responds in ― yes to the first bid Bi the second bid (Bu) is
some amount greater than the first bid (Bi lt Bu) is askedIf the respondent responds
―no to the first bid the second bid (Bl) is some amount smaller than the first bid (B
llt
Bi) is asked
76
Henemann et al (1991) and Leon (1995) confirmed that double bounded model is more
effcient than single bound model For the correction of poor choice of the initial vector
double bounded model was suggested Researchers also found that double bounded
method produce more precise point estimates of parameters Double bounded model
requires more sample size due to the statistical inefficiency imposed by the data
compared to payment card and open ended model If sample size is large enough
double bounded model estimates accurate results
Due to its potttential inconsistency with response to the first binary question and larger
scope for biased results double bounded model is contravartial Bateman et al (2001)
concluded that the respondents feel fury and guilt when the second question is asked
making the response of the double bounded internally inconsistence One of the main
disadvantage of double bounded model is that response of the respondents may be
influenced by the first offered amount which is generally called starting point bias
(Flachaire and Hollard 2005)
There are few notable patterens while studying consumerlsquos willingness to pay by using
different elicitation formats Estimated willingess to pay based on double bounded
format and payment card format tend to be large compared to open ended questins
format Furthermore estimated willingness to pay from double bounded model would
be larger than payment card format
Not surprisingly as shown in table 416 the estimated mean willingness to pay for
pesticides free fruit based on the models were significantly different across the three
elicitation format Estimated WTP for double bounded format payment card format
and open ended was 25 percent 16 percent and 14 percent respectively The estimated
mean WTP for double dichotomous model is higher than twice the estimated mean
willingness to pay based on payment card and open ended data
When comparing response rate of households to the willingness to pay questions
format was different across the three elicitation methods In double bounded method
the question was whether the households were willing to pay a specific amount in
payment card method households were asked to select the amount from a specified
values provided on a card whereas in open ended question households were asked to
say how much extra they were willing to pay for pesticides free fruits The difference in
questions leads us to expect that more individual would respond positively to
willingness to pay question in payment card method because in this elicitation format
consumers had to select from payment level The response rate of payment card format
77
is more than both DC and OE questions formats Results show that 87 of the
respondents respond to the willingness to pay question for payment card method For
dichotomous choice the response rate is 58 and for open ended respondentslsquo response
rate is 46 Taken together these results suggest that the payment card format is easy
for valuation task faced by respondents and lead to efficiency in data collection
It has been remained an unresolved issue that which CV questions format is best to use
While the NOAA panel (Federal Register 1993) recommended using double bounded
dichotomous choice model due to its easy use and resemblances in day to day decision
making In this study we found that the response rate in double dichotomous choice
model is lower than payment card format and higher mean willingness to pay than both
open ended and payment card format In contrast payment card format has desirable
response properties
One elicitation format is not clearly better than the others on priority ground The
appropriateness of any elicitation format depends upon the circumstances of the study
For example payment card elicitation format better suits if the sample size is small If
the sample size is large enough double bounded elicitation format is preferred
78
V SUMMARY CONCLUSION AND RECOMMENDATION
This chapter presents findings of the research study as well as policy recommendations
This chapter also outlined limitation in this research and suggestion for further research
in future
51 Summary
Conventional agriculture has gained the power of providing food to majority of the
world population but at the cost of damaging the environment and human health While
pesticides free farming on the other side is environmental and human health friendly
farming that avoids the use of such hazardous chemicals which are harmful for human
plants and animal planet Pesticides free farming system is increasingly becoming
popular in producers as well as in consumer The term pesticides free denote production
of fruit without the use of pesticides and play a vital rule in future agriculture
commodities production It has been observed that fruit produced without the use of
chemicals pesticides are generally higher in prices than the conventional fruit
production in most part of the world However pesticides free farming and pesticides
free food is a relatively new phenomenon and very few people especially in developing
countries are aware about the beneficial impacts of such food on health and
environment Willingness to pay for pesticides free fruit is different from fruits
produced through the use of chemicals pesticides because pesticides free fruits are
relatively expansive
The main theme of this study was to investigate householdslsquo awareness and willingness
to pay for pesticides free fruit and to determine socio-economic and socio-demographic
characteristics in relation to their impact on willingness to pay a price premium This
study was carried out in two districts of Khyber Pakhtunkhwa (Pakistan) namely
Peshawar and Mardan The household level data employed in this study were obtained
from 1000 households through face to face interview by employing pretested
questionnaires Householdslsquo perception and attitude about pesticides free fruit were
also analyzed Three questionnaire elicitation formats ie dichotomous choice payment
card and open ended were used in this study For the estimation of dichotomous choice
data double bounded dichotomous choice model was used An ordered logit model was
used for the estimation of payment card type data and for the estimation of open ended
79
questionnaires linear regression model was used to estimate householdslsquo willingness to
pay price premium for pesticides free fruits
52 Conclusions
Adoption of technological advancement in agriculture has attracted considerable
attention in many developing countries because majority of population in less
developed countries derives its likelihood from agricultural production New
technologies provide farmers an opportunity to increase production and enhance
economic growth (Carvalho 2006) Although the green revolution spread across
developing countries in Asia and resultant in increased food production by adopting
technological inputs like fertilizer and pesticides However the high usage of these
chemicals to bring this spectacular growth in agriculture production is not without its
problems In most countries it has been observed that using commercial agricultural
practices causes many problems like environmental degradation and human health
effects (Wilson 2000) Coordinated efforts are needed to increase food production
with a view to enhance food safety and quality Although chemicals free agriculture is
gaining more and more support for safer food but still not providing enough food to
support need of the population in developing countries
Demand and markets for pesticides free fruit has gained a significant and valuable
interest of research scientist in all over the world Several research studies have been
identified price premium that consumers are willing to pay for pesticides free fruit and
also showed some socio-demographic factors influencing their decision to pay more
price premiums Different approaches are adopted in these studies depending on their
objectives These research studies mainly focused on attitudes and perception towards
these foods and not their actual purchase According to our knowledge studies on
householdlsquos willingness to pay and the most relevant factors influencing their decision
to pay more price premium are limited in developing countries such as Pakistan
The general objective of this survey was to study the socio-demographic and socio-
economic characteristics of the householdslsquo and to investigate factors influencing their
willingness to pay for pesticides free fruit A variety of factors including respondentlsquos
age gender householdlsquos size respondentlsquos income householdlsquos head education
awareness and certain attitudinal questions like health concern and environment
concern appear to influence householdlsquos willingness to pay a price premium Findings
80
of the study suggest health concern and environment concern has significant influence
on householdslsquo willingness to pay Hence it can be concluded that households in the
study area are more concern about their health and surrounding environment Results of
the study also indicated no significant difference in willingness to pay across rural and
urban regions of the study area
Study concluded that the most relevant explanatory variables positively influencing
householdslsquo willingness to pay for pesticides free fruit are age of the householdlsquo head
income of the household headlsquos education householdslsquo awareness health concern and
environmental concern while householdlsquos size is negatively significant which usually
reported that householdslsquo with more members do not care much about quality but more
quantity because feeding more people with limited resources are difficult Majority of
the households are willing to pay price premium for pesticides free fruit especially
those with high level of income household leads to high degree of willingness to pay
Education level also became an important factor in willingness to pay higher price for
pesticides free fruit More aged people have always been concern about their health As
the people get aged more and more the diseases of aging caught their minds so they
like to pay more for safer food While when it become to pay more price variable
gender shows insignificant affect due to the limited availability of female respondents
in the sample data
Results of the households awareness regarding pesticides used on conventional fruit
and its impact on health and natural environment are positive Most of the households
are highly concern about health and environment Results suggest that more than half of
the households are aware of the adverse impact of pesticides on health and
environment Survey suggested that more than half of the households are strongly
agreed that farmers should produce such an agricultural food product which has
minimum adverse impact on human health and natural environment Results of the
study are consistent with other findings conducted on consumerslsquo willingness to pay for
organic food and pesticides free food and reported that health and environmental
concern were the most important factors
Health and environmental concern is an important factor constituted a significant
influence which inclined households towards willingness to pay for pesticides free fruit
Krisoff (1998) reported that consumers perceived pesticides free food as healthier safer
and environmental friendly as compare to food produced by conventional method
81
From this study it is observed that households perceived pesticides free food as
healthier they are willing to pay more price premium
Results obtained from this study concluded that 93 percent of the households are
willing to pay more prices for pesticides free fruit Out of this proportion 35 percent of
households are willing to pay 16 to 20 percent more price above the regular price while
24 percent are willing to pay 6 to 10 percent higher price for pesticides free fruit
Households are willing to pay above than 20 percent comprised of 215 percent of the
sample data Results show that out of total willingness to pay 4 percent of the
households are willing to pay 1 to 5 percent price premium and 9 percent are willing to
pay 11 to 15 percent more price premium Results also show that only a minor portion
65 percent of the sampled respondents is unwilling to pay any more
Householdslsquo willingness to pay was also assessed The study revealed that on average
the respondents are willing to pay 26 percent higher price for pesticides free fruit than
the regular price which concluded that households in the study area are responsive
towards safer food and they like to pay higher premium for such fruit
53 Recommendations
This study is one of the first analytical attempts to measure householdslsquo willingness to
pay for pesticides free fruit in Pakistan Since not much research work is done on
pesticides free fruit in Pakistan so this study would contribute a little for future
researchers Findings of the survey suggest some recommendations for consumers and
producers Researchers may consider this study as basis for further research
An important task is to provide more information to consumers regarding
pesticides free fruit and the perceived benefits by consuming these fruit This
research study also provides information to consumers that how pesticides free
fruit is differ from fruit produced conventionally The sampled studied shows
that there is a potential for market growth of pesticides free fruit To identify
these potential consumers knowledge about their socio-demographic and socio-
economic characteristics is important
With potential demand and high price premium pesticides free fruit production
could be one of the lucrative strategies for producers to earn higher net margin
from their production so like other new technologies management practices
and production system pesticides free fruit production also needs government
82
assistance such as advertisement consumers awareness campaigns financial
aids as well as green subsides and loans to the producers to develop well
established market and efficient supply chain in Pakistan
By adopting new agricultural practices and comply with standards of World
Trade Organization (WTO) this will not only abridge the supply demand gap
for pesticide free fruit sat domestic level but also will boost the economy of the
country due to increase in fruit and vegetables exports
Contribution in the field of pesticides free fruit production from academics
research workers extension graduates scientist and other professionals are
necessary to brief producers as well as consumers about the negative impact of
pesticides due to incorrectly use of these hazardous chemicals on human and
animals health as well as effect on natural environment
Based on the findings from this research government non-government
organization and other stakeholders should formulate policies and would
promote and encourage the production of pesticides free fruit in Pakistan
Demonstration centers should be established within the agriculturist community
for the awareness of farmers regarding the production of pesticides free food
As the results identified householdlsquos willingness to pay is effected by
explanatory variables so more independent variables should be included in the
model to further explain willingness to pay for pesticides free fruit
In addition the area of sampling could be more spread and not be limited to only
two districts of Khyber Pakhtunkhwa If data are collected from different
provinces and districts all over Pakistan the results obtained might be a better
representation of the whole population
As this research study conducted only at few fruit such as Apple Peach and
Mango future research should focus on more fruit as well as on vegetables
54 Limitation and Suggestion for Future Envisage
A couple of limitations were encountered during this research study
This research study has investigated willingness to pay for fruit only due to
time and budget constraint In future a large scale research study should be
carried out both on fruit and vegetable
83
Second since only two districts of Khyber Pakhtunkhwa were examined in
the future such studies should be replicated to other districts and provinces of
Pakistan to determine householdslsquo willingness to pay for pesticides free fruit
Third some variables employed in this study were not statistically significant
presumably due to small sample size To overcome this problem in future
study large sample size should be taken into consideration in order to enhance
the degree of freedom
56 Suggestions
The future of pesticides free agriculture production is very bright To lead a healthy life
human being needs pure food and pollution free environment It has been proved that
pesticides free agriculture is the only solution to provide safe and healthy food to the
world population Chemicals free agricultural system is a natural phenomena and
human being can feel its importance By adopting pesticides free farming soil fertility
can also be maintained Farmers can provide healthy and safer environment by
strengthening the sustainable and pesticides free agriculture Now a daylsquos demand for
pesticides free food is increasing very fast and in the future it would be necessary to get
rid of food produced by using chemical fertilizer and pesticides
To inform consumers long term investment in promotion and education campaigns
would help to develop individual concern regarding the risk associated with pesticides
on food products This concern will translate individual willingness to pay towards a
positive price premium
84
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85
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Arrow K RSolow PR Portney EELeamer R Radner and
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for organic products in Iran Trends in Agricultural Economics2(1)10-16
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Gil J M A Gracia M Sanchez 2000 Market segmentation and willingness to pay
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HUICL C W MAY and W K LI 2013 Research on householdlsquoslsquo willingness to
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KalogerasN S Valchovska G Baourakis and P Kalaitzis2009Dutch householdlsquos
willingness to pay for pesticide free olive oilJournal of International Food amp
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96
Appendix- 1 Questionnaire
Q1Socio-economic characteristics
1 Location
o Rural
o Urban
2 Name ____________________
3 Age ____________________(years)
4 Gender
o Male
o Female
5 Educational status ______________ Years
6 Household Size_________________ No
7 Monthly income _______________________________Rs
8 Monthly consumption expenditure _________________Rs
9 How much you spend on Fresh Fruits Rs __________month
10 How much you consume the following fruits
Fruits Quantity
Apple
Mango
Peaches
11 Local farmers are intensively using pesticides on Apple Peach and Mango fruits
o Aware
o Not aware
97
12 Attitudinal question responses
Householdrsquos Awareness Perceptions of Pesticides use
Questions Agreed Disagreed
Local farmers are intensively using pesticides on
Apple Peach and Mango fruits
I feel the use of pesticides in agriculture has negative
effect on the environment
I am concerned about pesticide residue in our food
supply
I believe farmer should engage in environmental
friendly agricultural production practices with
minimum impact on human health
The effect of pesticides residues on human health
The use of pesticides can badly affect the agro-ecological system as well as human
health Human health related problems may vary with the composition of chemicals
The most common problems are skin flue and headache while severe health hazards
include paralysis cancer etc Studies show that globally around 30 lakh people are
poisoned annually from consumption of pesticides contaminated food and 2 lakh of
them die from different heath problems caused by pesticides residues Most of the
pesticides used on agricultural crops are banned by the WHO
13 Householdrsquos willingness to pay for pesticide free fruit
Wording for Dichotomous choice question
Suppose your favorite fruit such as apple mango and peach regularly cost on average
Rs 100kg Assuming no difference in taste and nutritional content would you pay Rs
X more to consume pesticide free version of the same fruits
Yes No
Wording for open ended question
Suppose your favorite fruit such as apple mango and peach regularly cost on average
Rs 100kg Assuming no difference in taste and nutritional content how much would
you pay for pesticides-free version of the same fruits
Rs _________
98
Wording for payment card question
Suppose your favorite fruit such as apple mango and peaches regularly costs on
average Rs 100kg you purchase Assuming no difference in taste and nutritional
content would you pay slightly more for a pesticides free version of the same fruits
Yes No
If yes how much would you pay to consume pesticide free version of the same fruit
Select from the given payment card
1 WTP= 0
2 WTP= 1-5
3 WTP= 6-10
4 WTP= 11-15
5 WTP= 16-20
6 WTP= 21-25
7 WTP= 26-30
8 WTP= 31-35
9 WTP= 36-40
10 WTP= Above than 40
If no what are the reasons for not paying price premium for pesticide free
commodities (PFC) Please select the most relevant one
o I canlsquot afford to pay price premium on PFC
o The pesticide have no harmful effect on health
o We do not use fresh fruits
o Other reasons ___________________________
99
PLAGIRIASM UNDERTAKING
It is certified that the research work presented in the Ph D dissertation of Mr Jahangir
Khan C No 45 University Registration No2006-Agr-U-13234 Session 2014-2017
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar under the titled ―HOUSEHOLD
PREFRENCES AND WILLINGNESS TO PAY FOR PESTICIDES FREE FRUIT IN
KHYBER PAKHTUNKHAWA (KP) PAKISTAN was conducted under the
supervision of Dr Abbas Ullah Jan
I understand the zero-tolerance policy of HEC and the University of Agriculture
Peshawar towards plagiarism Therefore I as an author of the above titled research
thesis declared that no portion of my thesis has been plagiarized and the material used
for references is properly cited
I undertake that I found guilty at any time and any statement is found to be incorrect or
plagiarized in the above mentioned titled thesis even after my graduation the
University has the right to withdraw my Ph D degree and the HEC has the right to
publish my name on the HECUniversity website on the list of persons who submitted
plagiarized thesis of guilty under plagiarism policy
Jahangir Khan
100
AUTHORrsquoS DECLARATION
I Mr Jahangir Khan C No 45 Session 2014-2017 hereby stated that my Ph D
dissertation titled ―Household Preferences and Willingness to Pay for Pesticides free
Fruit in Khyber Pakhtunkhwa (KP) Pakistan is my own work and not been submitted
previously by me or anyone else for taking degree from The university of Agriculture
Peshawar or any other University in the country world At any time if any statement
found to be incorrect even after my graduation the university has the right to withdraw
my Ph D Degree
Jahangir khan
Date
101
CERTIFICATE OF APPROVAL
It is certified that the research work presented in the Ph D dissertation of Mr Jahangir
Khan C No 45 University Registration No 2006 -Agr-U-13234 Session 2014-2017
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar under the titled ―HOUSEHOLD
PREFRENCES AND WILLINGNESS TO PAY FOR PESTICIDES FREE FRUIT IN
KHYBER PAKHTUNKHAWA (KP) PAKISTAN was conducted under the
supervision of Dr Abbas Ullah Jan
No part of this dissertation has been submitted anywhere else for any degree The
dissertation is submitted for the award of degree of Doctor of Philosophy in the
Department of Agricultural amp Applied Economics Faculty of Rural Social Sciences
The University of Agriculture Peshawar
Ph D Scholar Jahangir Khan
APPROVED BY
1 External Examiner _________________ Lal K Almas Ph D
Associate Dean and Regents
Professor Agricultural Business amp
Economics University of West Texas
AampM USA
2 External Examiner ___________________ Prof Dr Harun Ucak
Alanya Alaadin Keykubat
University Turkey
Major Supervisor ___________________ Dr Abbas Ullah Jan
Head of Department ________________
Dr Ghaffar Ali