Share This Article:

Modeling Influence of Product Quality and Grower Reputation on Prices in Dutch Flower Auctions

PP. 339-350
DOI: 10.4236/jssm.2011.43040    3,616 Downloads   6,956 Views   Citations

ABSTRACT

The purposes of this study are to examine differences in prices that safari sunset flower growers from Israel receive on the Dutch flower bursa, suggest factors that influence such differences, and examine strength and significance of each factor. We show that price differences between growers can reach 36% - 47%. In the regression model price differences are regressed on explanatory variables that include proxies for flower quality and grower reputation. The model explains 58% - 59% of the price variability and enables to compare elasticity of price by the studied factors. Subsequent ordered probit analysis confirmed the relevance of the chosen variables and their ability to explain also the growers clustering by received prices. Analysis of marginal effects shows that changes in the probability of belonging to a specific price group of growers are consistent with the regression model results.

Conflicts of Interest

The authors declare no conflicts of interest.

Cite this paper

G. Din, A. Slutsky and Y. Steinmetz, "Modeling Influence of Product Quality and Grower Reputation on Prices in Dutch Flower Auctions," Journal of Service Science and Management, Vol. 4 No. 3, 2011, pp. 339-350. doi: 10.4236/jssm.2011.43040.

References

[1] M. Fafchamps, R. Vargas-Hill and B. Minten, “Quality Control in Non-Staple Food Markets: Evidence from India,” Agricultural Economics, Vol. 38, No. 3, 2008, pp. 251-266. doi:10.1111/j.1574-0862.2008.00297.x
[2] A. M. Khushk, A. Memon and K. M. Aujla, “Marketing Channels and Margins of dates in Sindh, Pakistan,” Journal of Agricultural Research, Vol. 47, No. 3, 2009, pp. 293-308.
[3] T. H. Spreen, R. L. Kilmer and C. R. Pitta, “Nonhomogeneous Products and the Law of One Price,” Agribusiness, Vol. 23, No. 3, 2007, pp. 407-420. doi:10.1002/agr.20130
[4] Y. Esemu and E. Wood, “Innovation and Performance Improvement among Exporters in the Uganda Floriculture Industry,” In: S. P. Sigué, Ed., Repositioning African Business and Development for the 21st Century, 10th Annual International Conference, Kampala, 19-23 May 2009, pp. 247-258.
[5] J. A. Watson and M. A. Gunderson, “Direct Marketing of Specialty Crops by Producers: A Price-Comparison between Farmers’ Markets and Grocery Stores,” Southern Agricultural Economics Association, 2010 Annual Meeting, Orlando, 6-9 February 2010. http://purl.umn.edu/56512
[6] B. Minten and T. Reardon, “Food Prices, Quality, and Quality’s Pricing in Supermarkets versus Traditional Markets in Developing Countries,” Review of Agricultural Economics, Vol. 30, No. 3, 2008, pp. 480-490. doi:10.1111/j.1467-9353.2008.00422.x
[7] J. Biermacher, S. Upson, D. Miller and D. Pittman, “Economic Challenges of Small-Scale Vegetable Production and Retailing In Rural Communities: An Example from Rural Oklahoma,” Journal of Food Distribution Research, Vol. 38, No. 3, 2007, pp. 1-13.
[8] J. Blandon, S. Henson and J. Cranfield, “Small-Scale Farmer Participation in New Agri-Food Supply Chains: Case of the Supermarket Supply Chain for Fruit and Vegetables in Honduras,” Journal of International Development, Vol. 21, No. 7, 2009, pp. 971-984. doi:10.1002/jid.1490
[9] J. Ekman, J. Eyre and D. Joyce, “Flowers by Sea: Improving Market Access for Australian Wildflowers. Australian Government, Rural Industries Research and Development Corporation,” Rural Industries Research and Development Corporation, 2008. https://rirdc.infoservices.com.au/downloads/07-181.pdf
[10] J. C. Batista and G. B. da Silveira Filho, “Trade Costs and Deviations from the Law of One Price,” American Journal of Agricultural Economics, Vol. 92, No. 4, 2010, pp. 1011-1023. doi:10.1093/ajae/aaq044
[11] G. Trip, R. B. M. Huirne and J. A. Renkema, “Price- Predicting Ability of Farm Managers: Empirical Findings with Flower Producers in the Netherlands,” Review of Agricultural Economics, Vol. 22, No. 2, 2000, pp. 464- 476. doi:10.1111/1058-7195.00033
[12] A. Hoogerwerf, A. E. Simons and M. P. Reinders, “A Systems View on Horticultural Distribution Applied to the Postharvest Chain of Cut Flowers,” Agricultural Systems, Vol. 44, No. 2, 1994, pp. 163-180. doi:10.1016/0308-521X(94)90159-D
[13] E. Gerstner, “Do Higher Prices Signal Higher Quality?” Journal of Marketing Research, Vol. 22, No. 2, 1985, pp. 209-215. doi:10.2307/3151366
[14] A. Kirmani and A. R. Rao, “No Pain, No Gain: A Critical Review of the Literature on Signaling Unobserved Product Quality,” Journal of Marketing, Vol. 64, No. 2, 2000, pp. 66-79. doi:10.1509/jmkg.64.2.66.18000
[15] H. Schnabel and K. Storchmann, “Prices as Quality Signals: Evidence from the Wine Market,” Journal of Agricultural & Food Industrial Organization, Vol. 8, No. 1, 2010, Article 2.
[16] D. Schoorl and J. E. Holt, “Quality, Reputation and Price in Horticultural Markets,” Agricultural Systems, Vol. 13, No. 4, 1984, pp. 191-203. doi:10.1016/0308-521X(84)90073-8
[17] C. Shapiro, “Premiums for High Quality Products as Returns to Reputations,” The Quarterly Journal of Economics, Vol. 98, No. 4, 1983, pp. 659-680. doi:10.2307/1881782
[18] G. Schamel, “Auction Markets for Specialty Food Products with Geographical Indications,” Agricultural Economics, Vol. 37, No. 2-3, 2007, pp. 257-264.
[19] I. B. M. M. Kortekaas, “Relation between Quality and Price of Spray Carnations,” Acta Horticulturae, Vol. 155, 1984, pp. 193-200.
[20] J. Benninga, “Causes of Variation in the Price of Roses,” Acta Horticulturae, Vol. 536, 2000, pp. 471-478.
[21] G. J. van den Berg and B. van der Klaauw, “Structural Empirical Analysis of Dutch Flower Auctions,” 2008. http://staff.feweb.vu.nl/bklaauw/laatdruk.htm
[22] L. Liu and C. Yue, “Non-Tariff Barriers to Trade Caused by SPS Measures and Customs Procedures with Product Quality Changes,” Journal of Agricultural and Resource Economics, Vol. 34, No. 1, 2009, pp. 196-212.
[23] D. Houser and J. Wooders, “Reputation in Auctions: Theory, and Evidence from eBay,” Journal of Economics & Management Strategy, Vol. 15, No., 2006, pp. 353- 369.
[24] D. Lucking-Reiley, D. Bryan, N. Prasad and D. Reeves, “Pennies from eBay: The Determinants of Price in Online Auctions,” Journal of Industrial Economics, Vol. 55, No. 2, 2007, pp. 223-233. doi:10.1111/j.1467-6451.2007.00309.x
[25] L. Cabral and A. Hortacsu, “The Dynamics of Seller Reputation: Theory and Evidence from eBay,” The National Bureau of Economic Research, 2004. http://www.nber.org/papers/w10363
[26] R. G. Hammond, “Comparing Revenue from Auctions and Posted Prices,” International Journal of Industrial Organization, Vol. 28, No. 1, 2010, pp. 1-9. doi:10.1016/j.ijindorg.2009.06.002
[27] J. Hou, “Late Bidding and the Auction Price: Evidence from eBay,” Journal of Product & Brand Management, Vol. 16, No. 6, 2007, pp. 422-428. doi:10.1108/10610420710823780
[28] A. Silber, M. Levi, M. Cohen, N. David, Y. Steinmetz and S. Assouline, “Response of Leucadendron ‘Safari Sunset’ to Regulated Deficit Irrigation: Effects of Stress Timing on Growth and Yield Quality,” Agricultural Water Management, Vol. 87, No. 2, 2007, pp. 162-170. doi:10.1016/j.agwat.2006.06.022
[29] VBN, “VBN Statistiekboek 2006,” Vereniging van Bloe- menveilingen in Nederland, The Netherlands, 2006.
[30] S. Philosoph-Hadas, S. Droby, I. Rosenberger, Y. Perzelan, S. Salim, I. Shtein and S. Meir, “Sea Transport of Ornamental Branches: Problems and Solutions,” Acta Horticulturae, Vol. 755, 2007, pp. 267-276.
[31] A. Kambil and E. van Heck, “Reengineering the Dutch Flower Auctions: A Framework for Analyzing Exchange Organizations,” Information Systems Research, Vol. 9, No. 1, 1998, pp. 1-19. doi:10.1287/isre.9.1.1
[32] G. J. van den Berg, J. C. van Ours and M. P. Pradhan, “The Declining Price Anomaly in Dutch Rose Auctions,” American Economic Review, Vol. 91, No. 4, 2001, pp. 1055-1062. doi:10.1257/aer.91.4.1055
[33] O. R. Koppius, E. van Heck and M. J. J. Wolters, “The Importance of Product Representation Online: Empirical Results and Implications for Electronic Markets,” Decision Support Systems, Vol. 38, No. 2, 2004, pp. 161-169. doi:10.1016/S0167-9236(03)00097-6
[34] J. C. Hsu, “Multiple Comparisons. Theory and Methods,” Chapman and Hall, London, 1996.
[35] V. P. Rindova, I. O. Williamson, A. P. Petkova and J. M. Sever, “Being Good or Being Known: An Empirical Examination of the Dimensions, Antecedents, and Consequences of Organizational Reputation,” Academy of Ma- nagement Journal, Vol. 48, No. 6, 2005, pp. 1033-1049. doi:10.5465/AMJ.2005.19573108
[36] V. A. Zeithaml, “Consumer Perceptions of Price, Quality, and Value: A Means-End Model and Synthesis of Evidence,” The Journal of Marketing, Vol. 52, No. 3, 1988, pp. 2-22. doi:10.2307/1251446
[37] L. Riisgaard, “Global Value Chains, Labor Organization and Private Social Standards,” World Development, Vol. 37, No. 2, 2009, pp. 326-340.
[38] M. Gebreeyesus and M. Iizuka, “Discovery of the Flower Industry in Ethiopia: Experimentation and Coordination,” Working Paper Series, United Nations University, Maastricht, The Netherlands, 2010. http://www.merit.unu.edu/publications/wppdf/2010/wp2010-025.pdf
[39] A. H. J. Helmsing and A. T. Melese, “Endogenisation or Enclave Formation? The Development of the Ethiopian Cut Flower Industry,” The Journal of Modern African Studies, Vol. 48, No. 1, 2010, pp. 35-66. doi:10.1017/S0022278X09990218
[40] G. Maddala, “Limited-Dependent and Qualitative Variables in Econometrics,” Cambridge University Press, Cambridge, 1983.
[41] W. H. Greene, “Econometric Analysis,” 5th Edition, Prentice-Hall, Englewood Cliffs, 2003.

  
comments powered by Disqus

Copyright © 2018 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.