A Methodology for Estimating the Maximum Price Consumers Are willing to Pay in Relation to Perceived Quality and Consumer Characteristics

Abstract

For an agribusiness company, the delivery of high quality products may be an effective strategy to differentiate itself from competitors. However, since production costs are usually higher for higher quality products, a high-quality strategy is on1y profitable when consumers are willing to pay more for better quality. In this article, a methodology is described that can be used to estimate the maximum price consumers are willing to pay for a food product in relation to its perceived quality, and the characteristics of the consumer. The methodology is empirically illustrated for meat cuts of varying perceived quality.