Understanding Consumers’ Preferences for Protected Geographical Indications: A Choice Experiment with Hungarian Sausage Consumers

Abstract

Geographical Indications (GIs) can increase producer margins and contribute to local economic development, but the extent to which they do so depends on the nature of consumer demand. A Discrete Choice Experiment (DCE) considers the value that consumers place on a Protected Geographical Indication (PGI) in comparison with a leading manufacturer's brand, as well as the importance of taste variations. Based on an application of DCE to sausages in Hungary, results indicate that a PGI can generate value to consumers exceeding that conveyed by the leading manufacturer's brand. Consumers' taste preferences, however, may not be consistent with the specification of GI products. Latent Class (LC) and Random parameter Latent Class (RLC) analyses identify two consumer segments, with the majority of consumers (71%-LC, 65%-RLC) classified as traditionalists, who most value the GI label, while a minority (29%-LC, 35%-RLC) is brand conscious, for whom the GI status is less salient. Both theoretical and business implications for GI marketing and club branding are drawn.