Masters Theses

Date of Award

5-2001

Degree Type

Thesis

Degree Name

Master of Science

Major

Agricultural Economics

Major Professor

Paul M. Jakus

Committee Members

Kimberly Jensen, Burton English

Abstract

This thesis provides an analysis of Tennessee residents' willingness to pay (WTP) for an environmentally certified wood product. The first portion of the analysis is a review of the available literature that has examined the WTP question. Examination of these studies shows that nearly all demonstrate a positive WTP for certified products. The remaining part of the literature review evaluates the additional costs of certification on producers.

The next portion of the thesis reports on the results of a telephone survey of Tennessee residents conducted in October/November 2000 by the University of Tennessee's Human Dimensions Lab. Following one factor descriptive analysis of residents' willingness to purchase an environmentally certified wood product, probit regression results with multiple factors are presented. The probit results are then used to calculate WTP. What we found from our analysis is that the two variables that had the most impact on predicting willingness to pay for the certified over the conventional product were price and the view that environmental practices are an extremely important characteristic of purchasing decisions.

Although other socioeconomic and demographic variables were tested for their influence on willingness to buy, none were found to be statistically significant, therefore not useful for predicting respondents' willingness to buy the certified product. Results of probit analysis revealed that there are no income effects in WTP. Willingness to pay estimates were calculated to represent the point at which respondents are indifferent between the certified and the conventional good. For all the models analyzed, the calculated WTP for the certified product was either at or below the price of the conventional good. These findings are an indication that there is no premium for this certified 2 x 4, which could have an impact on future decisions by Tennessee timber owners to certify their forests.

For the wood products market as a whole, no premium for the certified 2 x 4 was in evidence. However, some participants appear to be willing to pay more for a certified wood product. These participants have been identified as females with some college experience, around 45 years old, with an income of approximately $45,800, and have indicated environmental practices are an extremely important characteristic of their wood purchasing decisions. With this market segment, on average, the premium received by a certified 2 x 4 stud was $0.63 more than the cost of a conventional 2 x 4 stud.

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