Scandinavian Working Papers in Economics

HUI Working Papers,
HUI Research

No 36: Does Shelf-Labeling of Organic Foods Increase Sales? Results from a Natural Experiment

Sven-Olov Daunfeldt and Niklas Rudholm ()
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Sven-Olov Daunfeldt: The Ratio Institute (RATIO), Postal: P.O. Box 3203, SE-103 64 Stockholm, Sweden, and Department of Economics, Dalarna University, SE-781 88 Borlänge, Sweden.
Niklas Rudholm: The Swedish Retail Institute (HUI), Postal: Regeringsgatan 60, 103 29 Stockholm, Sweden, and Department of, Economics, Dalarna University, SE-781 88 Borlänge, Sweden.

Abstract: Can a simple point-of-purchase (POP) shelf-label increase sales of organic foods? We use a random-effects, random-coefficients model, including a time adjustment variable, to test data from a natural experiment in a hypermarket in Gävle, Sweden. Our model incorporates both product specific heterogeneity in the effects of labeling and consumer adjustment to the labels over time. The introduction of POP displays was found to lead to an increase in sales of organic coffee and olive oil, but a reduction in sales of organic flour. All targeted products became less price-sensitive. The results reveal that product specific heterogeneity has to be accounted for, and in some cases consumers adjusted to labeling over time.

Keywords: Product labeling; random coefficient models; ecological products; experimental economics

JEL-codes: L66; L81; M31; M37

24 pages, February 1, 2010

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