Japanese Perception of Safety and willingness-to-Pay
for Imported Rice
Kentaro Yoshida1 and Hikaru H. Peterson2
1. Introduction
Japan is the largest net food-importing country in the world. The percentage of caloric
intake supplied from domestic agricultural produce is 40 percent and has been
constantly decreasing since 1960s. Especially, self-sufficiency rate of grain is 28
percent and is at a very low level. Japan imports, however, only 7 percent of total
consumption of rice from foreign countries. Border measures and domestic price
supports account for such a low rate.
The Uruguay Round agreements of the GATT ensured the minimum access to
the Japanese rice market. Since then, the quantity of rice imported from various
countries has been steadily increasing. The ongoing round of the WTO agricultural
negotiation is scheduled to conclude by the end of 2004. According to the negotiating
proposal by the Ministry of Agriculture, Forestry and Fisheries of Japan, food safety
is considered to be one of the possible reasons to protest against tariff reduction
although it is often accused by exporting countries as a non-trade barrier. In addition,
Japan mandated rigid country-of-origin labeling (COOL) for all fresh foods in July
2000. For both exporting countries and Japan, it will be important information to
understand Japanese consumers’ perception of COOL and food safety of imported
rice.
In this study, we analyze the consumer response toward the COOL and food safety
of imported and domestic rice by choice modeling which is one of the stated preference
techniques. In the stated preference questionnaire, respondents are asked to choose from
a set of goods with varying attributes and levels. A nested logit model and a random
parameters logit model are used to test data from the questionnaire. Choice modeling in
marketing of agricultural products, as exemplified by Sato et al. [7], can simulate an
actual market behavior of consumers. A number of literatures have been devoted to
understand the relative impacts of factors that affect consumer choice, e.g., assessment
of consumer preferences for color of veal (West et al. [9]), food safety attributes in fresh
apples (Baker [1]), and use of genetically modified organisms (Burton et al. [2]).
1
2
Kentaro Yoshida is assistant professor in the Institute of Policy and Planning Sciences, University of Tsukuba,
Japan. E-mail address: yoshidak@sk.tsukuba.ac.jp.
Hikaru H. Peterson is assistant professor in the Department of Agricultural Economics, Kansas State University,
USA.
In general, it is often suggested that Japanese consumers show the strong
resistance to imported rice because of its flavor and safety concerns, e.g., post-harvest
pesticide, and other chemical residuals. For these reasons, consumers generally prefer
domestic produce over foreign produce. For fresh vegetables and other grains,
however, Japanese consumers are likely to accept imported produce because they
usually buy imported vegetables and grains at grocery stores mainly during out of
season. Our experimental study aims at revealing the difference in willingness-to-pay
(WTP) between imported and domestic rice when respondents are exposed to
imported rice brands along with domestic brands
2. Survey Design and Data Collection
The survey is designed to elicit values for several representative imported and
domestic brands of rice. Alternatives in the survey are selected from the following
brands. The three imported brands are the Koshihikari variety from the U.S. and
Australia, and the Akitakomachi variety from China. The four domestic brands were
selected based on telephone interviews to managers of several rice shops: the
Koshihikari variety from Niigata prefecture, the Akitakomachi variety from Akita
prefecture, and the Hitomebore variety from Miyagi prefecture. In addition, a fourth
domestic brand, Ibaraki Koshihikari, was selected as a representative local brand
familiar to the survey participants in Tokyo.
The valuation section of the survey consists of eight separate choice scenarios.
Respondents were asked to choose from three alternatives based on the description of
rice brands at different prices (option A, B, and C) or to choose option D.
Respondents have the option of indicating that they would choose none of them
(option D). The 16 choice sets were created using SPSS version 10.0J. Attributes and
levels are given in Table 1.
Table 1
Attribute levels used in the choice sets (yen per 5 kilograms)
U.S. Koshihikari
Australian Koshihikari
Chinese Akitakomachi
Akita Akitakomachi
Miyagi Hitomebore
Ibaraki Koshihikari
Niigata Koshihikari
Level 1
Level 2
Level 3
Level 4
Level 5
280
280
280
1880
1880
1780
2280
480
480
480
2080
2080
1980
2480
680
680
680
2280
2280
2180
2680
880
880
880
2480
2480
2380
2880
1080
1080
1080
2680
2680
2580
3080
The survey was pre-tested twice, and then mailed in March 2002 to 400
households in the Tokyo prefecture, all of whom were randomly chosen from a
commercial phone directory database, Kurofune 2002. A reminder was sent two
weeks after the initial mailing. 256 households (63.8 percent) returned the
questionnaires. Since some of them did not respond to the valuation section
completely, there were 1,713 usable observations. Selected demographics of the
respondents were as follows: 72.6% were female, average age was 58.9 years old
ranging from 25 to 88, and average annual income of households was 6,620 thousand
yen.
3. Empirical Models
Data obtained by choice modeling studies is usually analyzed by multinomial logit
(MNL) models (Louviere et al. [5]). Sato et al. [7] demonstrated the performance of
MNL by examining the reproducibility of brand choice of domestic rice in a particular
region. However, our preliminary surveys indicated that the utility level of foreign
brands was much different from that of domestic ones. In addition, Hausman’s
specification test of MNL rejected the independence of irrelevant alternatives (IIA)
assumption. We then estimated other models in order to relax the IIA assumption
(Greene [3]). These two models were a random parameters logit (RPL) model and a
nested logit (NL) model.
The RPL model allows the parameters to vary over people and choice situations
(Train [8], West et al. [9], Kodama [4]). The indirect utility function is defined as
follows.
U ij  X ij    ij  X ij (b   i )   ij
where the utility that respondent i chooses j among J possible alternatives is Uij,
and εij is an unobserved random term that is i.i.d. extreme value. X is a vector of
choice attributes, and  is a vector of marginal utilities parameters that can be
expressed as the sum of population mean b and individual deviation i.
In the two-level nesting structure, the utility of each consumer for each
alternative can be decomposed as Ulj = Ul + Uj|l. Ul is the utility of country-level
choice depends on household characteristics, and l = 1 (domestic) and 2 (foreign). Uj|l
are the utility of brand choice specified to depend on brand-specific characteristics.
Given these assumptions, the probability of choosing the jlth alternative is then
decomposed as Plj = Pj|lPl, which can be written as:
Plj 
exp  X

exp  X l   l I l 
 exp  X j|l   exp  X l   l I l 
j |l
where Il is an inclusive value of lth branch and τl is a parameter of the inclusive
value. We defined the following variables for two types of models. The choice set of
rice brands consists of eight alternatives: U.S. and Australian Koshihikari (US, AU),
Chinese Akitakomachi (CH), Niigata Koshihikari (NG), Akita Akitakomachi (AK),
Miyagi Hitomebore (MY), Ibaraki Koshihikari (IB), and choosing none of the
alternatives (NONE). The utility of brand choice depends on the price (Price) and the
brand, where each brand-specific quality is represented by brand-specific binary
variables (US, AU, CH, NG, AK, MY, IB). In addition, images regarding safety and
taste affect utility in choosing one of the foreign brands. Specifically, binary variables
interacted with brand-specific variables (US-SAFE, AU-SAFE, CH-SAFE) were
defined for each foreign brand. Their value is one if respondents had highly negative
images of the specific imported brand of rice compared with domestic rice, or they
were uncertain of its safety. In a same way, binary variables interacted with
brand-specific variables were defined for taste (US-TASTE, AU-TASTE, CH-TASTE).
If consumers have selected a brand of their choice over time, their utility may
additionally be affected by a habit formation factor. Thus, for domestic rice, the utility
level is specified to depend on whether it is the brand currently consumed by the
respondent. A binary variable interacted with each domestic brand (HAB-AK,
HAB-MY, HAB-IB, HAB-NG) is specified to equal one if the respondent stocked rice
from the same region as the specific domestic brand at home. Other variables
regarding their socio-economic characteristics are also specified as follows:
household income in 10,000 yen (INC), the number of children under 18 (NCHILD),
and gender variable (GENDER) which equals one for female and zero for male. In
addition, their attitude toward foreign produce (ATTFOR) is specified as Likert-type
scale, 1 if their answer to a question regarding their purchases of imported vegetables
is at least minding and 5 as only purchasing domestic produce.
The indirect utility function of the RPL model is defined as follows:
URPL = βPP + βUSUS +βAUAU + βCHCH + βNGNG + βAKAK + βMYMY + βIBIB +
βUSSUS-SAFE + βUSTUS-TASTE + βAUSAU-SAFE + βAUTAU-TASTE +
βCHSCH-SAFE + βCHTCH-TASTE + βHNGHAB-NG + βHAKHAB-AK +
βHMYHAB-MY + βHIBHAB-IB + εRPL
The indirect utility functions of the NL model are defined as follows:
UUS|foreign = βPP + βUSUS + βUS,1US-SAFE + βUS,2US-TASTE + εUS
UAU|foreign = βPP + βAUAU + βAU,1AU-SAFE + βAU,2AU-TASTE + εAU
UCH|foreign = βPP + βCHCH + βCH,1CH-SAFE + βCH,2CH-TASTE + εCH
UNG|domestic = βPP + βNGNG + βHNGHAB-NG + εNG
UAK|domestic = βPP + βAKAK + βHAKHAB-AK + εAK
UMY|domestic = βPP + βMYMY + βHMYHAB-MY + εMY
UIB|domestic = βPP + βIBIB + βHIBHAB-IB + εIB
Ul = αl0 + αl1 ATTFOR + αl2 GENDER +αl3NCHILD + αl4 INC + εl,
where εUS, εAU, and εCH are correlated, and εNG, εAK, εMY , and, εIB are correlated,
there is no correlation between the two set of error terms, and εl are independent.
4. Results
The simulated maximum likelihood result for RPL model and the FIML maximum
likelihood result for NL model were computed using LIMDEP, Version 7.0. The
estimation results are given in Table 2. The estimated coefficients of the RPL model did
not improve the result of the estimated MNL model1) in terms of the goodness-of-fit. In
addition, standard deviations of coefficients of foreign brands (US (s.d.), AU (s.d.), CH
(s.d.)) were not statistically significant. On the other hand, the NL model could derive
more reliable estimates than the MNL model according to adjusted pseudo R2 and log
likelihood. The coefficient on the safety perception of U.S. rice and the habit
formation factor of Miyagi Hitomebore were not statistically significant at 5% level.
Based on the estimated parameters, WTP for each brand is calculated as the
negative of the coefficient of the specific brand divided by the coefficient on price.
Similarly, expected WTP can be obtained for consumers who have highly negative or
uncertain images of foreign varieties. Table 3 reports the WTP estimates based on the
estimated results of the NL model, along with the average retail price in 2000 by Food
Agency of Japan. WTPs for imported brands can be interpreted as WTPs of those who
have neutral or positive images. For all imported brands, the average WTP estimates
were lower than the reported retail price, and for all domestic brands, the respondents
were willing to pay more than the average retail price. The WTP of Niigata variety
was the highest, which was consistent with the market price. Average retail prices of
domestic brands were at about 10 percent discount relative to their WTPs. It suggests
that consumers are currently benefiting the most from their purchases. Moreover,
there was a positive habit formation for domestic brands except Miyagi Hitomebore.
Consumers were willing to pay more for rice of the same brand as what they
purchased last.
Among foreign brands, WTP for Australian rice was the highest, followed by the
U.S. and China. WTP for U.S. rice was 65 percent of its average retail price, making it
most overpriced relative to its average WTP among the three brands, while Australian
rice was most closely priced. If the respondent had a highly negative or uncertain
image about safety or taste, WTP signed even negative. It is consistent with Japanese
consumers’ behavior at the Heisei rice disorder. When it happened in 1993, it was
observed that a large number of Japanese consumers threw away imported rice which
was sold as a tie-in of domestic rice.
Table 2
Estimated coefficients of the random parameters logit and nested logit model
Random parameters logit
Nested logit
Variable
Coefficient
T-statistic
Coefficient
T-statistic
Attributes in the utility functions
Price
-0.9291E-3
US
1.551
US (s.d.)
0.4567E-3
AU
1.912
AU (s.d.)
0.7923E-2
CH
1.540
CH (s.d.)
0.2569E-1
AK
2.628
MY
2.506
IB
2.375
NG
2.847
US-SAFE
-0.9269
US-TASTE
-1.795
AU-SAFE
-2.014
AU-TASTE
-1.013
CH-SAFE
-1.236
CH-TASTE
-1.492
HAB-AK
0.8590
HAB-MY
0.7434
HAB-IB
1.292
HAB-NG
1.487
Attributes of the branch choice equations
Constantforeign
－
ATTFORforeign
－
GENDERforeign
－
NCHILDforeign
－
INCforeign
－
Constantdomestic
－
ATTFORdomestic
－
GENDERdomestic
－
NCHILDdomestic
－
INCdomestic
－
Inclusive value parameters
FOREIGN
－
DOMESTIC
－
No.of observations
1713
Log likelihood
-1879.4
Adj. pseudo R2
0.470
-7.236
5.830
0.004
7.998
0.069
3.759
0.179
8.297
8.013
7.989
7.571
-2.524
-5.361
-6.968
-3.285
-2.592
-3.677
4.159
1.537
2.651
8.334
Note: Distribution simulations for RPL are based on 50 draws.
－
－
－
－
－
－
－
－
－
－
－
－
-0.1117E-2
1.445
－
1.792
－
1.341
－
3.137
2.997
2.813
3.444
-0.9229
-2.694
-2.279
-1.382
-1.738
-1.866
0.86641
0.8530
1.615
1.511
2.813
-0.6291
-1.041
-0.3333
-0.2166E-3
-0.5757
0.2455
1.127
0.2552
-0.8750E-3
-7.347
2.530
－
3.675
－
2.190
－
8.450
8.130
8.308
7.796
-1.835
-5.221
-5.109
-3.157
-2.871
-3.437
4.152
1.828
2.947
7.953
6.093
-5.844
-4.145
-2.032
-0.829
-0.955
1.545
2.995
0.988
-2.126
0.7284
6.654
0.4146
2.262
1713
-1809.5
0.524
Table 3
Willingness-to-pay estimates for each rice brand (yen per 5 kilograms)
WTP
Negative or uncertain image
Safety
Taste
Habit
Retail price
U.S. Koshihikari
1293.8
467.5
-1118.3
1988.5
Australian Koshihikari
1604.4
-436.3
367.4
1927.5
Chinese Akitakomachi
1201.1
-354.9
-469.5
1650.5
Akita Akitakomachi
2809.1
3582.8
2343.5
Miyagi Hitomebore
2683.3
3447.1
2396.5
Ibaraki Koshihikari
2518.7
3965.2
2309.5
Niigata Koshihikari
3084.0
4436.6
2789.0
Note: Average retail price in 2000 reported for 5 kilogram packages by Food Agency, Japan.
5. Summary and Implications
Rice purchasing decisions of residents of Tokyo were analyzed in the RPL and NL
model. Although the RPL model did not improve the result of the MNL model, the NL
model was proved to be more explainable for the rice brand choice including imported
rice. Choice modeling to elicit consumers’ WTP for imported brands of rice revealed
that the current retail prices for them were higher than the average consumers’ WTP,
while domestic brands were priced below the average. This suggests that sales volume
of imported rice varieties could increase by lowering the price. If consumers had highly
negative images toward imported brands in terms of safety or taste, or if they were not
familiar with imported varieties and their safety and taste were unknown to them, their
WTP was harshly discounted. Since general Japanese consumers tend to believe that
domestic produce is superior to imported produce in safety or taste, it is critical for
exporting countries to inform and convince them regarding the safety and taste of their
produce in comparison with domestic rice. On the other hand, for Japanese rice farmer,
they should make more effort to realize less input agricultural production. And the
Japanese government may support such farming practices to reduce chemical inputs by
introducing the environmental payment scheme.
Also, it is emphasized that resistance to foreign produce was smaller for fresh
vegetables than imported rice. Only 11 % of respondents stuck to domestic produce. It
might be for this reason that the majority of imported rice was routed for processing,
and average Japanese had not viewed it in stores and tasted it. Hence, the results are
merely reflecting the consumers’ current perception of foreign rice which is unknown
to most of the Japanese consumers. Although the current results provide realistic WTP
estimates judging from the estimated coefficients of interaction variables, the
interpretation of the results can not be expanded to general Japanese consumers.
In-depth follow-up surveys for more consumers at other regions will be important to
reveal the general consumers’ attitude toward imported rice.
1) The estimation results of MNL model were not given in table 2 since estimated
coefficients of MNL model were quite similar to those of RPL model.
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